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Earnings Season Kicks into High Gear with Key Companies Reporting
Bank of America (BAC)
Bank of America is set to report earnings before the bell on Tuesday. Analysts expect the banking giant to post double-digit profit growth in the second quarter. Despite having one of the best core deposit franchises in the business, there may be less flexibility on the asset side due to a large HTM portfolio, which could result in NII trends lagging behind larger peers. Historical data shows that Bank of America beats earnings expectations 78% of the time, but the stock averages a slight decline on earnings days.
Morgan Stanley (MS)
Morgan Stanley is also set to report earnings on Tuesday. Analysts anticipate a more than 15% year-over-year drop in profits. The bank may face challenges from weakness in investment banking, muted trading revenue, and cost cuts. Despite these challenges, historical data shows that Morgan Stanley beats earnings estimates 77% of the time, with the stock averaging gains on earnings day.
Goldman Sachs (GS)
Goldman Sachs is scheduled to report earnings before the market opens on Wednesday. Analysts expect a sharp decline in earnings compared to the previous year. Similar to Morgan Stanley, Goldman Sachs could face difficulties in investment banking and soft trading revenue. However, historical data shows that the bank beats earnings estimates 86% of the time.
United Airlines (UAL)
United Airlines will report earnings after the bell on Wednesday. Analysts predict that the airline's earnings will more than double. Despite facing challenges from thunderstorms and cancellations, demand for travel remains strong, especially for international trips. United Airlines will also provide updates on outstanding labor contracts, including progress for a potential deal with pilots. Historical data shows that United's earnings beat expectations 69% of the time.
Tesla is set to report earnings after the market closes on Thursday. Analysts forecast high single-digit earnings growth for the electric car maker. However, concerns have been raised about the impact of price cuts on Tesla's margins. Despite these concerns, historical data shows that Tesla has beaten analyst expectations in 11 out of the last 12 earnings days.
IBM will also report earnings after the bell on Thursday. Analysts expect flat year-over-year revenue and a double-digit drop in earnings. Key issues to watch for include the health of IBM's consulting business, the state of IT spending, and further details about the Apptio acquisition. Historical data shows that IBM shares tend to fall on earnings day despite beating estimates 83% of the time.
Netflix will report earnings following the market close on Thursday. The streaming giant is expected to report a decline in year-over-year earnings. Investors will be looking for clues on whether Netflix can continue growing its subscriber base, especially after its crackdown on password sharing during the second quarter. Historical data shows that Netflix has exceeded earnings expectations in seven out of the last 10 quarters.
American Airlines (AAL)
American Airlines will report earnings before the bell on Thursday. Analysts anticipate that the airline's earnings will have doubled compared to the previous year. Executives will face questions about the future in the Northeast U.S., particularly after JetBlue announced its decision to walk away from the Northeast Alliance partnership. American will also provide updates on labor negotiations with pilots and flight attendants. Historical data shows that American Airlines beats earnings expectations 89% of the time.
Navigating Earnings Season for a New Business
As earnings season kicks into high gear, the performance of key companies provides valuable insights for investors and businesses alike. For new businesses looking to establish their presence in the market, understanding the outcomes and implications of these earnings reports can be crucial.
Bank of America's projected double-digit profit growth indicates a strong banking sector, which may create favorable conditions for new financial ventures. However, the potential lag in NII trends due to a large HTM portfolio could pose challenges for businesses reliant on flexible asset management strategies.
Morgan Stanley's anticipated drop in profits highlights the prevailing issues facing investment banks, including weak investment banking and muted trading revenue. This serves as a reminder for new businesses in the financial industry to be prepared for potential challenges and consider alternative revenue streams.
The decline in earnings expected for Goldman Sachs and concerns about Tesla's margins due to price cuts signal the importance of careful financial management for new businesses. Maintaining competitive pricing while safeguarding profitability should be a priority for these companies and new businesses aiming to navigate a dynamic market.
On the other hand, United Airlines' predicted strong earnings growth indicates a resilient travel industry, particularly for international trips. As travel demand remains robust, new businesses in the travel and tourism sector may find opportunities to capitalize on this trend.
For technology companies, IBM's flat revenue and earnings drop underscore the need for continuous innovation and adaptation to evolving market demands. As IT spending and consulting services play a vital role in IBM's earnings performance, new businesses in the tech sector should closely monitor industry trends and customer needs.
Finally, Netflix's decline in year-over-year earnings and its focus on growing its subscriber base serve as a reminder of the importance of customer retention and satisfaction. New businesses in the streaming or subscription-based industries should prioritize providing value to their customers to drive sustainable growth.
Overall, as a new business entering the market, understanding the outcomes and implications of earnings reports can provide valuable insights into industry trends, challenges, and opportunities. By staying informed and adapting to changing market conditions, new businesses can position themselves for success in a competitive landscape.
Article First Published at: https://www.cnbc.com/2023/07/16/earnings-playbook-netflix-and-tesla-are-set-to-report-this-week-as-reporting-season-ramps-up.html