3 Things to Watch in the Stock Market Next Week

By Demitrios Kalogeropoulos Markets Fool.com

Stocks churned higher last week, with both theDow Jones Industrial Average(DJINDICES: ^DJI)and the S&P 500 (SNPINDEX: ^GSPC)pushing closer to 6% returns so far in 2017.

Continue Reading Below

^DJI data by YCharts

The next few trading days include highly anticipated earnings reports from some of the biggest names in their respective industries, including Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), Costco (NASDAQ: COST), and Priceline (NASDAQ: PCLN).

Warren Buffett's shareholder letter

Warren Buffett's Berkshire Hathaway will post its earnings results over the weekend, putting the stock in focus when markets open on Monday morning. Investors are expecting good news from the $400 billion conglomerate that traces its beginnings to a defunct textile factory in Massachusetts. After all, Buffett's investment portfolio includes heavy bets on the booming financial sector, and so the company should show awesome paper gains.

Continue Reading Below

Its collection of fully owned businesses will likely flex their earnings muscles, too, as declines in the railroad, utilities, and energy division are outweighed by gains in other areas of the portfolio.

Buffett's annual letter to shareholders makes for essential reading since it provides insight into his thinking about competitive moats, stock market valuations, and underlying earnings strength. It's just a bonus that this economics lesson tends to come sprinkled with the CEO's trademark wit.

Last year, for example, in explaining why Berkshire stays flexible in pursuing either stocks or full businesses, Buffett referred to Woody Allen's joke that one advantage of being bi-sexual is that it doubles your chance of finding a date. "In like manner -- well, not exactly like manner," Buffett explained, "our appetite for either operating businesses or passive investments doubles our chances of finding sensible uses for Berkshire's endless gusher of cash."

Costco's membership trends

Warehouse retailer Costco is hoping to get back to its winning ways with its quarterly report on Thursday. Its most recent fiscal year was hurt by unusually weak customer traffic and a rare decline in the critical membership renewal rate.

Image source: Costco.

But there's reason for growing optimism. The retailer recently announced that comparable-store sales growth jumped to a 6% pace in January -- up from December's 3% uptick.

That suggests Costco could be climbing back toward the market-beating 4% customer traffic spike it enjoyed for six straight fiscal years before 2016's slip. At the same time, investors will be looking for membership trends to recover from the drop that followed a disruptive switchover to a new co-branded credit card. It's also possible that Costco will announce plans to raise its membership fees for the first time in years, which would supercharge profit growth given that most of its earnings come from subscriber fees and not product markups.

Priceline's bookings growth

Priceline's stock is at all-time highs following a banner peak summer season for the travel booking specialist. The company handled 150 million room night reservations in the third quarter, up 29% from the prior year. That success helped generate a 23% boost in non-GAAP income, which management attributed to "the favorable market in which we operate as well as the value of our diverse global platform."

Image source: Priceline.

CEO Jeffrey Boyd and his executive team forecast a slight slowdown for the fourth quarter, with room night bookings set to grow by between 20% and 25%. Investors are also expecting to see healthy earnings growth but also a slight decrease in profitability as the company continues to invest heavily in marketing its brands and improving its online shopping experience. Earnings should rise by between 14% and 20% to as much as $12 per share.

10 stocks we like better than Costco Wholesale
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Costco Wholesale wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Demitrios Kalogeropoulos owns shares of Berkshire Hathaway (B shares) and Costco Wholesale. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Costco Wholesale, and Priceline Group. The Motley Fool has a disclosure policy.