It will be another strong week for the US March quarter corporate earnings season, which will be joined at an increasing rate by companies from Europe and Asia reporting quarterly or half year figures.
But head and shoulders above everything else will be the quarterly figures from Apple and Facebook on Tuesday and Wednesday respective (New York Time, or Wednesday and Thursday Sydney time).
The American economy slowed sharply in the first quarter according to the first estimate of GDP growth from the government (0.7% annual, from 2.1% in the December quarter and 3.5% in the three months to September), but there is no sign of corporate earnings following suit.
The slower than forecast GDP growth won’t impact thinking at the US Federal Reserve which meets this week, and won’t raise interest rates, but could sharpen its guidance for the rest of the year.
Nor will it change the direction of what is looking like the best first quarter growth in years.
Some analysts say the weak growth data (and expectations US car sales will continue to weaken for the rest of the year especially) could see the Fed limited to one rate rise this year if there is no improvement in the second quarter (which will be known by late July). That would match the single rate rises for 215 and 2016.
But there’s no sign of that slowdown having an impact on corporate earnings (perhaps a little in the auto sector). So far in the March quarter reporting season – now nearly 60% over – US companies are rolling in revenue, profits and cash.
That will become even more apparent this week with Apple to report, along with several global oil giants like BP and Shell, after Chevron and Exxon boosted earnings sharply and tech giants like Intel and Amazon did much better than expected.
More than 120 S&P 500 companies are expected to report this week after last week’s record 194 reporting groups confirmed the profits surge.
US analysts point out that the turnaround has been dramatic – 2015 and the first half of 2016 was characterised by an earnings recession which ended with small gains in the September and December quarter (outside the tech giants such as Intel, Apple, Netflix, Amazon, Facebook, Alphabet and Microsoft).
Now the first quarter earnings look like being up as much as 11% to13% according to a report from the US research group, FactSet which says the S&P 500 companies are looking at the first quarter of double-digit earnings growth since 2011.
According to a blended rate of reported and estimated earnings calculated by FactSet, earnings per share are up 12.5% year-over-year in the first quarter.
About 58% of the S&P 500 companies have now reported their first quarter earnings with another 120 plus reporting this week.
And if the 12.5% current growth rate is cried through to the end of season, FactSet says it will be the largest earnings gain for the index since the third quarter of 2011 and the first double digit earnings growth since the fourth quarter of the same year.
And Thomson Reuters said the average estimate of analysts for earnings per share growth this year of S&P 500 companies has risen to 11.3% from 10.9% at the start of the month,
The current estimated rate also tops the 9% predicted by Wall Street analysts at the end of quarter on March 31.
This strong growth is why so many analysts say the first quarter slowdown in economic growth is nothing to be worried abut.
The first quarter is now the most problematic of the yearly four quarters because of seasonal adjustment problems, variable weather (the three months to March were unusually warm across most of the US, which hit power production, but boosted building and construction) and the data will be revised two more times and could rise past 1%.
That will still be a sharp slowdown from the last half of 2016, but analysts are looking for growth to accelerate over the rest of 2017.
Apple, the world’s largest publicly listed company, is slated to report its fiscal second quarter results after the market close on Tuesday and the market will be watching for the latest iPhone unit sales. Net sales are tipped to rise close on 5% to $US53 billion.
Facebook reports the day after and analysts will be looking for another big increase in average daily users (currently around 1.7 billion) and higher figures for Instagram, as well as continued strong growth in ad revenues (Google and Facebook took more than half the $US75 billion spent on mobile ads in 2016)
But Apple is just one of more than 120 companies listed on the S&P 500 that are slated to report results next week, including Pfizer, Coach, ConocoPhillips, Kraft Heinz, Motorola, AMD, Facebook, Carlyle Group, GroupOn, Time Warner, Viacom, Facebook, HSBC, Bunge, Clorox, BNP Paribas, Sainsbury, Kinross Gold, Alacer Gold, Merck and Co, Lowes Cos, Mondelez, Aentna and Berkshire Hathaway.
And on Saturday the annual meeting of Berkshire Hathaway will be held in Omaha – more than 48,000 people are expected to attend what Warren Buffett has called the “Woodstock of Capitalism”. That will be after Berkshire releases its March quarter results.
