Schlumberger’s rosy report Friday — including its best profit in seven years and a boost to its full-year guidance — supports expectations for oil giants Exxon and Chevron to continue their earnings expansion streak when they deliver results at the end of the week. Meanwhile, the technology megacap companies reporting this week will look to shake off souring sentiment on digital advertising rates, after Snap’s slowest quarterly sales growth triggered a sell off that wiped out $35 billion in ma
(Bloomberg) — Schlumberger’s rosy report Friday — including its best profit in seven years and a boost to its full-year guidance — supports expectations for oil giants Exxon and Chevron to continue their earnings expansion streak when they deliver results at the end of the week. Meanwhile, the technology megacap companies reporting this week will look to shake off souring sentiment on digital advertising rates, after Snap’s slowest quarterly sales growth triggered a sell off that wiped out $35 billion in market cap for social media stocks.
Even with lowered earnings estimates for the third quarter, the proportion of S&P 500 companies beating expectations two weeks into the reporting season has been mostly in line with the level at this point last quarter, but is trending below that of the prior year. Of the almost 20% of companies that have reported so far, roughly 58% posted positive surprises in both revenue and EPS, according to data compiled by Bloomberg.
Goldman Sachs, Bank of America and Netflix were among last week’s better-than-expected results, assuaging fears for now about the health of the consumer even as executives remain cautious about the economic outlook. The concerns were more evident in American Express’s earnings, however, as the credit card provider set aside more money to cover bad loans than analysts expected. Tesla also reported lackluster results and said it will miss broad annual growth targets on EV demand concerns in China and Europe.
US stock futures rose Monday ahead of the busy earnings week, which will see reports from tech giants Apple, Amazon, Alphabet, Microsoft and Meta Platforms. Caterpillar, Boeing, General Electric, 3M and General Motors are also due to report. In the UK, former chancellor Rishi Sunak took a step closer to becoming the next prime minister after Boris Johnson pulled out of the race to succeed Liz Truss, who stepped down last week.
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Earnings highlights to look for this week:
Monday: Cadence Design (CDNS US), a software maker for semiconductor designs, is expected to post modest sequential revenue growth in the third quarter when it reports after-market, thanks to secular trends favoring a greater number of chip designs and their heightened complexity. Analysts from Bloomberg Intelligence and KeyBanc Capital Markets are bullish on the firm’s long-term drivers, potential new customer streams and business prospects, with BI likening “Cadence to selling the paint and the brushes into a semiconductor renaissance.” The company is expected to give comments on the impact of the recently announced US chip-export rules against China, though BI said that could be minimal given peer Synopsys said it didn’t expect material earnings impact.
Tuesday: Microsoft (MSFT US) is projected to report its slowest year-over-year revenue growth since late 2017 when it delivers fiscal 1Q results after the market close. Guggenheim analysts cast doubt on the company’s ability to maintain full year guidance, saying its target of double-digit reported revenue growth is at risk if the dollar continues to strengthen and macro conditions weaken further. Still, a rebound in cloud spending could help it beat expectations in 2024, according to Bloomberg Intelligence.
- Biogen (BIIB US) reports before the opening bell. The drugmaker’s next steps for the jointly-developed Alzheimer’s treatment lecanemab may steal the limelight from the results themselves, Bloomberg Intelligence wrote, given the positive findings from the phase 3 trial last month. Baird analysts said the company could face questions about its regulatory and pre-launch effort with Eisai for the treatment, also noting investors’ interest on pricing plans. They expect third-quarter results to largely meet the Street’s consensus, which is guiding for a low-double-digit contraction in both the top and bottom lines for the quarter.
Wednesday: Boeing (BA US) will report before the bell. Analysts are projecting a return to positive free cash flow and a sequential growth in operating cash generated for the fiscal third quarter, reinforcing comments last month made by Chief Financial Officer Brian West. On the earnings call, Cowen analysts are expecting the planemaker to address supply chain and labor concerns.
- Seagate (STX US) is due before the market open. Having cut its revenue forecast in August due to worsening economies and supply-chain snarls, the computer hard drive maker should post a top line for the fiscal first quarter that meets its updated guidance, Bloomberg Intelligence wrote. The sharp sales drop — consensus implies about a 32% decline compared with a year ago — may trigger cost-cutting measures as a margin remedy, they added.
Thursday: Apple (AAPL US), releasing its fourth-quarter results after the bell, could be hit harder than expected by the effects of the stronger dollar and weakness in China. “Unfavorable foreign-exchange movement may have driven high-single-digit growth in services both for the fourth quarter, with potential for similar gains in the first quarter of 2023, compared with an average of 19.7% over the past four quarters,” Bloomberg Intelligence said. IPhone sales could match or beat consensus of about 9.8% growth year-over-year, thanks to an extra week of new-iPhone sales, but total iPhone revenue in 2023 is projected to rise only about 2.7%. Apple withdrew plans to ramp up iPhone 14 production late last month, as an anticipated surge in demand did not materialize.
- Caterpillar (CAT US) will report premarket. The heavy machinery maker is set to post accelerated growth in revenue, driven by factors BI identified as its elevated backlog, solid underlying demand and easing supply constraints. Most of its dealers in North America are expecting further price hikes in 2023 as demand is out-running supply, according to Citigroup analysts. Management’s view on inflation pressures, supply chain and China demand will be closely watched after its CEO in August said there had been no broad improvements on these macro challenges.
Friday: Exxon (XOM US) and Chevron (CVX US) are both due before the opening bell. The two oil giants are projected by consensus to continue the bottom-line expansion streak they’ve seen over the past year, thanks to oil prices that remained elevated for most of the third quarter. The producers’ fourth-quarter outlooks will be key, as Bloomberg Intelligence raised the possibility of weaker cash flow for Exxon due to falling crude and gas prices, as well as a potentially slower profit growth for Chevron.
–With assistance from Rafael Mendes.
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