The March quarter earnings season has moved into top gear with 186 S&P 500 companies scheduled to report results this week, including last night. Of that 186, more than 800 companies will release results this week in one of the busiest periods of the reporting season. Watch especially for Apple, Facebook and Amazon quarterly reports to drive investor sentiment.
Not only will the flood of corporate reports influence markets, but so will the meeting of the US Federal Reserve and its expected decision not to lift key interest rates.
After last week’s shocks from the likes of Netflix, Microsoft, Alphabet (Google), Caterpillar and Goldman Sachs, the focus this week will be on companies in technology, energy, media, manufacturing and finance.
Tech stocks are on most investors alarm list after last week saw Microsoft, Alphabet, Netflix and IBM shares collectively lose $US100 billion in value after weak or underwhelming quarterly earnings reports. So far March quarter earnings results have showed 82% of companies beating on earnings and 59% beating on sales with 25% of S&P 500 companies having reported so far, according to figures from AMP Chief Economist Dr Shane Oliver.
Reuters says reported and estimated earnings for the S&P 500 are down 7.1% in the first quarter from a year ago, after having fallen 2.9% and 0.8% year-on-year in the previous two quarters. The second quarter of this year is also expected to post a contraction of 2.3%.
The roster of reporting companies this week includes Apple, Facebook, Ford, BP, Samsung, Bayer, BASF, Deutsche Bank, Banco Santander, Whirlpool, 3M, Rockwell, Freeport-McMoRan, Chipotle, Wynn Resorts, Boeing, First Solar, Facebook, eBay, LinkedIn, Twitter, Comcast, Dupont, Dow Chemicals, Time Warner Cable, ConocoPhillips, ExxonMobil and Amazon.
After Friday’s tech sell-off in the wake of the disappointing reports from Microsoft (which reported quite a poor set of figures) and Alphabet (which still managed to boost sales and profits), the S&P 500 tech sector on Friday posted its largest percentage decline in three months.
So watch for the impact of the high US dollar (although it has weakened recently) on results, especially those companies active in global markets such as Boeing, Apple, Amazon, Facebook, etc. Other companies will reflect mixed results from US domestic demand.
In fact Apple will be the focus company for the market this week, with the company scheduled to report earnings for the calendar first quarter (fiscal second quarter for Apple) early Wednesday morning, our time, a day later than usual.
US data group FactSet said at the weekend that, “If Apple reports a year-over-year decline in EPS for Q1 2016, it will mark the first time the company has reported a year-over-year decline in EPS since the calendar third quarter of 2013 (fiscal fourth quarter of 2013 for Apple)".
“As a result, Apple is expected to be the largest contributor to the blended earnings decline for the Information Technology sector for Q1 2016.
"The blended (combines actual results for companies that have reported and estimated results for companies yet to report) earnings decline for the Information Technology sector is -7.4%. Excluding Apple, the blended earnings decline for the sector would be -4.1%.” "Over the past three years on average, the iPhone product segment has accounted for nearly 60% of the total revenues generated by Apple. In four of the past five quarters, the iPhone product segment has reported year-over-year revenue growth in excess of 35%.
"However, last quarter (Q4 2015), the segment reported year-over-year revenue growth of only 7%. For Q1 2016, the segment is projected to report a year-over-year revenue decline of -18%.
“If the iPhone product segment does report a year-over-year decline in sales for the calendar first quarter, it will mark the first year-over-year decline in iPhone sales since FactSet began tracking sales for this product segment in the calendar fourth quarter of 2010,“ FactSet said at the weekend.
But there are other tech stocks reporting – none more important than Amazon – watch for a surprise perhaps in its sales performance, but another solid quarter for its fast growing cloud computing business.
Facebook is due to report early Thursday morning and could be overshadowed by the Fed’s post meeting statement a couple of hours earlier. Analysts are looking for more gains in user numbers and advertising revenues from Facebook.
Others tech stocks reporting include Twitter (can it survive another weak quarter?), LinkedIn, eBay, PayPal, and Texas Instruments.
But also watch for negative earnings reports from a group of energy majors led by BP, ExxonMobil, Chevron, Suncorp, Whiting Petroleum, ConocoPhillips, Phillips 66, Total and Hess.
Freeport McMoRan, the big gold and copper miner (with a weak oil and gas business), also reports. Together this group (and those to report next week, will generate most of the losses and weak earnings for the S&P 500 group of companies.
Another miner due to report is the giant gold group Barrick, while struggling US and Australian iron ore miner Cliffs Natural Resources is also due to release its latest results.
Oil services group Baker Hughes (Halliburton’s takeover target) reports this week and we might also get a definitive statement from the US government on why it opposes this takeover.
Halliburton revealed a $US21 billion impairment loss and more job cuts late last week, a day or so after rival Schlumberger reported lower revenues and profits and more job cuts.
Media groups Comcast, Gannett Viacom, Meredith (a magazine and TV company) and Time Warner Cable kick off the quarterly reports for the US media sector which steps up next week.
Some soft results are expected, especially from the newspaper groups like Gannett. Time Warner Cable is still subject to a takeover bid from rival Charter.
Giant telco AT&T which has moved deeper into pay TV with the takeover of DirecTV is due to report this week as well. Data and news group Thomson Reuters also reports late this week.
Also reporting are manufacturers such as 3M, United Technologies, Rockwell, Boeing, Lockheed Martin, Ford, Fiat Chrysler, chemical groups, Dow and Dupont, chocolate maker, Hershey, Mondelez (Cadbury), US Steel and pharma groups Sanofi, Shire, Astra Zenecca, Glaxo SmithKline and Eli Lilly. This is where the dollar’s impact will be most felt.
Colgate Palmolive, the big consumer products group, is down to release its latest report as well.
Numerous foreign companies are due to report either quarterly or half year results this week- groups such as Ping An Insurance, Bank of China, Sinopec, Baidu and Baoshan Iron and Steel from China, LGSamsung and Hyundai Motors from South Korea, Deutsche Bank, Bayer and BASF from Germany, Banco Santander from Spain, Suncor from Canada, Resmed from Australia and the US
But the weaker-than-expected results from Microsoft and Alphabet, the second and third largest US companies by market value, on top of weak reports from the likes of IBM and Intel will concentrate investor attention on the tech sector and this week’s reports expected from Apple, Amazon and Facebook. The strength and immediate direction of Wall Street will be decided this week (with the addition of the results of the Fed meeting).
