This is the first really big week for the current earnings season, with some huge companies set to report their most recent quarterly numbers.
Traders remain bullish on the overall market but there are enough uncertainties in the market at this time to keep the market volatile. The U.S./China trade war will continue to weight on market sentiment, and there is a lot of uncertainty surrounding the Federal Reserve which has already lowered interest rates twice and let the door open for additional rate cuts as it deems necessary.
The major indexes are all just shy of their all-time highs and a strong earnings season will certainly help drive the markets to new highs in the final months of the year.
This week features reports from a couple of the biggest tech stocks, a troubled airline company and a vulnerable heavy machinery company. Let's take a closer look at each company, all of which have the potential to determine the direction of the overall market.
Microsoft (MSFT)
Tech giant Microsoft (MSFT) is scheduled to report its fiscal first-quarter numbers after the market close on Wednesday. Analysts expect to see the company post earnings of $1.25 per share with sales of $32.19 billion for the quarter. Microsoft has posted better than expected top and bottom line numbers each of the last two quarters, and the street expects another positive earnings surprise with a $1.30 for the recent quarter. Microsoft is a leader in the fast growing cloud computing market, and earnings have risen at an annual rate of 17.6% over the last five years. Analysts expect profits to continue to rise at 14.5% per annum over the next five years, and the stock is currently trading at 27 times earnings. Microsoft has been a top stock in recent years, and barring a negative surprise shares should trend higher through the remainder of the year and build on the 36% gain it has enjoyed year to date. MSFT trades at $138.00 with an average price target of $156.42.
Amazon.com (AMZN)
E-commerce and cloud computing leader Amazon.com (AMZN) is expected to report its third-quarter numbers after the market close Thursday. The consensus calls for earnings of $4.46 per share on revenue of $68.57 billion, versus $5.57 and $56.6 billion during the same period last year. Analysts expect a small earnings beat for the quarter with a whisper number of $4.65. Last quarter Amazon reported mixed results with a revenue beat and an earnings miss. The bottom line miss pulled the stock lower, and AMZN has been stuck in a sideways pattern over the last three months following the drop. Amazon remains a solid long-term holding with a leadership role in both e-commerce and cloud computing, but Wall Street will be quick to punish the stock on any signs of weakness. AMZN has always traded at a high valuation, and shares are currently priced for perfection at 74 times earnings. With the company expected to grow earnings at an annual rate of 55% over the next five years the stock should trade higher as long as earnings estimates are hit. Analysts have an average price target of $2,285.00 on the stock.
Boeing (BA)
Aerospace and defense contractor Boeing (BA) will release its Q3 numbers Wednesday. The company will report before the market opens with the consensus calling for earnings of $2.04 per share with sales of $19.6 billion. During the same period last year, the company earned $3.58 with sales of $25.15 billion. BA continues to struggle with the fallout of its 737 groundings, and Wall Street is likely to remain bearish and has recently received multiple downgrades as analysts express concerns as the company continues to work on a solution to its equipment malfunction and details emerge that the company may have previously misled the FAA on the plane's safety. The company's quarterly report could help provide support and possibly push the stock a little higher, but with so many questions around the company's 737 jets it will take a very big earnings beat to rally BA shares higher.
Caterpillar (CAT)
Heavy machinery maker Caterpillar (CAT) reports Q3 numbers before the market opens Wednesday with analysts forecasting earnings of $2.83 per share on sales of $13.52 billion. During the same period last year the company earned $2.86 with revenue of $13.5 billion. CAT stock has had a volatile year and shares are currently trading higher ahead of the upcoming quarterly report and face a solid level of resistance at $132.50. The ongoing trade war between the U.S. and China poses a big problem for Caterpillar as farmers have been targeted, and a lingering trade war could easily result in a U.S. or global recession that would have a major impact on Caterpillar's business. For now analysts remain cautiously upbeat on the stock with an average price target of $134.50 versus its current price of $131.50. Last quarter the company missed on both the top and bottom line, and it will need to deliver better results for the stock to break through resistance and start to use $132.50 as a new support level.
