Earnings season continues this week with more big banks set to release fourth-quarter results the financial sector is joined by some big technology names and one of the big airlines.
Banking
Last week saw the beginning of the earnings season with major banks such as JP Morgan (JPM), Wells Fargo (WFC), Citigroup (C), and PNC releasing results. Each of those firms surpassed earnings expectations but mixed results on the revenue line led to some sharp drops in share prices.
Goldman Sachs (GS) reported Tuesday morning and markets responded extremely well. Revenue rose of 17.9% year over year and EPS of $12.08 easily surpassed the expected $7.36. However, Bank of America (BAC) showed mixed results more similar to Citigroup and Wells Fargo. BAC topped expectations for earnings, but fell short on the revenue line. U.S. Bancorp (USB) released earnings Wednesday morning that also beat earnings estimates and missed on revenue.
One common theme from bank earnings are massive reserve releases by many of these firms. Much of JP Morgan’s EPS was from a $2.9 billion reserve release. Bank of America, Citigroup, and PNC earnings also benefited from a major decrease in loan-loss reserves.
Still yet to report are Morgan Stanley (MS), Discover Financial Services (DFS), Truist (TFC), and Ally Financial (ALLY). Investors will be looking to see whether these financial institutions will keep a similar trend of beating earnings estimates with a boost from reserve releases, even if revenues fall short.
Big Tech
Along with the financial sector, some tech leaders are set to report their fourth-quarter results. Netflix (NFLX) reported after the close on Tuesday and while the company missed earnings estimates with EPS of $1.19 against expectations for $1.41. Netflix did slightly surpass revenue expectations, reporting $6.6 billion last quarter. Despite the initially financial results, NFLX shares soared Wednesday. The market has long paid more attention to the company's subscriber growth than financial results, and subscriber growth was strong. The company also said that it expects to be able to fund it own operations going forward and could even implement a share repurchase program. Netflix added 8.5 million new subscribers in the fourth quarter, smashing estimates for 6 million. All told, the company gained a pretty incredible 37 million subscribers in 2020.
Tech giants Intel (INTC) and International Business Machines (IBM) are expected to report fourth-quarter earnings after the close on Thursday. Both companies just barely beat estimates last quarter. IBM in particular has a history of having earnings results come in very close to estimates. IBM's stock hasn't really done much for the better part of 10 years. Shares hit an all-time high in 2013 and have been trending slightly downward since then.
INTC on the other hand had been rising ever since the dot.com bubble burst but has been mixed since 2018 with the rise of Advanced Micro Devices (AMD) and Nvidia (NVDA). Intel and AMD have been fierce competitors long before 2018 but the latter has experienced a recent surge based on massive improvements in its CPU performance that has left Intel behind. Apple (AAPL) recently announced a move away from Intel in favor of its own in-house hardware. Still, Intel is a giant that hasn't made huge technology advancements in recent years but a brand new generation of improved processors on new architecture could put Intel right back in favor of many computer manufacturers and hardware critics.
Airline Travel
Lastly, United Airlines (UAL) is reporting after the close Wednesday which will give investors a better look into how the airline industry performed last quarter. Delta Air Lines (DAL) already released earnings last week and missed EPS estimates but did manage to surpass revenue expectations. Portfolio managers will look to see if United manages to beat EPS estimates for a loss of $6.56 but has reported worse than anticipated earnings over the past two quarters during pandemic. Many are keeping a close eye on the airline industry this earnings season to get a glimpse into how much travel increased during the holiday season.
