The June 30 earnings season steps up in the US and Europe and kicks off in Australia this week. Most attention though will be on the US where the June quarter figures for some of the world’s major banks will be released.
In Australia there are a couple of the usual early reporters the Melbourne-based listed investment companies Mirrabooka Investments (later today) and Djerriwarrh Investments on Thursday.
Both are linked to the biggest LIC in the country, Australian Foundation, which releases its full year figures a week today.
Quarterly production reports will hold the bigger interest here this week with most attention on the June quarter production reports from Rio Tinto (and its figures for the first six months of the year) and Fortescue Metals Group (its 2014-15 figures).
Both will be closely examined because of the weakness in iron ore prices and the poor outlook for next two years.
But it will be the US reports that will hold the most interest and remind investors that earnings are the major driver of share prices – not Greece, China or the eurozone’s woes.
Reuters reported at the weekend: “At 16.5 times forward estimates, the S&P 500, up less than 2 percent for the year to date through midday Friday, is about 10 percent more expensive than its historic average of 15."
“While still well below the 24.5 ratio at the height of the dot-com era bubble in 1999, the price to earnings multiple recently hit its highest level since 2004,” Reuters reported at the weekend.
The big banks – JPMorgan Chase, Wells Fargo, Goldman Sachs, Bank of America and Citigroup report, along with a string of second tier financials, such as PNC.
Late in the week the big industrials, General Electric (which is busy shrinking itself) and Honeywell International, will report and analysts are looking to see how much damage the strong US dollar has done to earnings.
The dollar will be a big factor in the results of another US giant in medical/pharma group, Johnson & Johnson.
According to US research group, FactSet, S&P 500 index earnings are expected to fall 4.5% in the second quarter, marking the first drop since the third quarter 2012. Interestingly when the energy sector is excluded, earnings are forecast to be up 2.2%.
“Based on the earnings calls to date, the stronger U.S. dollar has been cited by the most companies (17) in the index as a factor that either had a negative impact on earnings or revenues for Q2, or is expected to have a negative impact on earnings and revenues in future quarters,” FactSet wrote at the weekend.
It should be remembered that forecasts for a fall in first quarter earnings didn’t pan out and they were actually higher, even after including energy companies.
Among the 40 companies in the S&P 500 reporting this week are Johnson & Johnson, JP Morgan Chase, Wells Fargo, and Yum! Brands, Bank of America, Intel, Netflix, and Delta Airlines. Citigroup, eBay, and Goldman Sachs. General Electric and Honeywell will also release, along with eBay, Domino’s Pizza, Mattel, AMD, Blackrock, Schlumberger , CSX and Intel.
Offshore and the reporting companies are mostly Scandinavian based and include Volvo, Swedbank, Swedish Match, Atlas Copco, Alfa Laval, Electrolux and Sandvik. From Asia the giant computer chip group, Taiwan Semi Conductor is due to release its latest figures.
