Around 100 S&P 500 companies report earnings this week as the March quarter earnings season pace steps up. Reporting companies will see the first of the major tech stocks release results, a couple of banks, airlines, big manufacturers, a smattering of smaller financials, media stocks, energy-related stocks and drug companies.
Warren Buffett will be watching the reports closely – last week, his biggest investment, Wells Fargo, America’s biggest mortgage lender, produced a reasonable quarterly figure.
This week it’s the turn of American Express, IBM and Coca Cola to tell the market how they performed in the March quarter. Coca Cola is expected to do the best of the trio (which complete Buffett’s four largest stockmarket investments).
Goldman Sachs and Morgan Stanley, the two biggest US investment banks, report early in the week – watch for their provisions for bad debts in the oil and gas business.
Already the big banks have been forced to sock away an extra $US2 billion for the March quarter, and there’s a lot more to come.
Their trading and investment banking revenues will be closely scrutinised, as will the extra they have to put away to cover rising losses in oil and gas companies – two medium size oil groups collapsed last week.
Amex leads a group of smaller non bank financials reporting as well. Airlines reporting include the two biggest and most aggressive – American and Southwest, along with Alaska Air which is in the process of buying Virgin’s US airline.
Consumer goods companies also pop up this week, led by Coca Cola, Pepsi Cola, Yum Brands, Starbucks and MacDonald’s – that’s enough to give us a good idea how the stronger US dollar has hit their international business, and the strength of consumer spending inside the US where retail sales had a very weak March quarter.
Sportswear and equipment group, UnderArmour is due to report (it has been the fastest growing company in this sector for the past two years).
IBM reports and another sluggish result is expected, with investors watching closely its shift into cloud computing is going.
Tech giants like Alphabet (the old Google), Microsoft, Qualcomm are also down to report this week. Yahoo, which is looking for bids from possible buyers of its internet based businesses, is also due to report tomorrow. But all eyes will be on the March quarter data provided by streaming video giant, Netflix, tomorrow morning, our time. It will be one of the key reports of this season and investors are expecting a rise in subscriber numbers, especially from outside the US.
A clutch of manufacturers led by General Electric, Textron, Danaher, Caterpillar, Honeywell, Rockwell will also reveal the impact the stronger dollar and international and domestic demand (especially from energy and resource companies) have hit sales and earnings for some companies.
General Motors reports as well, along with rail group, Norfolk Southern, while goldminer, Newmont is also scheduled to release its latest figures.
Telecommunications group Verizon Communications also reports, along with pay TV satellite group, Dish Network and media company, McClatchy.
Energy related companies reporting include the giant services company, Schlumberger and Linn Energy. Goodrich Petroleum is down to report, but it filed for Chapter 11 bankruptcy protection on Friday.
Pharmaceutical giants, Johnson and Johnson and Abbott Labs are both due to report this week.
S&P 500 earnings are forecast to have declined by 8.4% in the first quarter from the same period in 2015, the steepest drop since the financial crisis, according to S&P Global Market Intelligence.
But the AMP’s Chief Economist, Dr Shane Oliver reckons that might be too pessimistic. He wrote at the weekend “March quarter profit reports are off to a good start with 81% of results so far beating on earnings and 61% beating on sales.”
"But its early days with only 33 S&P 500 companies having reported! Market expectations remain for a 9% yoy fall in earnings for the March quarter, but it’s likely to come in a bit “better” at around -5%.”
