The significant blows from Big Tech and the big banks are likely to cause a surprising increase in corporate profits this earnings season.
S&P 500 index SPX,
companies are now expected to show a positive earnings growth of 1.7% for the fourth quarter, with 58% of the results already. This will enable the index to earn from a recession, which exists when corporate profits fall year-on-year. for two or more quarters in a row.
At the end of last year, analysts expected earnings to fall by 9.3% in December, marking the fourth consecutive quarter of year-on-year declines. Overall projections slowly started to improve as more results came and they finally became positive this week.
This has helped increase profitability in the financial services, information technology and communications sectors. As the S&P 500 is weighted by market value, larger companies have a greater influence on the index’s overall profit path.
According to John Butters, FactSet’s senior earnings analyst, the financial sector has made the biggest contribution to the increase in earnings. The mixed growth rate for the sector, which combines real and projected results, depending on whether a company reported another earnings, now stands at 17.2%, while the expectation for a decline of 9.4% from December 13 was.
Businesses that have made a significant impact include JPMorgan Chase & Co. JPM,
which beat earnings expectations by 44%, while Goldman Sachs Group Inc. GS,
beaten by 62%, Citigroup Inc. C,
beaten by 55%, Morgan Stanley MS,
beaten by 48%, and COF of Capital One Financial Corp,
estimate exceeded by 87%
In the information technology sector, Apple Inc. AAPL,
Intel Corp. INTC,
and Microsoft Corp. MSFT,
helped increase the sector’s mixed growth rate to 15.6%, from an expectation of 1.5% in December. Alphabet Inc. GOOG,
GOOGL,
and Facebook Inc. FB,
also exceeded expectations by a wide margin and increased the mixed growth rate for the communications services sector to 6%, compared to an expected decline of 12.9% on 31 December.
Outside of the three sectors, Amazon.com Inc. AMZN,
and Ford Motor Co. F,
also yielded large profit surprises that, according to Butters, contributed significantly to the rise in mixed earnings growth.
Boeing Co BA,
was the biggest draw, 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.
A total of 81% of the companies that have delivered results so far have better-than-expected revenue, he said.
The week ahead has another busy earnings record, with 77 members of the S&P 500 reporting, including three companies that are also in the Dow Jones industrial average. Walt Disney Co. DIS,
and Cisco Systems Inc. CSCO,
is among the biggest names due to postcodes.
Here’s what to look for:
Streamlined
Disney is expected to put another quarter in the red Thursday afternoon as the pandemic continues to weigh on its theme park and media businesses, but investors appear willing to look beyond the company’s pandemic earnings, according to LightShed Partners analyst Richard Greenfield .
The key to Disney’s report is that progress is being made with the company’s Disney + service. Disney is still growing its subscriber base with a fast cut, but following the company’s latest report, there were concerns about how much of the growth came from those who signed up for the company’s Indian Hotstar product, giving Disney a much lower average revenue per user.
Disney Earnings Preview: Can Disney + maintain its teasing pace to maintain the Magic Kingdom?
A new chapter for Twitter
Twitter Inc. TWTR,
probably benefited from the same strong advertising trends that Pinterest Inc. PINS helped,
and Facebook late last year, but the results are not as important as what comes next.
Twitter executives are likely to receive questions on Tuesday afternoon about user engagement trends following the decision to ban former President Donald Trump permanently from the platform because of his role in inciting violence in the U.S. Capitol in January.
“Regardless of the opinion of the president or Twitter’s recent policy actions, we view Trump as a unique life force for activity and engagement on the platform that cannot be easily replaced,” Wells Fargo analyst Brian Fitzgerald wrote after the ban has been announced.
Bernstein analyst Mark Shmulik has suggested that the ban on Twitter could be a blow, but that the ban could cause an ‘increase in brand-safe advertising inventory’, as some advertisers do not want the ban to their places should appear near Trump-related content.
Advice: Apple’s privacy changes affect more than just Facebook
Network
The IT spending landscape looks set to improve, which according to Everit ISI analyst Amit Daryanani could deliver slightly better-than-expected results for Cisco if the company delivers results Tuesday afternoon. He will seek information on the vision of new CFO R. Scott Herren, as well as progress with the company’s efforts to generate more entries.
Restoration of shares?
Lyft Inc. LIFT,
and Uber Technologies Inc. UBER,
probably continued on their rocky recovery path in the fourth quarter, but Shmulik warned that the company’s growth rate for the period may be low or even slightly lower than the third quarter, given an increase in global cases, the appearance of new COVID -19 strains, and the winter weather.
Read: Uber’s growing, ‘exciting’ delivery business, and possible ride recovery, analysts bullish
Lyft reported Tuesday afternoon, while Uber follows a day later. Uber executives are likely to discuss the recently announced decision to buy Drizly, a liquor delivery service.