U.S. companies have barely managed to make positive gains in this season of quarterly results, but the big test comes next week.
Nearly a quarter of the S&P 500 SPX,
is expected to report results, with companies accounting for 39% of the market value index, according to calculations based on FactSet data. Since the S&P 500 is weighted by market capitalization, this list of companies will have an excessive impact on the earnings trajectory of the index.
Earnings are expected to decline for the fourth consecutive quarter once all results have been obtained over the last period, but the companies that have reported so far have exceeded expectations overall.
The FactSet consensus now models a 5% drop in index profits, compared to the 6.3% drop projected a week ago. If the S&P 500’s profit growth ended up being positive, it would end the current profit recession, which occurs when corporate profits fall for two or more consecutive quarters.
Apple Inc. AAPL,
and Facebook Inc. FB,
are among the highlights of next week’s list, along with Tesla Inc. TSLA,
which will deliver results for the first time since it became a member of the S&P 500. The three high-profile companies are scheduled to present on Wednesday afternoon and are expected to produce record revenue during the holiday quarter.
The holiday neighborhood is always crucial for Apple, which launches new iPhones in the fall. With a slightly later-than-usual release this year due to the pandemic that boosted sales in the period, Apple is expected to record its largest quarterly revenue in history and the first to exceed $ 100 billion . The tech giant probably also continued to see benefits from remote work and remote school trends, which have boosted strong iPad and Mac sales during the COVID-19 crisis.
Full preview: Get ready for Apple’s first $ 100 billion quarter in history
Facebook is also expected to post what should easily be a record quarter given strong digital advertising trends during the holiday season. Still, the company will face questions about user involvement and the decision to ban Donald Trump from the platform indefinitely for his role in inciting violent revolt at the U.S. Capitol. Bernstein analyst Mark Shmulik points to “fatigue for continued use” on social media, as well as a “biased conversation toward non-monetizable political events.”
Full preview: Facebook’s profits continue to flourish amid a pandemic, economic slowdown and antitrust control
Tesla has already revealed full-year delivery numbers that advanced analysts ’expectations and all eyes will be on the company’s outlook for 2021. RBC Capital Markets analyst Joseph Spak predicts a delivery forecast of 825,000 to 875 billion units for the full year, though chief executive Elon Musk said in Tesla’s latest earnings call that an analyst was “not far away” for having expected between 840,000 and one million deliveries during 2021.
Full preview: Can Tesla’s sales growth coincide with rising stocks?
Here’s what to see next week, which reports 117 members of the DJIA S&P 500 and 13 Dow Jones Industrial Average,
components.
In the air
BA from Boeing Co.,
the journey remains turbulent, even as the company’s 737-MAX aircraft were re-certified after being landed for nearly two years. Although the company began delivering these aircraft, “the pace of delivering the parked 450 737-MAX will be dictated by the airline’s customers’ ability to absorb the aircraft and the demand for air traffic,” according to the Benchmark Company analyst Josh Sullivan.
The Boeing report on Wednesday morning will provide insight into the company’s recovery expectations amid the pandemic, though Sullivan sees future volatility stemming from a recent equity offering and the impact of the COVID-19 crisis in airlines.
Fourth-quarter reports from U.S. airlines have been bleak so far, and American Airlines Group Inc. AAL,
Southwest Airlines Co. LUV,
offer more on Thursday mornings.
Can you hear me now?
Verizon Communications Inc. VZ,
has a busy week of telecommunications earnings on Tuesday morning, followed by AT&T Inc. T,
Wednesday morning and Comcast Corp. CMCSA,
Thursday morning.
For mobile phone companies, a key issue will be the impact of iPhone 12 promotions on recent results. Investors will also be looking for information on a recent wireless auction offering that will be crucial for 5G network deployments. Although bids have not yet been made public, the auction generated record spending and AT&T and Verizon are expected to have paid very well 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 gains to start definitive year for telecom giant
AT&T and Comcast have more media exposure than Verizon, and these two companies have been trying to fight the new realities caused by the pandemic. Both companies have made moves to further emphasize the broadcast with their movie boards considering the closure of the theater, and the financial implications of those moves will be worth seeing.
Paying
The evolution of the situation with the pandemic is perhaps not reflected more clearly than in the results of Visa Inc. V,
Mastercard Inc. MA,
and American Express Co. AXP,
which have a pulse on the global consumer spending landscape. Companies should provide information on the recovery in travel towards the end of the year, as well as on the impact of recent closures.
Susquehanna analyst James Friedman recently wrote that his $ 3.979 billion Mastercard revenue projection is slightly below the consensus view, though he also asked, “Does anyone really care about the fourth quarter of 2020? ” Friedman is optimistic about the dynamics of mobile payments and online shopping suggesting “positive trends” for Mastercard, which reports Thursday morning. Visa continues that afternoon, while American Express launches the week with its Tuesday morning report.
The saga of chips continues
Advanced Micro Devices Inc. AMD,
is about to continue to benefit from Intel Corp.’s INTC,
stumbles, which analysts expect to 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 close this transistor gap quickly, so we expect it to continue to lose ground in the foreseeable future,” Jefferies analyst Mark Lipacis wrote after the latest earnings report. ‘Intel. AMD will show how this dynamic has played its part in the equation when it releases numbers Tuesday afternoon.
Full preview: If Intel shares its performance, can AMD maintain an inflated valuation?
Other chip makers that will present next week include Texas Instruments Inc. TXN,
on Tuesday afternoon; Xilinx Inc. XLNX,
which is in line to acquire it by AMD, the report reported Wednesday afternoon, when chip maker Lam Research Corp. will join. LRCX,
; and Western Digital Corp. WDC,
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 this reports on Tuesday.
“In the short term, we see the reading of the company’s COVID-19 vaccine as a key catalyst for the future and we believe that efficacy in the 80% + range would suggest a clear role for the product in the market,” he wrote Chris Schott, JP Morgan analyst, on Johnson & Johnson.
Cowen & Co. analyst J. Derrick Wood sees difficult comparisons for Microsoft, especially in Azure and server companies, although he expects a more favorable situation for the future.
Full preview: SolarWinds hack can be a really good thing for Microsoft
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. CLC,
and Caterpillar Inc. CAT,
complete the week Friday morning.