The US June quarter earnings reporting season accelerates this week with 91 S&P 500 companies due to report.
The reporting companies will include a couple of big banks, and dozens of tiddlers, the start of reports from Big Tech and Big Pharma, plus releases from some of America’s big manufacturers and the world’s two largest oil services groups.
So by the end of the week, with the exception of energy, media and retailing stocks, we should have a good idea of the quality of earnings for the three months to June 30, and some idea of what corporates are looking at in the current quarter.
While the consensus sees a 4% decline in earnings from the June quarter a year ago, this will translate to a 7% gain in earnings from the March quarter, with a more stable $US and oil price helping. In other words, the US earnings recession could be over.
But that might be too early to call with oil prices again weakening in the past two weeks.
But a string of reports shows activity in the huge US economy is better than forecast – retail sales for example and manufacturing activity – while investors are starting to become wary of a change of stance from the Fed after its next meeting in 10 days.
However, companies as diverse as Yum Brands, Delta Air Lines and CSX Corp last week reported better than expected figures, but started to manage investor expectations because of Brexit fallout.
Delta and Yum Brands cited a negative impact from currency, while CSX’s CEO expressed concerns about the effect of the strengthening dollar.
But major banks, led by JP Morgan Chase did better and this week’s see a trio of reports from three more – Goldman Sachs, Bank of America and Morgan Stanley, plus some second string – such as Bank of New York Mellon and a string of regional and local banks as well.
Watch also or weak results from financial groups from oil states such as Texas. Amex, the credit card giant, plus Via, another card are also due to report – Amex has been under growing pressure in the past two years. It plus IBM are two of Warren Buffett’s four key stockmarket holdings, along with Wells Fargo and The Coca Cola Company.
Wells Fargo reported on Friday and revealed a dip in second quarter profits and return on equity and the shares fell.
Among those reporting this week will be oil services giants, Halliburton and Schlumberger. Both have hacked into staff numbers and investment plans as oil prices tumbled in the past two years. Analysts are now looking for signs of stability in their figures.
Tech giants such as IBM, Microsoft, Qualcomm, eBay, PayPal,Yahoo and Intel are due report this week – the latter will be a key stock to watch. But tomorrow morning sees possibly the most important stock this week releasing its second quarter figures – the streaming video pioneer, Netflx.
Any sign of a stalling in growth,especially in the US could very well see the stock sold off.
Quarterly reports from key toy groups, Hasbro and Mattel will give us a good idea of the strength of consumer spending among key speciality stores and chains.
The US arm of Domino’s Pizza is also down to release its earnings this week, along with Chipotle, a Mexican style fast food group which has suffered food quality problems.
Several top industrial groups led by General Electric, Dana Corp, Honeywell and Johnson Controls, Johnson & Johnson will report and these have considerable exposure to the stronger US dollar, Europe and China and their forecasts for the next three to six months will be crucial to market support.
Whirlpool the big white goods manufacturer releases its figures late in the week as does America’s biggest steelmaker, Nucor. General Motors report will give us an idea if the still solid car sales being experienced by the industry have resulted in higher profits. And the first major aerospace group in Lockheed Martin releases its figures as well.
Big Pharma groups, Novartis, Abbott Labs and Johnson & Johnson will report along with Roche in Switzerland.There are suggestions this sector might have peaked.
American and Southwestern Airlines also report this week and their results will be compared with those from Delta last week (which were showed a small rise on lower fuel costs, and plans to cut international capacity).
And Newmont Mining is the first major resources group to report in the current season – its ability to ride the surging gold price – will be what investors will be focused on.
Offshore, a number of big groups in Europe and Asia will release reports, led by the likes of Sandvik, Hyundai motors, Daimler, Azko Nobel (a big chemicals group), ABB, Alfa Laval, Posco and Roche.
