• April 14, 2024

Weekly Preview: Earnings to Watch This Week (AA, PEP, JPM, WFC)

T.The earnings season for the first quarter begins next week. With stocks trading at all-time highs, it’s safe to say that the tenor for risk-weighted assets is extremely bullish. And it’s not hard to see why.

On Friday, the Dow Jones Industrial Average rose 297.03 points, or 0.89%, to close at 33,800.60. Strong performances at Apple (AAPL), Foreclosure (CRM), Microsoft (MSFT) and Intel (INTC) has helped offset Boeing’s weakness (BA) and Disney (DIS). The S&P 500 Index SPX rose 31.63 points, or 0.77%, to end the session at 4,128.80 while the Nasdaq Composite rose 0.51% and added 70.88 points to come in at 13,900.19 end up. The fact that the Nasdaq has risen despite the decline in tech giants Tesla (TSLA), Peloton (PTON) and Zoom Video (ZM) was remarkable among other things.

Even so, the three major averages ended the week in positive territory and continued on their march, despite ongoing concerns about not only rising bond yields but also fears of a weakened global economic recovery. When valuing stocks, investors rate the risk / return potential in relation to the pace of reopening. Aside from widespread vaccinations across the country, which some analysts predict will spur economic growth, investors are already betting on the $ 2 trillion infrastructure spending plan proposed by the Biden government.

These catalysts are not only included in the growth expectations for the first quarter, but also for the second quarter. Ethan Harris, head of global economic research at Bank of America, expects the economy to grow 10% in the second quarter. The question is whether all the good news is already priced into stocks. The market will get this response once CEOs start issuing guidelines for 2021, which are likely to be more optimistic than last year when the guidelines were (understandably) drawn. Many CEOs cite poor visibility after the outbreak of the pandemic.

However, CEOs who are conservative with their guidelines will not work this time, especially as many industries are preparing for the reopening of the US economy. The median GDP growth forecast for the second quarter is 9.3%, compared to a 5.8% increase in the first quarter. Not only is the market expecting companies to issue guidelines this time around, but stock prices suggest that investors are betting that those guidelines will be raised, especially in industries hardest hit by the pandemic.

The question that keeps coming up is growth expectations and investor optimism about economic growth. Even if it does, while analysts won’t be ready to argue that stocks are cheap, it will still take impressive sales and profit spikes and the above-mentioned confidence guidelines to keep the momentum going.

At the start of the new winning season, this week’s names are listed here that will set the tone for the weeks ahead.

JPMorgan Chase (JPM) – Reports before the opening, Wednesday April 14th

Wall Street expects JPMorgan to make $ 3.06 per share on sales of $ 30.42 billion. This compares to the same quarter last year when earnings were 78 cents per share on sales of $ 29.07 billion.

What to Remember: Without question, JPMorgan has built a well-deserved reputation as the best-processing bank not only among its peers, but also as one of the best-run banks in the world. Due to continued investment in areas such as technology and marketing, the bank’s share price has outperformed the competition over the past six and twelve months. Given the organic expansion initiatives to develop new branch / credit bureaus, these growth trends are expected to continue. However, with stock trading up 12% above pre-pandemic levels, all of this good news I just listed is well known in the market, which is evidenced by JPMorgan stock up 22% year-to-date compared to one S&P up 9% 500 index. Which additional catalysts, whether short-term or long-term, will drive up the share price, especially in the low interest rate environment? That is the answer the market will listen to on Wednesday.

Wells Fargo (WFC) – Reports before the opening, Wednesday April 14th

Wall Street expects Wells Fargo to make 68 cents per share on sales of $ 17.46 billion. This compares to the same quarter last year when earnings were 1 cent per share on sales of $ 17.72 billion.

What to Know: Wells Fargo stock was a hot commodity among banks, rising more than 60% in the past six months. With the stock up 32% year-to-date and outperforming the S&P 500 index by 9%, the market seems poised to look past some of the bank’s legacy troubles and certainly some short-term headwinds. While Wells Fargo still has many challenges to overcome, including the need to balance much-needed cost reductions with sales / business growth, the bank has still delivered the performance anyone would have expected. Not only were the bank’s depreciation and core utilities better than expected last quarter, but Wells Fargo’s adjusted expenses were also lower, contributing to a bottom-line gain of 12%. Specifically, this is due to the fact that revenue generation is still under pressure from both the weaker interest rate environment and the adjustments Wells Fargo had to make to ensure compliance with the asset cap. Currently, the bank has a variety of catalysts in place to maintain profitability and add value to shareholders.

PepsiCo (PEP) – Reports before the opening, Thursday April 15

Wall Street expects PepsiCo to generate earnings per share of $ 1.12 per share on sales of $ 14.54 billion. This compares to the same quarter last year when earnings were $ 1.07 per share on revenue of $ 13.88 billion.

What to Remember: The stock and beverage giant has seen its share price rise nearly 10% in the past thirty days. But even with the most recent surge, the stock is still down about 4% year-to-date, confirming the S&P 500 index’s 9% increase. In particular, Pepsi has underperformed despite reporting not only rapid organic sales growth but strong free cash flow in 2020 amid the pandemic. During this time, Pepsi was affected (at various times) due to lockdown restrictions and the impact on the restaurant industry to which Pepsi supplies beverages. Meanwhile, the company is investing in new brands and adapting to new trends that are gradually paying off. This is reflected in the 5.7% increase in organic sales growth in the last quarter. The unit volume was also strong, increasing by 3% for meals / snacks and 5% for beverages. The company continues to believe that there is plenty of room for growth in its core snacks and beverages business. It has to demonstrate this growth on Thursday.

Alcoa (AA) – Reports after the end, Thursday April 15th

Wall Street expects Alcoa to make 46 cents per share on sales of $ 2.65 billion. This compares to the same quarter last year, when it posted a loss of 23 cents per share on sales of $ 2.38 billion.

What to Remember: The aluminum giant’s stocks have been one of the bright spots in the materials sector. They rose nearly 10.5% last month and are up 36% since the start of the year. This surpassed the increase in SPDR S & P Metals & Mining ETF by 19% (XME). The surge in metal supplies was driven by optimism surrounding the Biden government’s $ 2 trillion infrastructure spending plan, which, among other things, aims to help repair the country’s roads and bridges. How much of that money is going to come to Alcoa? The company posted its 10th straight profit last quarter thanks to the improvement in its aluminum business. While there appears to be support for higher aluminum prices, the company needs to speak positive on Thursday about the demand / supply outlook for the next few quarters in order to keep demand for Alcoa shares high.

The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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