So far, US companies have barely been able to show positive profit growth this quarter with results, but the big test arrives next week.
Almost a quarter of the S&P 500 SPX,
is set to report results, with these companies representing 39% of the market value index, 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 huge impact on the index’s profit trajectory.
Profits are expected to fall for the fourth consecutive quarter, after all results are for the last period, but those companies that have reported so far have exceeded expectations as a whole.
The FactSet consensus is now modeling a 5% drop in profit for the index compared to a 6.3% drop forecast a week ago. If profit growth for the S&P 500 turns out to be positive in the end, it will mean the end of 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, along with Tesla Inc. TSLA,
which will yield results for the first time since becoming a member of the S&P 500. All three senior companies are due to report on Wednesday afternoon and are expected to bring in record revenue during the holiday quarter.
The holiday quarter is always crucial for Apple, which launches new iPhones in the fall. With a slightly later launch than usual this year due to the pandemic, which pushes sales to the period, Apple is expected to report its largest quarterly revenue so far and its first total of over $ 100 billion. The tech giant is also likely to continue to see benefits from the trends in distance work and distance learning, which have boosted strong sales of the iPad and Mac throughout the COVID-19 crisis.
Full Review: Get ready for Apple’s first quarter for $ 100 billion in history
Facebook is also expected to post what should easily be a record quarter, given the strong trends in digital advertising during the holiday season. Still, the company will face questions about consumer engagement and the decision to ban Donald Trump from the platform indefinitely because of his role in inciting violent riots in the US Capitol. Bernstein analyst Mark Schmulik cites “constant fatigue from use” on social media, as well as “a conversation distorted by non-monetized political events.”
Full Review: Facebook profits still thrive amid pandemic, economic slowdown and antitrust control
Tesla has already revealed delivery numbers for the full year, which exceeded analysts’ expectations, and all eyes will be on the company’s prospects for 2021. RBC Capital Markets analyst Joseph Spack expects a delivery forecast of 825,000 to 875,000 million units for all year round, although CEO Elon Musk said in a recent Tesla call that an analyst was “not far off” as he expected 840,000 to a million deliveries in 2021.
Full Review: Can Tesla’s sales growth match stock growth?
Here’s what you need to look out for next week, which features reports from 117 members of the S&P 500 and 13 Dow Jones Industrial Average DJIA,
In the air
BA of Boeing Co.,
the journey remained tumultuous even when the 737-MAX’s aircraft were recertified after being grounded for almost two years. Although the company has begun shipping these aircraft, “the pace of delivery of all 450 parked 737-MAXs will be driven by the airline’s customers’ ability to pick up aircraft, as well as the demand for air traffic,” said Benchmark Company analyst Josh Sullivan.
Boeing’s report on Wednesday morning will offer a perspective on the company’s recovery expectations amid the pandemic, although Sullivan sees instability stemming from recent stock offerings and the impact of the COVID-19 crisis on airlines.
The reports from the fourth quarter of the American airlines so far are gloomy 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 the busy week of telecommunications revenue on Tuesday morning, followed by AT&T Inc. T,
Wednesday morning and Comcast Corp. CMCSA,
For wireless operators, a key issue will be the impact of iPhone 12 promotions on the latest results. Investors will also be looking for information on a recent wireless auction offering a spectrum that will be crucial to deploying a 5G network. Although the bids have not yet been made public, the auction has led to record costs and AT&T and Verizon are expected to pay well to defend their position. The question for investors is what impact these offers will have on the financial position of companies.
Full Review: AT&T’s profits begin a defining year for the telecommunications giant
AT&T and Comcast have more media exposure than Verizon, and the two companies are trying to fight the new realities caused by the pandemic. Both companies have taken steps to put more emphasis on streaming with their film discs in indoor theaters, and the financial implications of these moves will be worth watching.
The evolving pandemic situation is reflected perhaps no 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 need to provide an idea of the recovery of travel at the end of the year, as well as the impact of recent blockades.
Susquehanna analyst James Friedman recently wrote that his Mastercard revenue forecast of $ 3.97 billion is slightly below consensus, although he also asked, “Is anyone really interested in Q4 2020?” Friedman is optimistic about the dynamics. of mobile payments and online shopping, which suggest “positive trends ahead” for Mastercard, which announced on Thursday morning. Visa follows this afternoon as American Express kicks off the week with its Tuesday morning report.
The chip saga continues
AMD, Advanced Micro Devices Inc.
is ready to continue to take advantage of Intel Corp.’s INTC,
a stumbling block that analysts expect to continue 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 bridge this transistor gap quickly, and therefore we expect it to continue to lose ground in the foreseeable future,” Jefferies analyst Mark Lipachis wrote after Intel’s latest revenue report. AMD will show how this dynamic has developed on its part of the equation when it publishes numbers on Tuesday afternoon.
Full Review: If Intel Gathers, Can AMD Support Swollen Ratings?
Other chip makers reporting next week include Texas Instruments Inc. TXN,
on Tuesday afternoon; Xilinx Inc. XLNX,
which is on the acquisition line from AMD on Wednesday afternoon, when it will be joined by chip equipment maker Lam Research Corp. LRCX,
; and Western Digital Corp. WDC,
on Thursday afternoon.
A 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 and Johnson JNJ,
American Express, Verizon and Microsoft Corp. MSFT,
all of whom report on Tuesday.
“In the short term, we see the company’s reporting of the company’s COVID-19 vaccine as a key upcoming catalyst, and we believe that efficacy in the 80% + range would suggest a clear market role for the product,” JP Morgan analyst Chris Shot wrote for Johnson & Johnson.
The analyst at Cowen & Co. J. Derrick Wood sees tough comparisons for Microsoft, especially in the Azure and server business, although he expects a more favorable situation in the future.
Full Review: SolarWinds hacking can actually be a good thing for Microsoft
Wednesday brings results from Boeing and Apple, while Thursday includes McDonald’s Corp. MCD,
Dow Inc. DOW,
and Visa. Honeywell International Inc. HON,
Chevron Corp. CVX,
and Caterpillar Inc. CAT,
round off the week on Friday morning.