American companies have barely managed to achieve positive profit growth so far in this quarterly earnings season, but the big test comes next week.
Almost a quarter of the S&P 500 SPX,
is set to report results, with these 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 a disproportionate impact on the index’s profit trajectory.
Profits are expected to decline for the fourth consecutive quarter, once all results for the most recent period have been released, but companies that have reported so far are exceeding aggregate expectations.
The FactSet consensus now models a 5% drop in profits from the index, compared to the 6.3% drop projected a week ago. If profit growth for the S&P 500 turns out to be positive, it would mark the end of the current earnings recession, which occurs when corporate earnings decline 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 becoming a member of the S&P 500. All three high-profile companies are scheduled to report on Wednesday afternoon and are expected to have produced record revenue in the holiday quarter.
The holiday quarter is always crucial for Apple, which launches new iPhones in the fall. With a release a little later than usual this year due to the pandemic pushing sales for the period, Apple is expected to record its highest total quarterly revenue ever and its first total above $ 100 billion. The tech giant probably also continued to see the benefits of remote work and remote education trends, which boosted iPad and Mac sales during the COVID-19 crisis.
Full view: get ready for the $ 100 billion first quarter in Apple history
Facebook is also expected to post what should easily be a record quarter, given the strong trends in digital advertising during the holiday period. Still, the company will face questions about user involvement and a decision to ban Donald Trump from the platform indefinitely because of his role in inciting the violent rebellion on the United States Capitol. Bernstein analyst Mark Shmulik points to “fatigue from continued use” on social media, as well as “talk geared towards non-monetizable political events”.
Full view: Facebook earnings still flourishing amid the pandemic, economic slowdown and antitrust scrutiny
Tesla has already released year-round delivery numbers that have come above analysts’ expectations, and all eyes will be on the company’s prospects for 2021. Analyst Joseph Spak of RBC Capital Markets predicts a delivery forecast of 825,000 to 875 billion units for the entire year, although Chief Executive Elon Musk said in the last call about Tesla’s profits that an analyst “was not far” waiting for 840,000 to one million deliveries during 2021.
Full view: Can Tesla’s sales growth match stock growth?
Here’s what else to watch for next week, which features reports from 117 members of the S&P 500 and 13 Dow Jones Industrial Average DJIA,
components.
Up in the air
BA from Boeing Co.,
The journey remains turbulent, even though the company’s 737-MAX jets have been recertified after almost two years of being stopped. Although the company has started delivering these aircraft, “the delivery pace of all 450 parked 737-MAXs will be dictated by the ability of airline customers to Benchmark Company analyst Josh Sullivan.
Boeing’s report on Wednesday morning will offer insight into the company’s expectations of recovery from the pandemic, although Sullivan predicts volatility stemming from a recent stock offering and the impact of the COVID-19 crisis on airlines.
U.S. airlines’ fourth quarter reports have been disappointing so far, and American Airlines Group Inc. AAL,
and Southwest Airlines Co. LUV,
offer more on Thursday morning.
Can you hear me now?
Verizon Communications Inc. VZ,
leads a busy telecom earnings week on Tuesday morning, followed by AT&T Inc. T,
Wednesday morning and Comcast Corp. CMCSA,
Thursday morning.
For mobile operators, an important 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 spectrum that will be crucial for 5G network deployments. Although the bids have not yet been released, the auction has generated record spending and AT&T and Verizon are expected to have generously paid to assert their position. The question for investors is what impact will these bids have on companies’ financial positioning.
Full view: AT&T earnings usher in a decisive year for the telecommunications giant
AT&T and Comcast have more media exposure than Verizon, and these two companies have been trying to deal with the new realities brought about by the pandemic. Both companies have made moves to further emphasize streaming with their movie cards due to the closing of cinemas, and the financial implications of these changes are worth watching.
Paying
The evolution 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 pulse on the global consumer spending landscape. Companies are expected to provide information about the recovery of travel at the end of the year, as well as the impact of recent blockages.
Susquehanna analyst James Friedman recently wrote that his $ 3.97 billion Mastercard revenue projection is slightly below the consensus view, although he also asked, “Does anyone really care about the fourth quarter of 2020?” Friedman is optimistic about mobile payments and the dynamics of online shopping that suggest “positive trends ahead” for Mastercard, which he reports on Thursday morning. Visa follows that afternoon, while American Express kicks off the week with its Tuesday morning report.
The chip saga continues
Advanced Micro Devices Inc. AMD,
is about to continue to benefit from Intel Corp. INTC.
stumbles, which analysts hope will last for some time, even as Intel prepares for a new technology-oriented CEO to take over.
“We have little confidence that Intel will be able to close this transistor gap quickly and therefore we expect it to continue to lose share in the foreseeable future,” wrote Jefferies analyst Mark Lipacis after Intel’s latest earnings report. AMD will show how that dynamic worked on its side of the equation when it publishes the numbers Tuesday afternoon.
Full view: If Intel acts together, can AMD keep the assessment bloated?
Other chip makers reporting the following week include Texas Instruments Inc. TXN,
Tuesday afternoon; Xilinx Inc. XLNX,
which is about to be acquired by AMD in the Wednesday afternoon report, when it will join chip equipment maker 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,
set to report this week are 3M Co MMM,
, Johnson & Johnson JNJ,
American Express, Verizon and Microsoft Corp. MSFT,
everyone reports Tuesday.
“In the short term, we see reading the company’s COVID-19 vaccine as an important catalyst and we believe that the effectiveness in the 80% + range suggests a clear role for the product in the market,” wrote Chris Schott, analyst at JP Morgan, from Johnson & Johnson.
Cowen & Co. analyst J. Derrick Wood sees difficult comparisons for Microsoft, especially in its Azure and server businesses, although he expects a more favorable situation in the future.
Full view: SolarWinds hack could really be a good thing for Microsoft
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,
finish the week Friday morning.