Significant beatings from Big Tech earnings and big banks are likely to lead to a surprising increase in corporate profits this earnings season.
S&P 500 index SPX,
Companies are now forecast to show positive earnings growth of 1.7% for the fourth quarter, with 58% of results already. This would allow the index to emerge from a recession in earnings, which exists when companies’ profits have fallen from year to year. for two or more quarters in a row.
At the end of last year, analysts expected revenues in December to fall by 9.3%, marking the fourth consecutive quarter of year-on-year declines. Overall projections began to improve slowly as more results emerged and finally turned positive this week.
Helping to boost momentum have been high gains in the financial services, information technology and communications sectors. Because the S&P 500 is market weighted, larger companies have a more significant impact on the index’s overall profit trajectory.
The financial sector has been the biggest contributor to earnings growth, according to Factset Senior Earnings Analyst John Butters. The mixed growth rate of the sector, which combines real and expected results depending on whether a company still reported earnings, now stands at 17.2%, while expectations were for a decline of 9.4% since with December 13th.
Companies that have had a significant impact include JPMorgan Chase & Co. JPM,
which exceeded earnings expectations by 44%, while Goldman Sachs Group Inc. GS,
beat 62%, Citigroup Inc. C,
beat 55%, Morgan Stanley MS,
increased by 48%, and Capital One Financial Corp. COF,
exceeded estimates by 87%
In the information technology industry, the big gains are higher than Apple Inc. AAPL,
Intel Corp. INTC,
and Microsoft Corp. MSFT,
contributed to the growth of the mixed growth rate of the sector to 15.6% from an expectation of 1.5% in December. Alphabet Inc. GOOG,
GOOGL,
and Facebook Inc. FB,
It also exceeded expectations by a wide margin, raising the mixed growth rate for the communications services sector to 6% positive, compared to an expected decline of 12.9% on 31 December.
Outside of these three sectors, Amazon.com Inc. AMZN,
and Ford Motor Co. F,
it also offered big profit surprises, which Butters said contributed significantly to the growth rate of mixed earnings.
Boeing Co. BA,
it was the biggest attraction, as the company reported an adjusted loss of $ 15.25 per share, while analysts expected a loss of $ 1.78 per share. Without Boeing’s results, the mixed growth rate for the S&P 500 would be more than double what it is now, Butters wrote.
In total, 81% of the companies that achieved results recorded better earnings than expected, he said.
Next week shows another busy revenue stream, with 77 members of the S&P 500 to report, including three companies that are also in the Dow Jones Industrial Average. Walt Disney Co. DIS,
and Cisco Systems Inc. CSCO,
are among the biggest names due to post numbers.
Here’s what to look for:
Padded
Disney is expected to post another quarter on Thursday’s red afternoon as the pandemic continues to weigh on its theme parks and media business, but investors seem willing to oversee the performance of the pandemic-affected earnings, according to LightShed analyst Partners Richard Greenfield.
A key interest in the Disney report will be the company’s progress with its Disney + streaming service. Disney continues to grow its subscriber base at a fast clip, but following the company’s latest report, there has been some concern about how much of this growth came from those who signed up for Indian Hotstar’s product. the company, through which Disney generates a much lower average revenue per user.
Disney Earnings Preview: Can Disney + keep up the pace to support the Magic Kingdom?
A new chapter for Twitter
Twitter Inc. TWTR,
probably benefited from the same strong advertising trends that helped Pinterest Inc. companies. PINS,
and Facebook at the end of last year, but these results are not as important as what will follow.
Twitter executives are likely to face questions on Tuesday afternoon about trends in user involvement following the decision to ban former President Donald Trump from the platform due to his role in inciting January violence in the US Chapter.
“Regardless of the opinion of the president’s recent political actions or Twitter, we see Trump as a unique driving force for platform activity and involvement, which will not be easily replaced,” Wells Fargo analyst Brian Fitzgerald wrote after announcement of the ban.
Bernstein analyst Mark Shmulik hypothesized that while Twitter’s engagement could be successful, the ban could lead to an “increase in brand-safe advertising inventory,” as some advertisers didn’t want their spots to appear next to content. linked to Trump before the ban.
Opinion: Apple’s privacy changes affect more than just Facebook
Networks
The IT spending landscape seems to be improving, which Evercore ISI analyst Amit Daryanani said could get slightly better results than expected for Cisco when the company releases results on Tuesday afternoon. He will seek information on the vision of new Chief Financial Officer R. Scott Herren, as well as on progress in the company’s efforts to generate more subscription revenue.
Rideshare Recovery?
Lyft Inc. LYFT,
and Uber Technologies Inc. UBER,
they probably continued on their rocky path of recovery in the fourth quarter, but Shmulik warned that the company’s growth rate for the period could be uniform or even slightly below the third quarter rate, given an increase in global cases, the emergence a new COVID -19 stems and winter weather.
Read: Uber’s growing, “interesting” delivery business, possible ride recoveries, have optimistic analysts
Lyft reports on Tuesday afternoon, while Uber follows a day later. Uber executives are likely to discuss the company’s recently announced decision to buy Drizly, an alcohol delivery service.