The second-quarter earnings season will kick off later this week with a wave of financial stocks reporting their most recent quarterly numbers.
Between rising interest rates and fear of a full blown trade war with China, the market has struggled to find its footing over the last couple of months, and has been stuck in a fairly tight sideways pattern since early February.
Gains the market enjoyed following the recent tax reform have faded, with plenty of analysts believing that the negative impact of a trade war with China will erase the benefits of lower corporate taxes.
With so much uncertainty surrounding the market at this point, traders really need to see a good earnings season for the market to have any hope in resume its upward trend.
The financial sector is going to be highlight of the season in its first week, but there are plenty of big name stocks that report early on that could set the stage for the rest of the season.
Let’s take a look at five important reports that will come toward the beginning of the next earnings season.
Financial giant JP Morgan (JPM) will help set the stage for the financial sector when it reports its quarterly numbers on July 13. Analysts have forecast the bank to report earnings of $2.23 per share, which is up from $1.82 during the same period last year. Rising interest rates should be driving JPM shares higher, but the stock has trended lower in recent months out of fear of what a trade war with China will do to international economies. If JPM can report strong second-quarter numbers, the stock should move higher and pull the financial sector with it. If financials start to show strength, the overall market should start to follow suit. Wells Fargo (WFC) and Citigroup (C) will also report on the 13th so that day will be a great indicator on the overall sector’s current state.
Johnson & Johnson
Consumer goods maker Johnson & Johnson (JNJ) will report its second-quarter numbers on July 17. JNJ is most known for its popular personal goods brands, but the company is also a major player in the pharmaceutical and medical device sectors as well, so its results will give a good insight into multiple market sectors. Ahead of the upcoming report, analysts expect to see the company post earnings of $2.06 per share, up from $1.83 during the same period last year. The company has topped estimates for the top and bottom line the last three quarters, and profits have outpaced estimates for an impressive 23 straight quarters. Traders expect that streak to continue, with a whisper number of $2.10 for the quarter. The stock showed weakness through the first five months of the year, but has begun to rebound, and a strong quarterly report should help it erase more of its recent losses.
Credit card company American Express (AXP) will release its second-quarter numbers after the market close on July 18. Analysts forecast profit of $1.83 per share, up from $1.47 during the same period last year. The overall economy has been strong, and unemployment low, which should lead to strength for payment processors like American Express. Last year U.S. households set a new record with the level of credit card debt, proving that consumer sentiment remains upbeat and people are shopping. AXP’s results will give a better insight into both the consumer and financial sectors and should provide clearer insight into consumer spending.
Aluminum maker Alcoa (AA) used to be considered the ultimate bellwether stock, but its importance has faded a bit in recent years, but the company’s results are still important to track. With aluminum being used is so many sectors such as autos, construction, homebuilding, etc., Alcoa’s results are an important indicator into the state of the overall economy. President Trump’s aluminum and steel tariffs will lift prices on imported metals, and should help boost Alcoa’s position in the sector. Analysts expect to see Alcoa report earnings of $1.68 per share for the quarter, much higher than the $0.62 the company earned during the same period last year. After trading lower through May and June, AA has started to move higher, and a strong quarterly report should push the stock even higher.
Tech leader Microsoft (MSFT) will be the first big tech company to report when it releases its fiscal fourth-quarter results on July 19. The company will post its numbers after the market close, with the consensus calling for earnings of $1.08 per share, up from $0.98 during the same period last year. Microsoft has done a good job carving out its piece of the cloud computing market, which is among the fastest growing sectors in tech, and the company’s cloud numbers will drive the stock as well as other big players in the sector like Amazon (AMZN) and Adobe (ADBE). The market has remained very bullish on tech stocks, and MSFT continues to trade just shy of its all-time high. Like many stocks in the sector, MSFT is priced for perfection, so any signs of weakness could signal tech spending is slowing, which would have a ripple effect across the entire industry, which is why MSFT’s numbers will be so important to watch.