So far, the earnings season has been upbeat, but earnings growth is slowing, which is a major reason the market corrected in December. Fourth quarter earnings growth for the S&P 500 is expected to come in at 14.3% for the fourth-quarter, but that number is forecast to dip to just 2% for the first quarter, suggesting the impact of tax cuts is wearing out.
On top of slowing earnings growth, rising interest rates and trade tensions between the U.S. and China will continue to weigh on the market. With so much uncertainty in the market, each and every earnings report matters this quarter, and this week sees some major reports.
Let’s take a closer look at five upcoming reports that could impact the overall market this week.
iPhone maker Apple (AAPL) will report fiscal first-quarter earnings after the market close Tuesday. The company is forecast to earn $4.17 per share on sales of $84.1 billion, versus earnings of $3.89 and sales of $88.3 billion during the same period last year. After years of strongly outperforming the market, AAPL hit a ceiling and in October and has lost close to 35% from its all-time high. Demand for the company’s newest iPhone models has been weaker than expected, and the company warned earlier this month of problems in the all-important China market.
Apple has a strong track record of posting big earnings surprises and it will need another major positive surprise on both the top and bottom line for the stock to rebound. There is a lot of negativity priced into the stock at this time, and shares are trading a low valuation with a forward P/E of 11.6. The street expects a decent earnings beat with a whisper number of $4.25 for the quarter. If Apple is able to top that whisper number the stock should rally unless the company provides more bearish outlook on operations in China. The stock is now trading at $155.06 and analysts have an average price target of $197.04.
Telecom leader AT&T (T) reports fourth-quarter earnings before the market open on Wednesday, with the consensus calling for earnings of $0.85 per share on revenue of $48.42 billion. The telecom market in in the U.S. is highly saturated and competition is fierce between the established leaders. Despite the market saturation AT&T has managed to continue growing its earnings, with profits up 7.7 percent per annum over the last five years and the company is forecast to continue growing earnings by 6% on average over the next five years.
The company posted mixed results last quarter with profits weaker than expected, and traders expect an in-line report this quarter with a whisper number of $0.85. With earnings expected to fall in-line with the consensus, a positive earnings beat could push the stock significantly higher following the report. The stock trades at $30.46 with a $36.23 average price target.
Aerospace and defense contractor Boeing (BA) will report its fourth-quarter results before the market open January 30. Analysts forecast earnings of $4.52 for the quarter on revenue of $26.92 billion. During the same period last year the company earned $4.80 a share on sales of $25.4 billion. The company has a very strong earnings track record, with better than expected results on the top and bottom line each of the last five quarters, and profits topping estimates for 10 straight quarters. Analysts expect another earnings beat for the company’s recent quarter with a whisper number of $4.61 for the quarter.
The stock trades at 21 times earnings, and analysts forecast earnings growth of 23 percent per annum over the next five years. The stock has rebounded nicely from a December selloff, and with the strong growth estimates and reasonable price there is a lot of upside potential should the company top estimates as expected. BA is trading at $360.95 and analysts have a $415.47 average price target on the stock.
Social media leader Facebook (FB) is scheduled to post its fourth-quarter results after the market close Wednesday, with analysts forecasting earnings of $2.17 per share and sales of $16.41 billion. It has been a tough six months for the stock as investors continue to worry about the impact of the company’s data privacy scandal and its drop in popularity with teens. Facebook continues to grow at a very fast pace, and the company remains the only real competitor to Google’s dominance of online advertising. Facebook also own Instagram and WhatsApp, both of which should continue to improve as viable revenue streams moving forward. A lot of negativity has been priced into the stock, but Wall Street has a short memory, and if the company is able to string together a couple strong quarterly reports it will focus more on the company’s dominance of social media and its strong position in online advertising and come back to the stock.
The street expects a small beat for the quarter with a whisper number of $2.26 for the quarter. Last quarter the company posted a big positive earnings surprise, but sales have fallen short of estimates the last two quarters. This is weighing on the stock, and Facebook needs to break that streak with a beat on the top and bottom line for the stock to move higher following the report. FB is trading at $147.24 with an average price target of $192.65.
Credit card company Visa (V) reports fiscal first-quarter earnings after the market close Wednesday. Analysts expect to see earnings of $1.25 and sales of $5.4 billion. Visa and its main competitor, Mastercard (MA) both sold off with the overall market in December, but the sector held up pretty well, and both stocks have rounded nicely as stability returned to the overall market. Consumer sentiment definitely took a hit in January during the government shutdown, but now that the shutdown has ended (at least for now), sentiment should rise and help payment processors build on their recent gains. The recent holiday shopping season was a good one, and it has been reported that consumers spent around $126 billion during the holiday season, up 16.5% year over year. Higher online sales are a strong indicator for a positive earnings season for credit card companies.
Visa has posted strong than expected earnings each of the last seven quarters, and the street expects another earnings beat this quarter with a whisper number of $1.28 for the quarter. The stock is currently trading at $135.60 with an average price target of $162.91.