The considerable gains of Big Tech and the big banks are likely to generate a surprising increase in corporate profits this profit season.
S&P 500 SPX index,
companies are now expected to show positive profit growth of 1.7% during the fourth quarter, with 58% of the results already obtained. This would allow the index to emerge from a profit recession, which exists when corporate profits fall year-on-year for two or more quarters in a row.
At the end of last year, analysts expected profits for the December quarter to fall by 9.3%, which would have meant the fourth consecutive quarter of year-on-year falls. Overall projections began to improve slowly as more results arrived and finally turned positive this week.
To help boost momentum, high profit rates occurred in the financial services, information technology and communications sectors. Because the S&P 500 is weighted by market value, larger firms have a more significant impact on the global earnings trajectory of the index.
The financial sector has been the main contributor to rising profits, according to FactSet senior earnings analyst John Butters. The combined growth rate of the sector, which combines actual and projected results depending on whether a company has still presented profits, is now at 17.2% positive, while expectations were of a decline of 9, 4% from 13 December.
Companies that had significant impacts include JPMorgan Chase & Co.
which exceeded earnings expectations by 44%, while Goldman Sachs Group Inc. GS,
will beat 62%, Citigroup Inc. C,
won by 55%, Morgan Stanley MS,
beat 48%, and Capital One Financial Corp. COF,
has exceeded estimates by 87%
In the information technology industry, big profits outweigh Apple Inc. AAPL,
Intel Corp. INTC,
and Microsoft Corp. MSFT,
they have helped drive the sector’s combined growth rate to 15.6%, from an expectation of 1.5% in December. Alphabet Inc. GOOG,
GOOGL,
and Facebook Inc. FB,
it also exceeded expectations by a wide margin, raising the combined growth rate of the communications services sector to 6% positive compared to a projected decline of 12.9% at 31 December.
Outside of these three sectors, Amazon.com Inc. AMZN,
and Ford Motor Co. F,
it also gave big profit surprises which Butters said contributed significantly to the increase in the combined profit growth rate.
Boeing Co. BA,
has been the biggest drag, as the company reported a tight loss of $ 15.25 per share, while analysts expected a loss of $ 1.78 per share. Without Boeing’s results, the combined growth rate for the S&P 500 would be more than double what it is now, Butters wrote.
In total, 81% of companies that have yielded results so far have made better profits than expected, he said.
Another busy earnings record appears next week, with 77 members of the S&P 500 due to report, including three companies that are also on the Dow Jones industrial average. Walt Disney Co. DIS,
and Cisco Systems Inc. CSCO,
they are among the most important names because of the publications.
Here’s what to look for:
Current
Disney is expected to release another quarter on a red Thursday afternoon as the pandemic continues to weigh on its theme park and media businesses, but investors seem willing to outperform the pandemic-affected company. , according to LightShed Partners analyst Richard Greenfield.
The key interest in the Disney report will be the company’s progress with its Disney + streaming service. Disney continues to grow its subscriber base at a rapid pace, but after the company’s latest report, there was some concern about how much of that growth came from those who had signed up for the Indian Hotstar product. company, through which Disney generates a much lower average revenue per user.
Disney Earnings Preview: Can Disney + keep up its torrid pace to maintain the Magic Kingdom?
A new chapter for Twitter
Twitter Inc. TWTR,
probably benefited from the same strong advertising trends that helped Pinterest Inc.’s PINS companies,
and Facebook late last year, but those results aren’t as important as what’s coming.
Twitter executives are likely to face questions Tuesday afternoon about user participation trends following the decision to permanently ban former President Donald Trump from the platform for his role in inciting January violence in the United States Capitol.
“Regardless of the opinion of the president’s recent political actions or Twitter, we see Trump as a unique driving force for activity and commitment to the platform that will not be easily replaced,” the Wells Fargo analyst wrote. , Brian Fitzgerald, after the ban was announced.
Bernstein analyst Mark Shmulik raised the hypothesis that while the Twitter engagement could be successful, the ban could lead to an “increase in safe advertising inventory for brands,” as some advertisers did not want sites close to Trump-related content to appear before the ban.
Opinion: Apple’s privacy changes affect more than Facebook
Nets
It looks like the outlook for IT spending is improving, which Evercore ISI analyst Amit Daryanani said could get slightly better results than expected for Cisco when the company released results on Tuesday afternoon. It will seek information on the vision of new Chief Financial Officer R. Scott Herren, as well as advances in the company’s efforts to generate more subscription revenue.
Carpool recovery?
Lyft Inc. LYFT,
and Uber Technologies Inc. UBER,
they probably continued on their way to recovery during the fourth quarter, but Shmulik warned that the company’s growth rate during the period could be flat or even slightly below the third quarter rate, given a increase in global cases, the emergence of new COVID. -19 strains, and winter weather.
Read: Uber’s growing and exciting delivery business, the possible recovery of attractions, has bullish analysts
Lyft reports on Tuesday afternoon, while Uber follows it a day later. Uber executives are likely to discuss the company’s recently announced decision to buy Drizly, an alcohol delivery service.