What To Watch For This Earnings Season

By: Wayne Duggan

It’s the most wonderful time of the year—earnings season. With the quietness of the holidays behind us and macro stories like the trade war and government shutdown still playing out, we can take solace in the regularly scheduled programming that is earnings season.

The fourth quarter earnings season is off and running with Alcoa ($AA), Netflix ($NFLX), and the major U.S. banks all reporting. Here are a few of the trends and dates that will be on our radar over the next few weeks.

One Big Thing: China

A handful of companies—most notably Apple ($AAPL), many of its suppliers like Lumentum ($LITE) and Skyworks Solutions ($SWKS), and FedEx ($FDX) — have already said that slowing global economies and the ongoing trade war with China will negatively impact sales in 2019. The question now is who’s next?

The Street will be closely watching to see which CEO’s cite trade tensions and global weakness, particularly in China, as headwinds going forward. What’s making investors particularly anxious is most major companies have some sort of exposure to China. So, we need to pay close attention to what is said by everybody, from tech names like Qualcomm ($QCOM) and HP ($HPQ) to consumer goods like Campbell’s ($CPB) and Coca-Cola ($KO).

If CEO’s come out and downplay any concerns about China, that would be a hugely positive sign. If, however, they lower 2019 expectations directly blame the trade war/Chinese economy (a la Tim Cook), we could be in for some trouble.

ICYMI: Q3 Earnings Were Not Amazing

Third-quarter earnings season painted a somewhat troubling picture of what we can expect this earnings season. Of the companies which issued Q4 guidance in last quarter, 69 percent issued guidance below consensus analyst expectations. Because of all the negative guidance revisions in the final three months of 2019, the consensus S&P 500 EPS growth estimate for Q4 fell from 16.7 percent to just 11.4 percent.

On an individual sector basis, the technology sector is looking to continue its momentum from last quarter. According to Factset, 89 percent of S&P 500 tech sector companies reported earnings beats in Q3, better than any other sector. The energy sector had the lowest percentage of earnings beats, at just 67 percent.

Key Earnings Dates

This week is a big week for earnings reports because of the banks. Following Citigroup’s ($C) report on Monday morning, JP Morgan ($JPM) and Wells Fargo ($WFC) will report on Tuesday morning, and then Goldman Sachs and Bank of America ($MER-K) will report Wednesday before the bell. Netflix ($NFLX) is also due to report Thursday after the close.

Next week brings with it a number of Dow components as IBM ($IBM) and Johnson & Johnson ($JNJ) report on Jan. 22, Procter & Gamble ($PG) reports on Jan. 23, and Intel ($INTC) reports Jan. 24 along with Starbucks ($SBUX).

The biggest week for earnings is the following week, as big tech will take the stage. Apple ($AAPL) is reporting on Jan. 29 and Facebook ($FB) is reporting Jan. 30. Both are confirmed for after the bell.

Alphabet ($GOOGL), Microsoft ($MSFT), and Amazon ($AMZN) are also expected to report that week, though they have yet to confirm their exact dates.

Disclosure: the author holds no position in the stocks mentioned.

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