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Earnings Watch: The vacation earnings forecasts to this point have been lumps of coal, and right here come the largest

The holiday earnings forecast has disappointed investors so far, and the biggest boxes under the Wall Street tree are coming this week.

A dozen S&P 500s so far in winning season
SPX,
-0.11%
Companies have issued profit forecasts, and eight of them have been weaker than expected. Investors have penalized these companies – like Intel Corp.
INTC,
-11.68%,
which had its worst day in more than a year on Friday after a poor forecast – as well as those outside the index who disappointed like Snap Inc.
SNAP,
-26.59%,
which lost almost a quarter of its market cap on Friday.

The market can withstand such movements of a certain number of companies. After all, the Dow Jones Industrial Average
DJIA,
+ 0.21%
still rose to a record on Friday despite the miserable performance of Intel, one of its 30 components. But poor predictions for the week ahead could do a lot more damage, as nearly half the S&P 500's market cap is at stake if big tech jumps into the fray.

Alphabet Inc.
Google,
-3.04%
Goog,
-2.91%,
Amazon.com Inc.
AMZN,
-2.90%,
Apple Inc.
AAPL,
-0.53%,
Facebook Inc.
FB,
-5.05%
and Microsoft Corp.
MSFT,
-0.51%
will all be reporting for the coming week, with a combined market cap of over $ 8 trillion. Overall, companies that account for more than 43% of the S&P 500's market capitalization are likely to be in the coming week, according to the Chief U.S. Credit Suisse equity strategist Jonathan Golub, reporting much more than this season (25.5%).

Big Tech's strength from the pandemic has been propelling the market as a whole, but there is cause for concern. Apple and Amazon are facing some of the same supply chain problems that have rattled other industries, with the expectation that Apple will struggle to ship enough new iPhones to meet vacation demand, and Amazon's signature logistics network is going to be a lot more cash need to function near the peak performance.

Don't Miss: The tech earnings boom is fizzling out as Apple and Amazon face the same problems as everyone else

Amazon's forecast last quarter caused a stir and lowered its share price, and analysts now expect the dominant online retailer's earnings to fall year over year in both the third and fourth quarters, something that Amazon only saw in two quarters of the year last 16 happened. Apple stopped making predictions during the COVID-19 pandemic, but investors will expect some sort of trend-setting color after reports of cut production estimates.

Full Earnings Preview: Can Apple's Purchasing Power Keep Profits On Track?

Facebook and Google got implicated in the Snap decline on Friday for good reason. Grab detailed customer issues resulting from a big change in Apple's new operating system that is cutting off some traffic from advertisers to track and manage their campaigns unwilling to advertise these goods widely. While the two larger online advertising companies may be more isolated from the threats than Snap, they could still be affected.

Full Profit Preview: Learn more about Facebook and Google earnings

Microsoft appears to be the safest big tech giant despite a decline in PC sales. The company's cloud computing business, Azure, is expected to continue to see revenue growth well in excess of 40%, and a $ 20 billion acquisition due to close before the end of the year will add even more to that category. However, the decline in PCs and any difficulty getting new Xbox game systems into stores will be factored into the forecast.

Full Preview Results: The PC's slowdown shouldn't hurt Microsoft's bottom line, and here's why

Facebook reports Monday afternoon, Microsoft and Google will follow on Tuesday and Apple and Amazon will both report after the bell on Thursday. They're just five of the 160+ S&P 500 companies that will be reporting profits this week, so here are some other reports to watch out for.

The numbers to look at

AMD's margins. Intel's forecast wasn't the only number from the chipmaker's report that caused problems – Intel expects gross margins to drop to the mid 50% range as more chips are made in the coming years, including for other companies. Rival Advanced Micro Devices Inc.
AMD,
+ 0.41%,
meanwhile, its margins have bolstered and could top 50% in a quarter for the first time since 2006, as it reported on Tuesday afternoon. As MarketWatch's Wallace Witkowski points out, AMD jumped from roughly half of Intel's market cap this summer to nearly three-quarters before its report began. So make sure that this gap continues to close.

GE's revenue. General Electric Co.
GE,
+ 0.87%
The stock was on hold after a sharp surge late last year and early 2021, although earnings estimates continued to successfully beat and industrial cash flow hit hard in the final quarter. As MarketWatch's Tomi Kilgore noted, the metric that GE hasn't seen strong gains over that time is a more fundamental one, revenue, which was missing from sales for two consecutive quarters as the stock stayed flat. If you're hoping GE stock is breaking in the positive direction, take a look at the top line on Tuesday morning.

Fast Food Results. After Chipotle Mexican Grill Inc. CMG broke expectations across the board on Thursday thanks to more than $ 200 million in profits and nearly $ 2 billion in sales in three months, Wall Street will be looking for signs that the winnings be widespread or relate to the burrito chain. There will be a lot of potential in the coming week, with reports from McDonald’s Corp. MCD, Yum Brands Inc. YUM, Shake Shack Inc. SHAK and others.

The calls to put on your calendar

UPS. Because sourcing Christmas gifts is difficult for some retailers due to supply chain issues, United Parcel Services Inc.
UPS,
+ 2.19%
could provide the best insight into the expected flow of goods to US consumers. UPS earnings will provide a deep dive into some of the biggest issues the US is facing beyond the flow of goods in the fourth quarter, including staffing issues and inflation. Keep an ear out for the read-throughs on Tuesday morning.

Chevron and Exxon. According to FactSet's senior earnings analyst, the energy sector is expected to be one of the most powerful drivers of the earnings performance of the S&P 500 this quarter as rising oil prices are expected to boost their overall bottom line from a loss last year to a profit of $ 23 billion John Butters. The two largest expected contributors to these earnings are Chevron Corp.
CVX,
+0.95%
and Exxon Mobil Corp.
XOM,
+ 0.69%,
which are expected to raise more than $ 11.4 billion of it, and both report to the bell on Friday morning.

This week in receipts

This is expected to be the busiest week of the reporting season, with roughly a third of the companies in the S&P 500 and Dow Jones industry averages reporting. FactSet's Butters expects 164 S&P 500 companies to report, while 10 Dow components are on the schedule and many companies not in major indices will join them, including Canadian e-commerce powerhouse Shopify Inc .
SHOP,
-4.73%
and music streaming service Spotify Inc.
JOB,
-0.80%.

Dow Jones Industry Average Reports: 3M Co.
MMM,
-0.72%,
Microsoft and Visa Inc.
V.,
+ 0.43%
(Tuesday); Boeing Co.
BA,
-0.64%,
Coca-Cola Co.
KO,
+ 0.18%
and McDonald’s (Wednesday); Apple, Caterpillar Inc.
CAT,
-0.19%
and Merck & Co. Inc.
MRK,
-0.02%
(Thursday); Chevron (Friday).

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