Last week’s big bank earnings marked the unofficial start of the reporting season, and quarterly earnings from the biggest Wall Street firms relayed a mixed message. As the earnings flow kickstarts in earnest in the unfolding week, here is Benzinga’s compilation of expectations and the key earnings reports to watch out for during the trading week:
Q4 Sentiment Muted: Fourth-quarter earnings from S&P 500 companies are estimated to drop 3.9% year-over-year, financial data provider FactSet’s latest weekly “Earnings Insight” report shows. This marks a slight improvement from the 4.1% drop predicted in the firm’s previous weekly report.
If the prediction for negative earnings comes true, it would mark the first drop since the third quarter of 2020.
Twenty-nine of the S&P 500 companies have reported actual results, with 23 reporting earnings outperformance relative to estimates and 20 reporting upside revenue surprise.
Early Trends Give Hope: Of the 29 earnings reports printed so far, 79% have reported better-than-expected earnings per share, and in aggregate actual earnings exceeded estimates by 7.7%, FactSet said.
At a very early stage, the number of companies reporting positive EPS surprises and the magnitude of these EPS surprises are trending close to their five-year averages, the report said.
The forward 12-month P/E ratio for the S&P 500 Index is at 17.3, according to FactSet, which is below the five-year average of 18.5 but above the 10-year average of 17.2.
It has also improved from 15.2 at the end of the third quarter, as the index has appreciated about 11.1%. The trailing 12-month P/E ratio is 19.4, below the five-year average of 22.7 and the 10-year average of 20.5.
Commonwealth Financial Network’s chief investment officer Brad MacMillan has called for earnings gain, rather than a decline. The analyst noted that the analyst community is struggling to characterize extreme uncertainty in multiple areas and suddenly becoming more pessimistic.
“Normally, history suggests earnings will come in about 5% better than expected. If so, we could be looking at more or less flat earnings, which would not be great — but still much better than a decline,” he said.
McMillan also sees strong support from relatively strong fundamentals that are still in place, as reflected by people continuing to shop and spend and businesses continuing to invest. This could lead to topline growth, and with margins largely expected to hold, the bottom line will also likely hold, he said.
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Key Earnings Reports To Watch: Big bank earnings continue into the week and several bank and financial services companies will report through the week. A couple of airlines, a consumer goods behemoth, streaming giant Netflix, Inc. NFLX and an oilfield services company are all on the earnings deck this week.
In total, 26 S&P 500 companies, including two Dow 30 companies, are due to report earnings in the week of Jan. 16.
1. Goldman Sachs Group, Inc. GS (before the market open)
EPS Estimate: $5.48 vs. $10.81 year-ago
Revenue Estimate: $10.83 billion vs. $12.64 billion last year
2. Morgan Stanley MS (before the market open)
EPS Estimate: $1.19 vs. $2.01 year-ago
Revenue Estimate: $12.64 billion vs. $14.52 billion last year
3. United Airlines Holdings, Inc. UAL (after the close)
EPS Estimate: $2.10 vs. (-$1.60) year-ago
Revenue Estimate: $12.23 billion vs. $8.19 billion last year
Last week, competitor Delta Airlines Inc. DAL reported better-than-expected fourth-quarter earnings and revenues but issued a below-consensus EPS forecast for the first quarter of 2023, citing cost pressure.
1. Charles Schwab Corp SCHW (before the market open)
EPS Estimate: $1.09 vs. $0.86 year-ago
Revenue Estimate: $5.57 billion vs. $4.71 billion last year
2. JB Hunt Transport Services, Inc. JBHT (before the market open)
EPS Estimate: $2.46 vs. $2.28 year-ago
Revenue Estimate: $3.84 billion vs. $3.5 billion last year
3. Alcoa Corp. AA (after the close)
EPS Estimate: (-$0.73) vs. (-$0.24) year-ago
Revenue Estimate: $2.67 billion vs. $3.34 billion last year
4. Discover Financial Services, Inc. DFS (after the close)
EPS Estimate: $3.66 vs. $3.64 year-ago
Revenue Estimate: $3.66 billion vs. $2.94 billion last year
1. American Airlines Group, Inc. AAL (before the market open)
EPS Estimate: $0.77 vs. (-$1.42) year-ago
Revenue Estimate: $12.92 billion vs. $9.43 billion last year
2. Procter & Gamble Company PG
EPS Estimate: $1.59 vs. $1.56 year-ago
Revenue Estimate: $20.69 billion vs. $20.95 billion last year
Several regional banks, including KeyCorp. KEY, M&T Bank Corp. MTB and Northern Trust Corp. NTRS, are also scheduled to report their fourth-quarter results ahead of the market open.
3. Netflix (after the close)
EPS Estimate: $0.44 vs. $1.33 year-ago
Revenue Estimate: $7.82 billion vs. $7.71 billion last year
Netflix earnings will shape investor expectations for other big tech communication services companies. The focus will likely be on the paid net subscriber additions and commentary regarding initiatives to stem subscriber losses and boost revenue, including its ad-supported plan and any potential price hikes.
1. Schlumberger Limited SLB (before the market open)
EPS Estimate: $0.68 vs. $0.41 year-ago
Revenue Estimate: $7.8 billion vs. $6.22 billion last year
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