US companies have barely managed to achieve positive earnings growth so far this quarterly results season, but the big test comes next week.
Nearly a quarter of the S&P 500 SPX is expected to report results, with those companies making up 39% of the index by market value, according to calculations based on FactSet data. Since the S&P 500 is weighted by market capitalization, this list of companies will have too much impact on the index profit trajectory.
Earnings are expected to decline for the fourth consecutive quarter once all results are available for the latest period, but the companies that have reported so far have exceeded expectations in aggregate.
The FactSet consensus now models a 5% earnings decline for the index, compared to the 6.3% decline forecast a week ago. If profit growth for the S&P 500 were to end positively, it would mark the end of the current earnings recession, which occurs when corporate profits fall for two or more consecutive quarters.
Apple Inc. AAPL and Facebook Inc. FB are among the highlights on next week’s list, along with Tesla Inc. TSLA, which will deliver results for the first time since becoming a member of the S&P 500. All three companies of high profile are scheduled for the report Wednesday afternoon and should have produced record revenue in the holiday quarter.
The holiday quarter is always crucial for Apple, which releases new iPhones in the fall. Launching slightly later than usual this year due to the pandemic driving sales over the period, Apple is expected to post its largest quarterly revenue ever and its first total in excess of $ 100 billion. The tech giant also likely continued to see benefits from remote work and distance education trends, which drove strong iPad and Mac sales during the COVID-19 crisis.
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Facebook is also expected to post what should easily be a record quarter given the strong trends in digital advertising over the holiday period. However, the company will face questions about user engagement and the decision to ban Donald Trump from the platform indefinitely for his role in inciting the violent uprising on the United States Capitol. Bernstein analyst Mark Shmulik points out “continued use fatigue” through social media, as well as an “unbalanced conversation towards non-monetizable political events”.
Full preview: Facebook’s earnings continue to flourish amid pandemic, economic slowdown, and antitrust scrutiny
Tesla has already revealed full-year delivery numbers that have exceeded analysts’ expectations and all eyes will be on the company’s 2021 outlook. RBC Capital Markets analyst Joseph Spak expects a delivery forecast from 825,000 to 875,000 million units for the full year, although CEO Elon Musk said in Tesla’s latest earnings call that an analyst “wasn’t far off” to expect 840,000 to one million deliveries in 2021.
Full preview: Can Tesla’s sales growth match the rise in shares?
Here’s what else to keep an eye out for next week, which brings up reports from 117 members of the S&P 500 and 13 Dow Jones Industrial Average DJIA components.
Up in the air
The Boeing Co.’s journey remains turbulent even though the company’s 737-MAX jets have been recertified after being grounded for nearly two years. Although the company has begun deliveries of these aircraft, “the pace of delivery of all parked 450 737-MAXs will be dictated by the ability of airline customers to absorb aircraft and air traffic demand,” according to the analyst. Benchmark Company Josh Sullivan.
Boeing’s Wednesday morning report will offer a perspective on the company’s recovery expectations amid the pandemic, though Sullivan sees future volatility stemming from a recent stock offering and the impact of the COVID-19 crisis on airlines.
Fourth quarter reports from US airlines have been gloomy so far, and American Airlines Group Inc. AAL and Southwest Airlines Co. LUV are offering more on Thursday morning.
Can you hear me now?
Verizon Communications Inc. VZ opens a busy week of telecommunications earnings on Tuesday morning, followed by AT&T Inc. T on Wednesday morning and Comcast Corp. CMCSA on Thursday morning.
For wireless carriers, a key issue will be the impact of iPhone 12 promotions on recent results. Investors will also be looking for information on a recent range of wireless auction offerings that will be crucial for 5G network deployments. Although the bids have not yet been made public, the auction has pushed record spending and AT&T and Verizon are both expected to have paid handsomely to assert their position. The question for investors is what impact these offers will have on the financial positioning of companies.
Full preview: AT&T earnings to kick off a decisive year for the telecom giant
AT&T and Comcast have more media exposure than Verizon, and those two companies have tried to address the new realities brought by the pandemic. Both companies have moved to emphasize streaming more with their movie lists given theaters closing, and the financial implications of these moves are worth looking at.
The evolution of the situation with the pandemic is perhaps no more clearly reflected than in the results of Visa Inc. V, Mastercard Inc. MA and American Express Co. AXP, which have a boost in the global consumer spending landscape. Companies are expected to provide information on the resumption of travel towards the end of the year, as well as the impact of recent lockdowns.
Susquehanna analyst James Friedman wrote recently that his $ 3.97 billion Mastercard revenue projection is slightly lower than the consensus view, though he also asked, “Does anyone really care about Q4 2020?” Friedman is optimistic about mobile payments and online shopping dynamics suggesting “positive trends in the future” for Mastercard, which he reports Thursday morning. Visa follows that afternoon, as American Express kicks off the week with its Tuesday morning report.
The chip saga continues
Advanced Micro Devices Inc. AMD is poised to continue to take advantage of Intel Corp.’s INTC stumbles, which analysts expect will last for some time even as Intel prepares for a new technology-oriented CEO to take the helm. .
“We have little confidence that Intel will be able to quickly close the transistor gap, and so we expect it to continue losing shares for the foreseeable future,” Jefferies analyst Mark Lipacis wrote after Intel’s latest earnings report. . AMD will show how that dynamic played its part in the equation when it releases the numbers on Tuesday afternoon.
Full preview: If Intel gets down to business, can AMD maintain a high rating?
Other chipmakers who have reported in the coming week include Texas Instruments Inc. TXN Tuesday afternoon; Xilinx Inc. XLNX, which is expected to be acquired by AMD, in Wednesday afternoon’s report when it will be joined by chip maker Lam Research Corp. LRCX; and Western Digital Corp. WDC on Thursday afternoon.
Busy week for the Dow
Among the 13 members of the DJIA Dow Jones Industrial Average to report this week are 3M Co MMM. , Johnson & Johnson JNJ, American Express, Verizon, and Microsoft Corp. MSFT, all reporting Tuesday.
“In the short term, we see the company’s COVID-19 vaccine reading as a major impending catalyst and believe efficacy in the 80% + range would suggest a clear role for the product in the market,” the analyst wrote. by JP Morgan Chris Schott of Johnson & Johnson.
Cowen & Co. analyst J. Derrick Wood sees tough comparisons for Microsoft, especially in its Azure and server businesses, although he expects a more favorable situation for the future.
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Wednesday brings the results of Boeing and Apple, while Thursday presents McDonald’s Corp. MCD, Dow Inc. DOW and Visa. Honeywell International Inc. HON, Chevron Corp. CVX and Caterpillar Inc. CAT complete the week on Friday morning.
- According to this source Apple, Tesla and Facebook are all set to report record sales in their busiest earnings week
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