3 Things to Watch in the Stock Market This Week

By Demitrios Kalogeropoulos Markets Fool.com

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Stocks posted another week of gains last week. And even though the Dow Jones Industrial Average(DJINDICES: ^DJI)never cracked the 20,000 point level, it and the S&P 500 (SNPINDEX: ^GSPC)index ticked higher to keep firmly in rally mode.

The week ahead could bring big portfolio swings for shareholders of Netflix (NASDAQ: NFLX), CSX (NASDAQ: CSX), and General Electric (NYSE: GE), as the companies will post highly anticipated earnings announcements over the next few trading days.

Netflix's profit forecast

Netflix shares are at all-time highs heading into this week's earnings report. The streaming video titan trounced growth estimates in its last quarterly outing as exclusive content like Stranger Things and season 2 of Narcos kept subscribers binging. According to the official forecast from CEO Reed Hastings and his executive team, Netflix should add 5.2 million members -- up sharply from the prior quarter's 3.6 million user gain.

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That figure would represent a slowdown from the prior year, though, since cancelation rates are still elevated due to the price hikes it's rolling out on its existing user base. The international segment, meanwhile, is up against a tough comparison with a prior-year period that included launches in the big markets of Spain, Portugal, and Italy.

Netflix investors will get their first hints as to the company's long-term profit picture now that it is done expanding into new markets and finished pushing new pricing plans onto its U.S. members. Hastings and his team have been telling investors that they expect to start posting significant global earnings beginning in 2017, and this week, the company will finally back those words up with some hard numbers.

CSX's volume

CSX shares have rocketed higher over the last year as the business inches closer to a growth rebound. Sales in the third quarter declined 8%, marking an improvement over the prior quarter's 12% drop and the 14% slump that the railroad giant endured in the first quarter.

Image source: CSX.

Consensus estimates are calling for a 3% uptick when CSX announces fourth-quarter results this week, which would be its first increase in almost two years.

The boost should come despite a long-term slump in coal revenue that's seen annual sales fall by nearly $2 billion since 2011. But volumes are also down sharply in its agricultural, industrial, and construction segments.

Cost cuts will shield profits from the worst of those declines. After all, the employee base has dropped to just 27 thousand from 31 thousand a year ago. But CSX's management is still expecting earnings to fall in the fourth quarter. Its forecast for the coming year will be closely watched by investors since it could include volume rebounds that, combined with efficiency savings, will power sharp earnings growth in the coming fiscal year.

General Electric's profit margin

General Electric's stock fell behind the broader market last year as tough selling conditions forced the conglomerate to lower its growth outlook midway through the year. Organic sales gains are now expected to be about 1% for 2016, rather than the 3% CEO Jeff Immelt and his team had first predicted.

But a rebound in the oil and gas industry could set the stage for a brighter year ahead. In fact, GE last month predicted organic sales gains of 4% at the midpoint of guidance. Margin expansion, meanwhile, is likely to help earnings grow at a faster pace, up double digits in 2017.

Shareholders have plenty to look forward to in 2017, including the closing of the Baker Hughes merger and full integration of the Alstom acquisition. These deals should aid in diversifying the business and, ideally, in raising profitability so that earnings growth is both faster and more predictable over the coming years.

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Demitrios Kalogeropoulos owns shares of Netflix. The Motley Fool owns shares of and recommends Netflix. The Motley Fool owns shares of General Electric. The Motley Fool recommends CSX. The Motley Fool has a disclosure policy.