US companies have barely managed to deliver positive earnings growth so far in this quarterly earnings season, but the big test is coming in the next week.
Almost a quarter of the S&P 500 SPX,
is set to report results, with those companies representing 39% of the index by market value, according to calculations based on FactSet data. Given that the S&P 500 is weighted by market capitalization, this list of companies will have an extraordinarily large impact on the index’s earnings trajectory.
Earnings for the fourth consecutive quarter are expected to decline once all results are known for the latest period, but the companies that have reported so far have exceeded expectations overall.
The FactSet consensus is now models a 5% earnings decline for the index, compared to the 6.3% expected decline a week ago. If earnings growth eventually turns out positive for the S&P 500, it would end the current earnings recession that occurs when corporate earnings fall for two or more consecutive quarters.
Apple Inc. AAPL,
and Facebook Inc. FB,
are among the highlights of next week’s slate, along with Tesla Inc. TSLA,
which will deliver results for the first time since joining the S&P 500. All three high-profile companies will report Wednesday afternoon and are expected to have record sales in the holiday quarter.
The holiday quarter is always crucial for Apple, which is releasing new iPhones in the fall. With a launch slightly later than usual this year due to the pandemic pushing sales in the period, Apple is widely expected to post its highest-ever quarterly sales and its first-ever total above $ 100 billion. The technology giant also likely continued to see benefits from distance working and distance learning trends that fueled the strong sales of iPads and Macs during the COVID-19 crisis.
Full preview: Prepare for the first quarter of $ 100 billion in Apple history
Facebook is also expected to post what should easily be a record quarter given the strong digital ad trends over the holiday season. Still, the company will face questions about user engagement and a decision to ban Donald Trump from the platform indefinitely for his role in sparking the violent riot in the Capitol. Bernstein analyst Mark Shmulik points to “continued usage fatigue” on social media, as well as a “conversation skewed toward unaffordable political events.”
Full Preview: Facebook revenues are still thriving amid pandemic, economic slowdown, and antitrust investigations
Tesla has already released full-year delivery figures that exceed analyst expectations, and all eyes will be on the company’s 2021 outlook. RBC Capital Markets analyst Joseph Spak expects a delivery forecast of 825,000 to 875,000 million units for the full year. year. although Chief Executive Elon Musk said during Tesla’s latest earnings call that an analyst was “not far off” as he expected 840,000 to a million deliveries in 2021.
Full Preview: Could Tesla’s Revenue Growth Match Stock Gains?
Here’s what to look into even more in the next week, with reports from 117 members of the S&P 500 and 13 Dow Jones Industrial Average DJIA,
components.
In the air
BA from Boeing Co.,
the journey remains turbulent, even as the company’s 737-MAX jets have been re-certified after nearly two years on the ground. Although the company began delivering these aircraft, “the rate at which all 450 737-MAXs parked will be delivered is determined by the airlines’ ability to absorb both the aircraft and air traffic,” said Benchmark Company analyst Josh Sullivan.
Boeing’s Wednesday morning report offers perspective on the company’s recovery expectations amid the pandemic, though Sullivan sees volatility from a recent equity offering and the impact of the COVID-19 crisis on airlines.
U.S. carriers’ reports in the fourth quarter have so far been bleak, and American Airlines Group Inc. AAL,
and Southwest Airlines Co. LUV,
offer more on Thursday mornings.
Can you hear me now?
Verizon Communications Inc. VZ,
leads Tuesday morning off a busy week of telecommunications revenue, followed by AT&T Inc. T,
Wednesday morning and Comcast Corp. CMCSA,
Thursday morning.
For the wireless carriers, a major issue is the impact of iPhone 12 promotions on recent results. Investors will also be looking for information on a recent spectrum of wireless auctions that will be critical to 5G network deployments. While the bids have not yet been made public, the auction generated record spending and it is expected that AT&T and Verizon have both paid nicely to confirm their position. The question for investors is what impact these offers will have on the financial positioning of the companies.
Full Preview: AT&T Revenue to Start a Decisive Year for Telecom Giant
AT&T and Comcast have more media coverage than Verizon, and those two companies have been trying to deal with the new reality created by the pandemic. Both companies have taken steps to put more emphasis on streaming their videos given theater closings, and the financial implications of these moves will be worth seeing.
Pay
The changing situation with the pandemic may not be more evident than in Visa Inc.’s results. V,
Mastercard Inc. MA,
and American Express Co. AXP,
that are boosting the global consumer spending landscape. The companies should provide insight into the travel recovery towards the end of the year, as well as the impact of recent lockdowns.
Susquehanna analyst James Friedman recently wrote that his Mastercard revenue projection of $ 3.97 billion is slightly below consensus, although he also asked, “Can anyone really care about Q4 2020?” Friedman is bullish on mobile payments and the dynamics of online shopping, which hint at “positive trends in the future” for Mastercard, which reports Thursday morning. Visa follows that afternoon, while American Express starts the week with its Tuesday morning report.
The chip saga continues
Advanced Micro Devices Inc. AMD,
is ready to continue benefiting from Intel Corp.’s INTC,
stumbles, which analysts expect will take some time, even as Intel prepares for a new, technology-focused chief executive to take the helm.
“We have little faith that Intel will be able to close that transistor gap quickly, and therefore expect it to continue to lose market share for the foreseeable future,” Jefferies analyst Mark Lipacis wrote after Intel’s latest earnings report. AMD will show how that dynamic has played on its side of the equation when it posts numbers Tuesday afternoon.
Full Preview: If Intel gets its act together, can AMD maintain a bloated valuation?
Other chip makers to report in the coming week include Texas Instruments Inc. TXN,
on Tuesday afternoon; Xilinx Inc. XLNX,
which is about to be acquired by AMD, on a Wednesday afternoon report, when it will be joined by chip equipment maker Lam Research Corp. LRCX,
; and Western Digital Corp. WDC,
on Thursday afternoon.
Busy week for the Dow
Among the 13 members of the Dow Jones Industrial Average DJIA,
who will report this week are 3M Co MMM,
, Johnson & Johnson JNJ,
American Express, Verizon and Microsoft Corp. MSFT,
they all report Tuesday.
“In the short term, we see the readout of the company’s COVID-19 vaccine as an important emerging catalyst and believe an efficacy in the 80% + range would suggest a clear role for the product in the market,” wrote Chris Schott, JP Morgan analyst, on Johnson & Johnson. .
Cowen & Co. analyst J. Derrick Wood sees tough comparisons for Microsoft, especially in the Azure and server businesses, although he expects a more favorable situation in the future.
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Wednesday brings results from Boeing and Apple, while Thursday brings McDonald’s Corp. MCD,
Dow Inc. DOW,
and Visa. Honeywell International Inc. HON,
Chevron Corp. CVX,
and Caterpillar Inc. CAT,
round off the week Friday morning.