The US third quarter earnings season gathers pace this week after Alcoa kicked off the reporters last Thursday with a much weaker than expected performance that highlighted what will be the issues for investors over the next two months – the high value of the US dollar, poor growth in emerging markets, falling commodity prices and patchy domestic demand.
This week the financial sector that will dominate (and next week as well), as a number of big banks post quarterly results. Goldman Sachs, Bank of America Corp, Wells Fargo & Co, Citigroup and JPMorgan Chase & Co – the five biggest US banks by market value – are due to report results as the sector has trailed the market in recent weeks and earnings estimates have fallen.
But the health of manufacturing will be highlighted by results on Friday from GE and Honeywell, tech and nets will see Alpabet Inc (Google) and chipmakers, Intel and AMD also reporting, along with oil services giant Schlumberger and big US airline, Delta. Giant fund manager Blackrock is also down to report.
Others reporting reporting this week are Infosys, Johnson & Johnson, Mattel, CSX, Intel, Netflix, US Bancorp, Advanced Micro and Kinder Morgan.
So by the close of business on Friday we could have a good idea of the health of corporate earnings and key sectors such as finance (banking), manufacturing, airlines and technology and internet-related activities.
Interestingly JP Morgan starts the process tomorrow – but will report after trading has ended, instead of before trading, as it has been doing for years. That’s a change that has caught the eye of many analysts.
According to Thomson Reuters, financial companies are expected to show earnings growth of 8.4% in the quarter, behind only telecoms and consumer discretionary companies, But that will be down 14.8% expected at the start of the quarter, and down by half from the neat 18% growth expected at the start of the year.
In the last month analysts have carved back their estimates for bank earnings with Goldman seeing a 25% cut in forecasts for its profit.
Thomson Reuters points out that the S&P 500 financials index has underperformed the broader market in recent months, falling 5.6% so far in 2015 against the 2.1% fall in the S&P 500. In the past month bank shares have hardly moved while the S&P 500 is up 2.2%.
Overall, third-quarter earnings for S&P 500 companies are expected to decline 4.5%, according to Thomson Reuters data. That compares with a 0.3% fall that had been forecast in July. FactSet though is tipping a 5.1% per cent fall in earnings for the third quarter.
