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Big Names Kick off New Earnings Season

Monday, January 13, 2020 04:42 PM | Michael Fowlkes

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Big Names Kick off New Earnings Season

This week will see the launch of the new earnings season, with big banks Wells Fargo (WFC) and JP Morgan (JPM) both reporting their next set of quarterly numbers before the market opens on Tuesday.

Big banks will headline the opening week of the earnings season, but the market will also get important quarterly reports from different sectors as well that should set the tone for the rest of the market as we move deeper into the new earnings season.

Strong economic conditions continue to prop consumer confidence, consumer spending and as a result investor confidence. The major indexes are all trading near record highs, and the market needs a strong earnings season for stocks to build on their recent gains through the first months of 2020.

Here are a few quarterly reports to watch as Wall Street kicks off the new earnings season this week.

Bank of America (BAC)

Bank of America (BAC) will report its fourth-quarter numbers before the market open on Wednesday. The bank's results will come following quarterly reports from JP Morgan (JPM) and Wells Fargo (WFC) and will help guide the market on what to expect as we move into the new earnings season. The financial sector has been strong during the bull market, and BAC stock is currently trading just shy of its 52-week high. Analysts forecast the bank to post to quarterly earnings of $0.68 per share, but the street expects a better than expected quarterly report with a whisper number of $0.72. Bank of America has a strong earnings track record with better than expected profits each of the last 14 quarters. Should the bank post another positive earnings surprise as expected, BAC stock is likely to rise to a new 52-week high following the report. The stock has a very attractive valuation with a forward P/E of 11.6, and profits are expected to rise at an annual rate of 7.5% over the next five years. Economic conditions remain favorable for the financial sector and analysts see additional upside in the stock. BAC is trading at $34.90 and analyst have an average price target of $36.53 on the stock.

J.B. Hunt Transport Services (JBHT)

As a logistics company, J.B. Hunt Transport Services (JBHT) is an important earnings report to watch as it does indicate the level of business activity in the U.S. The company is scheduled to release its fourth-quarter numbers before the market opens on Friday. Going into this week's quarterly report analysts forecast earnings of $1.56 per share, but the street expects a small earnings beat with a whisper number of $1.58. JBHT trades in the upper end of its 52-week range despite the company posting weaker than expected earnings each of the last five quarters. Despite the negative surprises, the stock has maintained strength. Last quarter earnings fell short of the consensus but did rise to $1.40 from $1.19 year over year. Profits have risen just shy of 11% per annum over the last five years and are forecast to rise an additional 9.1% per annum over the next five years. JBHT trades at 20 times future earnings, which should allow shares to build on recent gains if the company is able to post in-line numbers or top estimates as the street expects. JBHT is currently trading at $118.01 with an average price target of $112.38.

Alcoa (AA)

Aluminum maker Alcoa (AA) used to be considered the primary bellwether stock for earnings season. Due to the importance of aluminum in so many different market sectors, Alcoa's quarterly report remains important, but it has definitely lost the level of importance it held prior to the technology revolution. Alcoa will report its fourth-quarter numbers after the market close on Wednesday, with the consensus calling for a loss of 21 cents per share. AA stock is trading in the lower end of its 52-week range with the company posting mixed numbers last quarter with a negative earnings surprise and a small top-line beat. AA trades with a forward P/E of 27 and analysts expect the company's profits to fall 15% per annum over the next five years. Wall Street loves growth, and falling profits will weigh on the stock unless the company is able to outpace estimates moving forward. The street expects another earnings miss this quarter with a whisper number loss of 23 cents per share. The expected earnings miss has already been priced into the stock so there is upside potential should Alcoa post in-line or better than expected numbers. AA trades at $19.53 with an average price target of $23.19.

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