The market has another short trading week with Monday’s closure to celebrate Martin Luther King, Jr., but there will be plenty of big earnings reports happening during the week.
Last week officially kicked off the current earnings season with most of the major financials reporting, and early reports have been encouraging. While the market has started the year strong following December’s correction, but the recent volatility remains fresh on investors’ minds and traders will be quick to sell stocks that any show signs of weakness this earnings season.
This week’s reports feature big name stocks from a diversified group of sectors. Whether you have these stocks in your portfolio or not, you should pay attention to their quarterly reports because they have the potential to create a ripple effect across their entire sectors and possibly even the overall market.
Every earnings season is important but given the market’s recent volatility and the amount of uncertainties facing the market at this time, this earnings season carries extra importance. The market has been strong over the last couple of weeks, but overall market conditions remain very fragile which puts extra pressure on each earnings report in the weeks ahead.
Here are five of the biggest names set to report their quarterly numbers this week.
Procter & Gamble (PG)
Consumer goods maker Procter & Gamble (PG) will report earnings before the market open Wednesday. The consensus for the quarter calls for earnings of $1.21 per share and revenue of $17.2 billion. During the same period last year, the company earned $1.19 on sales of $17.39 billion. Procter & Gamble has done a great job cost cutting and focusing its attention on its strongest brands in recent years which has helped the company return to earnings growth. Over the last five years earnings are down 0.6% per annum, but for the current year profits are forecast to rise 4.5% and analysts expect the company to grow earnings by 6.7% per annum over the next five years. The earnings improvements have been reflected in the stock which has been a strong performer since last spring. The street expects a small earnings beat for the quarter with a whisper number of $1.23 per share. If the company is able to top estimates, it would mark the third straight earnings beat and should drive shares back to their record high set in December just before the overall market correction. PG trades at $91.42 with an average price target of $94.82.
International Business Machines (IBM)
International Business Machines (IBM) continues to struggle with its turnaround program. The company has failed to boost revenues for its cloud computing and artificial intelligence initiatives that were supposed to drive the company in the future. Last year IBM opted to buy its way into a leadership role in the all-important cloud market with a $34 billion acquisition of RedHat. The market was not happy with the cost of the deal and IBM shares took a big hit on the news. The company will report fourth-quarter numbers after the market close Tuesday with the consensus calling for earnings of $4.81 on sales of $21.75 billion. During the same period last year, the company earned $5.18 per share and had sales of $22.5 billion. With year over year drop in earnings and sales has already been priced into the stock and should not lead to a big selloff as long as the company is able to hit the estimates. The street expects a small earnings beat with a whisper number of $4.88. Given the year over year drop, and the expected small beat, there is a lot of downside risk if the company is unable to hit the forecast. The company does have a strong history of posting positive earnings surprises, and with so much negativity in the stock at the moment a positive surprise is crucial for IBM to recover from its recent losses. IBM is trading at $123.82 with an average price target of $156.10.
U.S. automaker Ford Motor (F) will report fourth-quarter results after the market close on Wednesday. Analysts forecast earnings of $0.30 per share on sales of $36.96 billion. During the same period last year the company reported earnings of $0.39 and sales of $38.5 billion. The auto sector has cooled after years of record-setting sales, and all of the major auto stocks have been weak over the last year. Ford stock fell to a 52-week low in December during the market correction and while the stock has started to recover it remains in the lower end of its 52-week low and Wall Street remains skeptical of the company. China is a major market for automakers and until the U.S. and China reach a deal that brings the current trade war to an end the overall sector will remain under pressure. The street has a whisper number of $0.30, suggesting the company will report earnings in-line with the consensus, so even just a small earnings beat should be rewarded and allow the stock to recover some of its recent losses. F is trading at $8.58 with an average price target of $10.78.
Alaska Air (ALK)
Regional airliner Alaska Air (ALK) reports fourth-quarter numbers after the market close Thursday. Analysts forecast earnings of $0.73 per share on revenue of $2.06 billion, versus earnings of $0.83 on sales of $1.96 billion during the same period last year. Higher oil prices are hurting the bottom line despite higher sales, but as oil prices started to ease during the fourth quarter last year most airliner stocks started to rally before selling off in sympathy to the overall market correction in December. Alaska Air followed suit, but shares have already started to move higher ahead of the upcoming quarterly report and strong set of numbers should help the stock build on recent gains. Oil peaked in October and fell sharply in the final months of the year as a result of oversupply and fears of a global economic slowdown stemming from the current U.S./China trade war. If oil prices remain at their current level airline stock should rally. Current trade negotiations between the U.S. and China have the market hopeful of a possible deal which would put to rest some concerns over a possible global recession, but the oversupply of oil will prevent oil prices from move too much higher which is a positive for all transportation stocks. With the fourth quarter selloff in the stock ALK is now trading at less than 10 times earnings so there is definitely value in the stock as long as the company is able to hit its estimates. ALK is trading at $64.86 and analysts have an average price target of $79.45 on the stock.
Consumer goods maker Colgate-Palmolive (CL) reports Q4 numbers on Friday. The company will report its numbers before the market open with the consensus calling for earnings of $0.73 per share and sales of $3.79 billion. During the same period last year, the company had earnings of $0.75 and sales of $3.89 billion. 2018 was a tough year for the stock as the market drove the stock lower in response to falling earnings and sales. The stock hit a 52-week low in December and has bounced a little as strength returned to the overall market, but shares remain firmly in the lower end of its 52-week range. Colgate has reported weaker than expected sales for four straight quarters, and until the company is able to keep pace with analysts’ sales estimates it will be tough for the stock to regain strength. The current government shutdown has hurt consumer sentiment, which is now at its lowest level since President Trump took office. The University of Michigan’s monthly report showed consumer confidence fell to 90.7 in January, down from 98.3 in December. The drop in consumer sentiment will weigh on consumer goods companies until Trump and the Democrats are able to reach a deal to reopen the government, which has been shut down for 30 days at this point, marking the longest government shutdown in history. There is a lot of negativity priced into the stock, so a positive earnings surprise should push the stock higher, but the upside will be limited while consumer sentiment suffers from the shutdown. CL trades at $62.63 with an average price target of $64.17.