Earnings Watch: Who Could Surprise Markets Next Week?

The Q2 2026 earnings season is already nearing its end, but there is still a number of interesting companies that are only now reporting. Many of them are mid cap companies where the outlook, both positive and negative, remains uncertain. Understanding their specifics can help position properly ahead of earnings and draw better conclusions from the releases.

Lumentum

The company is one of the key beneficiaries of the explosion in demand for computing power. Lumentum is a leader in one of the most interesting industries, one that is only just spreading its wings and may become one of the foundations of the next expansion of the technology sector. This is photonics.

• The company is regularly undervalued by the market. Across the last 8 earnings calls, it beat market expectations in all 8, and 6 of those were followed by a rise in the share price.
• The growth rate is accelerating and profits are rising exponentially. This suggests that markets are not only underestimating the company’s earnings, but as the current earnings trend continues, the misses could become larger. The current quarter points in that direction.
• Equally important, if not more important, profit is growing faster than revenue, which indicates high efficiency and significant operating leverage.
• The US government and the Department of Commerce are reportedly working on a ban on imports of optical switches from China to prevent dependence on Chinese components. While the work on the proposal is still at an early stage, the impact on results, even if not large, could already be visible.
• To genuinely beat market expectations, the company must maintain the pace of expansion in both margin and revenue. The market currently expects around USD 1 billion in revenue and EPS of about USD 3, with a gross margin of at least 35%. A real surprise appears only above the USD 1.02 to 1.05 billion level, with EPS around USD 3.1 to 3.2 and a gross margin no lower than 36%.

Coherent

Coherent is also a photonics focused company and will benefit from many of the same supportive factors as Lumentum, but there are differences. Coherent does not yet have as strong a position. The fundamentals are good, but expectations are not yet as relatively high as they are for Lumentum.

• The biggest contribution to profitability expansion is the product mix. This means not only a broader shift toward the data center segment, but also a focus on specific products where the company’s margins are best. This matters because while growth in the data center segment is about 40%, growth in industrial is in the low single digits.
• The key for the market reaction will be maintaining revenue growth dynamics above 20% year over year, while keeping gross margin above 40%. At the same time, beating USD 1.5 in EPS and presenting optimistic guidance from management will be important. Without that, the reaction to the results may be muted.
• The biggest risk is overly aggressive expansion of production capacity. Expanding too quickly or too expensively could scare investors due to CAPEX putting pressure on free cash flow.

Brinker International

Brinker is a group that owns a number of iconic US brands such as Chipotle and Chili’s. Previous quarters were fairly positive in terms of results, but in part that growth came off a relatively low base. Today the base is already fairly high and expectations are greater.

• Market and analyst expectations do not account for the asymmetry of risk, which is currently clearly to the disadvantage of buyers.
• Results from retailers and other budget chains such as McDonald’s, as well as macroeconomic data, have shown that lower income consumers are under pressure, while wealthier consumers are concentrating around businesses better tailored to them. The market will expect an increase in restaurant visits, and that may not be possible.
• Chipotle is particularly sensitive to gasoline, beef, and labor costs, while having fewer tools and less ability to manage them. Consensus expects roughly USD 10 to 11 EPS, and in the current environment such a result will be very difficult to achieve.
• International chains can manage margin, labor, and logistics on a global level, which gives them significant flexibility. Smaller groups focused on the US do not have that ability.

Cardinal Health

The healthcare sector has had a strong period in terms of valuations, but that has made the growth the market now expects from these companies less rational.

• In a way, the company has set the bar high itself by publishing guidance of USD 10.7 to 10.8 EPS for the full year. However, Cardinal Health is a unique example where profitability is not everything, because the scale of growth also matters. In the previous quarter, the stock fell after earnings despite strong EPS because it disappointed on revenue. This is due to the Global Medical segment performing very poorly, with profit down more than 30%.
• The company’s overall results depend on performance in the specialty pharmaceuticals segment. Conditions in that segment are currently excellent, as confirmed by analyst reports, for example on McKesson, but that may not be enough to lift the shares of the entire group.
• Good results are already in the price. The mentioned USD 10.8 EPS is the starting point, not the goal. The market expects revenue growth, margin expansion in growth segments, and maintaining margins where the market is shrinking. In addition, optimistic guidance for the next year will be necessary for a fully positive reception of the results.

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