Earnings season, the most important and busiest time of the year for the world’s biggest companies, is in full swing. Following a week where major stock market indices hit record highs, we're looking forward to Amazon, Facebook, Alphabet, Boeing Co. and some other large-cap companies announcing their Q2 earnings figures.
Earnings reports will give us a glimpse into every major economic sector. So far, the season has shown a mixed bag results. In times when stock markets are trending near record highs, but the risk of recession is growing, the second quarter of 2019 can either continue the longest bull run in history, or indicate the beginning of its end.
How to navigate the earnings season calendar
According to FactSet data before the start of the earnings season, market analysts predicted S&P earnings to fall by 3%. By the end of last week, more than 15% of S&P 500 companies had reported and 79% of them showed better-than-expected results.
Let’s find out what to expect from various industries so far:
The automotive industry may suffer from declining sales and big technological disruptions. Working together on self-driving and electric vehicles, Ford Motor Co. and Volkswagen are forecasted to report dwindling revenues. Analysts also predict another unsuccessful period for Tesla, which is still striving to increase profits.
If sales at Chipotle Mexican Grill, Starbucks and McDonald’s slow down, it might suggest that households are feeling the monetary squeeze – choosing to eat at home. Restaurants have been forced to raise prices due to increased commodity and labour costs. Meanwhile, the surprisingly strong sales numbers in China, despite the ongoing US-China trade war, will also draw analysts’ attention.
Comcast Corp. and AT&T Inc. start fighting with Walt Disney Co.’s HULU and Netflix for streaming-video customers. However, they may suffer from the decline in their primary services. As more people prefer streaming services like Netflix over standard cable packages, AT&T is forecasted to lose part of their TV base. The performance of casino companies, including MGM Resorts International and Las Vegas Sands Corp, will depend on their subsidiaries from Asia and the impact of Chinese economic slowdown.
Looking forward to Boeing earnings report, investors attention will be drawn to the future of the 737 Max – the company’s troubled jetliner, as American Airlines and Southwest Airlines have removed the plane from their flight schedules through the end of the year. In the meantime, Caterpillar investors will wait for precise and clear data about the global demand for CAT’s machinery for the second half of 2019.
Investors in technological sectors are excited about floods of available data coming into their hands, with Twitter, Alphabet, Facebook and others reporting this week. The main question remains the same – whether revenue keeps accelerating despite the global economic slowdown and the US-China trade tensions. The industry may also suffer from further regulatory pressure caused by data privacy concerns. Microsoft is lucky to avoid this critical observation, as its quarterly profit exceeded the analysts’ forecasts. Other companies like Intel may also begin to feel the effects of the US ban on Chinese telecommunications giant Huawei.
European banks are suffering from the US-China trade war, which in turn are influencing client activity. Deutsche Bank has declared a loss for this quarter, while Morgan Stanley Q2 results surpassed Wall Street expectations for earnings per share and revenue.
5 major investment giants to watch for
How to trade the earnings season and catch up the ultimate investment opportunities? Keep your eyes wide open and wait for the earnings reports of the key market players with top-traded stocks.
Last year, Facebook’s mid-year earnings report didn’t look strong. The company lost more than $120 billion of its market cap the following day.
In 2019, the social media giant has almost regained its strength, but encounters new challenges such as data privacy concerns and controversial views surrounding Libra, Facebook’s cryptocurrency. All these factors can also decrease the company’s major revenue source – advertising. Investors are intrigued whether the company will manage to maintain revenue growth from digital advertising.
In 2019, Alphabet – Google’s holding company – has underperformed its FAANG peers so far. In its Q1 earnings report, the company announced lower-than-expected revenue growth figures.
Against a backdrop of antitrust investigations and political controversy around “hateful” content on YouTube, it’s time to find out whether the technological giant has managed to find another way to drive income.
After the largest Prime Day in history, with sales surpassing those of Cyber Monday and Black Friday combined, Amazon stock has almost reached the record high set in September 2018.
Looking forward to the company's Q2 earnings report, investors will focus on the revenue derived from Amazon’s Web Services platform. Year-by-year, AWS show continuous increase in sales, making it the top growing revenue stream for Amazon.
After a recent record high, Starbucks will have to prove its continuous revenue growth. Last quarter results showed that Starbucks' store sales grew up by 3% globally. Today, investors wait with baited breath for 25 July 2019 to find out whether the company proceeds with sustainable growth in global sales.
In view of the upcoming T-Mobile and Sprint merger, AT&T is facing a new tough rivalry in the telecoms sector. Although the last 5 earnings reports resulted in a drop in the company’s share price, the rollout of 5G and cooperation with IBM could improve AT&T’s position this time.
The company is struggling to recover from a drastic decrease in the number of video subscribers last quarter. In spring AT&T is going to launch HBO’s Max streaming service, which will run one of the world's most popular TV shows, “Friends”.
In the end
It seems that corporate earnings forecasts for Q2 were set so low that companies can easily beat them. Negative profit growth expectations have already turned positive. Let’s see how it goes and try not to miss the best trading opportunities.
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