Stock Market Analysis Today – Third Quarter Earnings Calendar – Fintech Zoom Advisor
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The U.S. stock market has just come out of its worst month since March 2020, and rattled investors may need to buckle up for more turbulence in the weeks ahead. That’s because earnings season begins in mid-October—a multi-week period that brings additional volatility to the stock market.
Companies in the S&P 500 are expected to report quarterly earnings that are nearly 28% higher than the same quarter one year ago, according to analysts’ estimates. That’s more than double the five-year average earnings growth rate of 11.8%, according to figures compiled by FactSet. With only about 12 weeks left in the year, investors will also be keen to hear from company executives about the outlook for 2022.
The biggest theme that’s likely to be a focus in earnings reports? “The continued impact from supply chain disruptions,” says Bill McMahon, managing director and chief investment officer of active equity strategies at Charles Schwab. Many companies already have revised earnings guidance as a result of issues like congested ports, longer transit times from Asia and labor shortages—and more companies may do so, he adds.
Here’s what to expect week-by-week for 2021’s third quarter earnings season.
Earnings Season Week One—October 11-15
The reporting period for companies that adhere to a traditional calendar quarter, with a third quarter ending September 30, will kick off earnings season in the week of October 11. Just 19 companies in the S&P 500 are currently scheduled to report results this week, according to YCharts. The list is heavy on banks, with JPMorgan Chase, Bank of America, BlackRock, Citigroup and Morgan Stanley among the companies expected to report earnings.
Analysts are forecasting earnings growth of 17.2% for the financial sector in the third quarter, according to FactSet. This stock market sector is important to watch because it helps investors get a sense of the pace of broader economic growth, based on things like demand for loans and credit, McMahon notes. “Banks offer a good read on consumer and business spending.”
As longer-term interest rates—like the benchmark 10-year Treasury note—have started to increase, causing the yield curve to steepen, investors will be keen to hear from the biggest banks about the lending prospects for the current quarter and beyond, says Sam Stovall, chief investment strategist at CFRA Research.
Of particular note this week:
- Oct. 13: JPMorgan Chase (JPM—Financials). As the largest U.S. bank and one of the 10 largest companies in the S&P 500, JPMorgan is a bellwether for both the financial sector and the broader economy. The company is expected to report earnings per share for the quarter of $2.98, according to the consensus of analysts’ estimates compiled by YCharts.
- Oct. 13: Delta Air Lines (DAL—Industrials). Airlines were especially hard-hit during the worst months of the Covid-19 pandemic, but that’s changed recently. Analysts are forecasting Delta will report a profit of 16 cents per share after six straight quarters of losses, according to data compiled by YCharts.
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Earnings Season Week Two—October 18-22
Earnings season heats up in week two, with more than 80 of the S&P 500 companies scheduled to report results. Unlike the first week, however, this period offers more variety—IBM, Netflix, Tesla, AT&T, American Express and Dow are among the companies reporting.
Wall Street will get an early read on one of the most important market sectors: Technology. This sector accounts for more than 25% of the weight in the S&P 500, and companies in this sector are expected to report the earnings growth of 28.5% (third behind the materials and industrials sectors), according to FactSet.
“Technology is one sector I’d certainly pay attention to; it’s a big part of the economy and the stock market,” says McMahon. In particular, he wants to see whether demand for tech products was “pulled forward” in 2020 as a result of a rapid shift to remote work during the early months of the pandemic—and if that demand has since cooled.
What’s more, McMahon will also be interested to see how semiconductor companies are faring in light of chip shortages. “I’ll be curious what they report in terms of lead times and backlogs,” he adds.
Consumer staples companies also begin reporting results this week and will be important to monitor for mention of inflation, Stovall adds. “Are these companies continuing to see inflationary pressures and are they transitory, as the Fed suggests?”
Companies to watch this week include:
- Oct. 19: Procter & Gamble (PG—Consumer staples). The company is a giant in the household products industry, and owns brands like Tide detergent, Charmin toilet paper and Pampers diapers. For the past nine quarters, the company has reported earnings that have beat analysts’ expectations.
- Oct. 21: Intel (INTC—Information technology). The world’s largest chipmaker will offer some additional insight into the aforementioned chip shortage, which may not be fully resolved until 2023. The stock has fallen about 20% since April.
Earnings Season Week Three—October 25-29
The third week of earnings season will be the busiest, with nearly 40% of the S&P 500 members scheduled to report results. As with week two, investors will hear from a wide swath of companies including big tech players like Facebook and Google parent Alphabet
Several companies in the consumer discretionary sector will report results this week—and Stovall says this is the sector he’s most keyed-in on for the upcoming earnings season. “My feeling is I want to see how the consumer is doing,” says Stovall, adding he’ll look for indications of whether Americans are feeling confident or cutting back on spending.
The third quarter will capture the back-to-school shopping period, and companies are likely to share an early read on the all-important holiday season, notes McMahon. In addition to companies that will offer that specific view into consumer behavior—Hasbro, Etsy, eBay, Mastercard and Apple—several transportation operators also report results, chief among them being UPS.
Companies to pay attention to this week include:
- Oct. 29: Amazon.com (AMZN—Consumer discretionary). The online retail giant offers an important early read on the holiday shopping season since other major retailers (like Target and Walmart) have a different fiscal quarter and won’t report results until mid-November. Amazon is expected to report earnings per share of $8.96, according to the consensus of analysts’ estimates compiled by YCharts.
- Oct. 29: Exxon Mobil (XOM—Energy). The energy sector is expected to return to profitability after suffering a loss one year ago, and Exxon will likely be one of the biggest contributors to this rebound in earnings, according to FactSet. Thanks to higher oil prices, the stock is up nearly 50% this year.
Earnings Season Week Four—November 1-5
The final big wave of earnings season happens in the fourth week, with more than 100 companies reporting results. Fewer of the flashier companies remain, though some big players in their respective industries are scheduled for the week, including Clorox, CVS Health, MGM Resorts, Kellogg and PayPal.
This week of earnings is heavier on companies in the healthcare, real estate, industrials, materials and utilities sectors. Some of these companies will be able to weigh in on the potential benefit from the long-awaited infrastructure package that’s still working its way through Congress, Stovall notes.
Of particular note this week are:
- Nov. 2: Mosaic (MOS—Materials). It may not be a household name like Dow, but analysts have been significantly revising higher their estimates for fertilizer giant Mosaic’s earnings, now at an estimate of $1.58 per share up from 98 cents in June, according to FactSet. The stock is up more than 70% this year.
- Nov. 5: Berkshire Hathaway (BRK.A—Financial Services). This holding company is always one of the most-watched companies during earnings season because of its famous CEO: Warren Buffett. It’s also among the top 10 largest companies in the S&P 500.
Earnings Season and Your Portfolio
Earnings season can cause significant volatility for individual stocks, which can affect the direction of the broader stock market. In addition to a review of what happened in the prior quarter, companies will offer valuable information about what they expect through the end of the year and into 2022.
Whether you’re a new or experienced investor, earnings season is always an interesting time to learn more about specific companies—and broader industry trends. “The devil’s in the details,” McMahon says. “If someone has the appetite, they should spend the time to learn about the companies they own.”
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Stock Market Analysis Today – Third Quarter Earnings Calendar – Fintech Zoom Advisor