Earnings season can have an outsized impact on a company’s share price, which means considering stocks to sell before earnings reports are released. Netflix (NASDAQ:NFLX) reports great subscriber growth and its stock jumps 12% higher. 3M (NYSE:MMM) issues weak forward guidance, and its stock falls 10%. Given the big swings in share prices caused by financial results, it’s unsurprising that many investors hedge their bets ahead of earnings season.
Many Wall Street traders take this same approach, often shorting the stocks of companies they expect to post earnings misses. It’s a process called “trading around earnings.” While it can be difficult for retail investors to figure out how a company will perform with their earnings, in some cases it’s evident when a stock is headed for a selloff. Here are three stocks to sell before their earnings reports disappoint in 2024.
Starbucks (NASDAQ:SBUX) has a China problem, and it could look a whole lot worse after reporting its fourth quarter 2023 financial results on Jan. 30. Heading into the Q4 print, SBUX stock is languishing near a 52-week low, having fallen 13% in the last 12 months. The poor performance is largely due to concerns over the company’s exposure to China, its second-largest market after the U.S. It operates more than 6,500 stores in 250 cities across the Chinese mainland.
During the pandemic, Starbucks’ same-store sales in China declined 16% due to Beijing’s zero Covid-19 crackdown. It left many of its outlets shuttered for extended periods. The pandemic might be over, but China’s economy is enduring a downturn that has worsened recently. This could negatively impact Starbucks’s upcoming Q4 earnings and lead to a more pronounced selloff in SBUX stock. Get out now.
Also reporting its Q4 numbers on Jan. 30 is pharmaceutical giant Pfizer (NYSE:PFE). In winter, one might assume a boost in upcoming earnings from sales of its Covid-19 vaccine. Don’t count on it. The company has warned for months that sales of its Covid shots are diminishing, impacting financial results. In October, Pfizer lowered its full-year earnings and revenue guidance as global demand for its Covid-19 vaccine and other products wanes.
The upcoming Q4 print will include the company’s full-year numbers. Pfizer now expects 2023 sales of $58 billion to $61 billion, down from previous guidance of $70 billion. Earnings are expected to range from $1.45 to $1.65 a share, down from $3.25 to $3.45. The lowered guidance comes as revenue from Pfizer’s Covid-19 pill, Paxlovid is $7 billion lower than expected, and sales of its Covid-19 vaccine, Comirnaty, are $2 billion less than previously forecast.
PFE stock is down 36% in the last 12 months, trading near a 52-week low heading into earnings.
Investors might also think things can’t improve for commercial aircraft manufacturer Boeing (NYSE:BA). But you never know. It could be a surprise when the company issues its Q4 results on Jan. 31. BA stock has been heavily punished since the U.S. Federal Aviation Administration (FAA) has heavily punished BA stock, grounding hundreds of 737 MAX 9 aircraft earlier in January over safety concerns. The FAA wants 171 Boeing airplanes thoroughly inspected before they can fly again.
News of the grounding and the incident that prompted it has sent BA stock down 14% in January. This continues a pattern for Boeing, whose share price today is trading 40% lower than where it was five years ago. Any negative surprises in its upcoming Q4 print can be expected to push the company’s stock even lower. Already on tender hooks, shareholders of Boeing are in no mood for any more bad news and are likely to hit the “sell” button at the drop of a hat.
The FAA and other regulators around the world continue to watch Boeing closely after two fatal crashes of its aircraft five years ago. To be safe, stockholders should sell BA stock before the company’s earnings disappoint.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.