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U.S. companies have barely managed to post positive earnings growth so far in this quarterly earnings season, but the big test comes in the week ahead.
Almost a quarter of the S&P 500 SPX,
is set to publish results, with companies accounting for 39% of the index by market value, according to calculations based on FactSet data. Since the S&P 500 is market cap weighted, this list of companies will have a disproportionate impact on the index’s profit trajectory.
Profits are expected to decline for the fourth quarter in a row once full results are known for the final period, but the companies that have released so far have beaten expectations overall.
The FactSet consensus now models a 5% drop in earnings for the index, compared to the 6.3% drop projected a week ago. If the S&P 500’s earnings growth ends up being positive, that 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 of next week’s slate, along with Tesla Inc. TSLA,
which will deliver results for the first time since becoming a member of the S&P 500. The top three companies are expected to report Wednesday afternoon and are expected to have produced record revenue in the holiday quarter.
The vacation district is still crucial for Apple, which is releasing new iPhones in the fall. With a launch slightly later than usual this year due to the pandemic driving sales in the period, Apple is widely expected to post its highest quarterly revenue on record and its first-ever total of over $ 100 billion. of dollars. The tech giant has likely continued to see the benefits of remote work and distance education trends, which have driven strong iPad and Mac sales throughout 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 during the holiday season. Nonetheless, the company will face questions over user engagement and a decision to indefinitely ban Donald Trump from the platform because of his role in inciting the violent riot on the U.S. Capitol. Bernstein analyst Mark Shmulik points to “continued use fatigue” on social media as well as “a conversation biased towards non-monetizable political events.”
Full Snapshot: Facebook Profits Still Booming Amid Pandemic, Economic Downturn, And Antitrust Control
Tesla has already disclosed full-year delivery numbers that have exceeded analysts’ expectations, and all eyes will be on the company’s outlook for 2021. RBC Capital Markets analyst Joseph Spak predicts a expected delivery of 825,000-875,000 million units for the full year, although chief executive Elon Musk said on Tesla’s latest earnings call that an analyst was “not far” away. expect 840,000 to one million deliveries in 2021.
Full Snapshot: Can Tesla’s Sales Growth Match the Rise in Shares?
Here’s what to watch out for in the coming week, which features reports from 117 members of the S&P 500 and the 13th Dow Jones Industrial Average DJIA,
Components.
In the air
BA from Boeing Co.,
The trip remains turbulent even as the company’s 737-MAX jets have been recertified after being grounded for nearly two years. Although the company has started deliveries of these planes, “the pace of delivery of the parked 450 737-MAXs will be dictated by the ability of airline customers to absorb the planes as well as air traffic demand,” said Josh Sullivan, Benchmark Company analyst.
Boeing’s Wednesday morning report will offer a perspective on the company’s recovery expectations amid the pandemic, although Sullivan sees the volatility ahead resulting from a recent stock offering and the impact of the crisis in the world. COVID-19 on airlines.
U.S. airlines’ fourth quarter reports have been grim so far, 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,
kicks off a busy week of telecoms results Tuesday morning, followed by AT&T Inc. T,
Wednesday morning and Comcast Corp. CMCSA,
Thursday morning.
For wireless carriers, a key issue will be the impact of iPhone 12 promotions on recent results. Investors will also seek information on a recent wireless auction offering spectrum that will be crucial for 5G network deployments. While the bids have yet to be made public, the auction resulted in record spending and AT&T and Verizon are both expected to have paid generously to assert their position. The question for investors is to know what impact these offers will have on the financial positioning of companies.
Full Snapshot: AT&T Profits Kick Off Decisive Year for Telecom Giant
AT&T and Comcast have more media exposure than Verizon, and both of these companies have tried to deal with the new realities brought on by the pandemic. Both companies have taken steps to put more emphasis on streaming with their movie slates given theatrical closures, and the financial implications of those moves will deserve to be watched.
Pay
The development of the situation with the pandemic may not be reflected more clearly than in the results of Visa Inc. V,
Mastercard Inc. MA,
and American Express Co. AXP,
that have a boost on the global consumer spending landscape. Businesses are expected to provide an overview of 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 lower than consensus view, although he also asked, “Does anyone really cares about the fourth quarter of 2020? ” Friedman is bullish on mobile payments and online shopping dynamics that suggest “positive trends ahead” for Mastercard, which reported Thursday morning. Visa follows this afternoon, while American Express kicks off the week with its Tuesday morning report.
The flea saga continues
Advanced Micro Devices Inc. AMD,
is set to continue to benefit from Intel Corp.’s INTC,
stumbles, which analysts expect to last for a while even as Intel braces for the arrival of a new tech-focused chief executive.
“We are unconvinced that Intel will be able to quickly close this transistor gap, and so we expect it to continue to lose share for the foreseeable future,” Jefferies analyst Mark Lipacis wrote after Intel’s latest earnings report. AMD will show how that momentum has played out on its side of the equation when it releases numbers on Tuesday afternoon.
Full Snapshot: If Intel Comes Together, Can AMD Maintain Inflated Valuation?
Other chipmakers who will report in the coming week include Texas Instruments Inc. TXN,
Tuesday afternoon; Xilinx Inc. XLNX,
which is expected to be acquired by AMD on Wednesday afternoon when it is joined by chipmaker Lam Research Corp. LRCX,
; and Western Digital Corp. WDC,
Thursday afternoon.
Busy week for the Dow
Among the 13 members of the Dow Jones Industrial Average DJIA,
put to report this week are 3M Co MMM,
, Johnson & Johnson JNJ,
American Express, Verizon and Microsoft Corp. MSFT,
all that report Tuesday.
“In the short term, we see the company’s reading of the COVID-19 vaccine as a key catalyst for the future and believe that an efficiency of around 80% and above would suggest a clear role for the product in the market,” wrote Chris Schott, analyst at JP Morgan, about Johnson & Johnson.
J. Derrick Wood, analyst at Cowen & Co., sees tough comparisons for Microsoft, especially in its 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 presents McDonald’s Corp. MCD,
Dow Inc. DOW,
and Visa. Honeywell International Inc. HON,
Chevron Corp. CLC,
and Caterpillar Inc. CAT,
complete the week on Friday morning.
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