Investing Action Plan: Brace For A Blue Wave Of Earnings

A mixed week for the stock market is no surprise after a strong start to January. Tech stocks staged a nice show, leaving the Nasdaq composite comfortably above its 50-day line, while the Dow turned and undercut its 50-day average and the S&P 500 ended clinging to support. The coming week could be active, with Tesla (TSLA) due to report, along with Microsoft (MSFT), Chevron (CVX) and a wave of other blue chips. A heavy economic calendar, chip industry results and key defense and aerospace names are also on tap. The one front on which markets may be less likely to see economic or company news would be China, as the country hunkers down for its Lunar New Year’s celebration.

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Stocks To Watch: Five Resilient Stocks In A Tricky Market

The stock market rally struggled this past week, as the Nasdaq notched a third straight weekly gain while the Dow fell to its first down week of the year. Investors should be looking within that mix for stocks showing signs of resilience. BP (BP), Axon Enterprise (AXON), Vertex Pharmaceuticals (VRTX), Baidu (BIDU) and Visteon (VC) are all near buy points. BP is just below a flat base buy point, and above 50-day support, as oil prices test recent highs. Axon and Vertex are working on possible handles. So is Baidu, amid a sharp rebound from its 10-day moving average. All could present buy points early in the coming week. Auto parts maker Visteon has flirted with a handle buy point since Wednesday.

Economic Calendar: Fed Sees The Devil In the Details

The first official estimate for Q4 GDP growth, on Thursday at 8:30 a.m. ET, will highlight a busy week of economic data. And December’s personal income and spending data come out Friday at 8:30 a.m. The latter will include the latest reading of the Federal Reserve’s favored inflation measure, the personal consumption expenditures price index.

After the consumer price index and producer price index both showed inflation continuing its swift retreat, there’s some risk that the PCE price index may show more persistent price pressures. That has a lot to do with the differences between the PCE and CPI inflation gauges. The PCE measures for health care and airline travel both come from the PPI, and both ran hotter than CPI readings in December. Those categories are part of core services, excluding shelter, which Fed Chair Jerome Powell says offers the best clue where inflation is going. Rounding out the economic calendar: The S&P Global Flash PMI for manufacturing and services is out Tuesday at 9:45 a.m. Durable goods orders and new home sales are both out Thursday at 8:30 a.m. Pending home sales and the Univ. of Mich. Consumer Sentiment Index are due Friday at 10 a.m.

Dow Earnings: The Week Of The Blue Wave

After a gradual rollout to the fourth-quarter reporting season, blue chips head for their busiest week of the period. Reports are due from Microsoft (MSFT), Johnson & Johnson (JNJ), 3M (MMM), Travelers (TRV), Boeing (BA), IBM (IBM), ServiceNow (NOW), Chevron (CVX), American Express (AXP), Visa (V) and Intel (INTC). That will leave just half of the Dow’s 30 issues, including Apple (AAPL), still to report.

Taking A Closer Look At Tesla

EV juggernaut Tesla (TSLA) reports fourth-quarter and year-end earnings after the market closes on Wednesday. Analysts expect EPS to grow 35% to $1.15 — well below the company’s average 196% pace in 2022. Sales are forecast to rise 39% to $24.68 billion, also well below the recent trend. Tesla deliveries, released earlier, jumped 31% vs. a year earlier and nearly 18% vs. Q3’s 343,830. Overall, deliveries swelled 40% to 1,313,851 in 2022, below the 50% goal. Analysts expected Q4 Tesla deliveries of roughly 420,000. Investors should also get a better picture Wednesday of Tesla’s revised deliveries outlook after making steep price cuts in China, Europe and the U.S.

 Microsoft Earnings Likely Dipped

Microsoft plans to report its fiscal second-quarter results late Tuesday. Analysts expect the software giant to earn $2.30 a share on sales of $53.1 billion for the December quarter. That would translate to a year-over-year decline of 7% in earnings and a 3% increase in revenue. Recent layoffs and restructuring charges will cut earnings by 12 cents a share. The company warned that customers worldwide are cutting their spending in a difficult economic climate. Personal computer sales have fallen for the last four quarters, pressuring Microsoft’s Windows and Office software businesses.

Chip Cycle In Focus Amid Reports

Several major chipmakers and semiconductor equipment suppliers will report their December-quarter earnings in the week ahead. Investor focus will be on the chip cycle, as segments of the semiconductor industry have entered a downturn, including memory chips and PC processors. Among chipmakers, Texas Instruments (TXN) reports late Tuesday, followed by Wolfspeed (WOLF) on Wednesday, and Intel (INTC) and STMicroelectronics (STM) on Thursday. On the chip-gear side, ASML (ASML) and Lam Research (LRCX) report on Wednesday, followed by KLA (KLAC) and Teradyne (TER) on Thursday.

Big Oil Speaks: Chevron Outlook In Focus

Energy giant Chevron kicks off the Big Oil reporting season on Friday. Analysts forecast EPS growth slowing to 73%, at $4.42. This is off record profits from the second quarter and below the 200% average quarterly gain Chevron saw throughout 2022. Analysts expect revenue advanced 12% to $53.83 billion. More important will be the Dow Jones heavyweight’s outlook on production growth, refining capacity and overall market demand, as China’s economy regains its post-Covid stride. Exxon Mobil (XOM) follows with its own earnings on Tuesday, Jan. 31.

Defense: Boeing, Lockheed Martin, Raytheon, Northrop Grumman

Lockheed Martin (LMT) and Raytheon (RTX) kick off defense earnings on Tuesday next week, followed by Boeing (BA) and Northrop Grumman (NOC) on Wednesday and Thursday, respectively. The U.S. defense budget has ballooned to all-time highs. But Republican lawmakers are pushing for cuts to reduce government debt which could potentially affect defense spending this year, Goldman Sachs analyst Noah Poponak wrote in a research note last week.

Wall Street expects Lockheed Martin earnings to edge down 1% to $7.74 per share on 3% revenue growth to $18.3 billion. Raytheon earnings are seen rising 15% to $1.24 per share while revenue climbs 6.7% to $18.2 billion. Analysts forecast Boeing earnings to come in at 27 cents per share, massively improving from the $7.69 loss last year, as revenue spikes 37% to $20.25 billion. And the Street sees Northrop Grumman reporting a 10% earnings increase to $6.58 per share on 11.8% revenue growth to $9.66 billion.  

Airlines: Views For A Stronger 2023?

It is earnings season for airline companies. Following United Airlines (UAL) and Delta Air Lines (DAL) reporting this week, American Airlines (AAL), Southwest Airlines (LUV) and Alaska Air (ALK) will report Q4 earnings on Thursday. Analysts project 92 cents EPS for American Airlines, reversing a loss of $1.42 a year ago. Throughout Covid, AAL had a string of nine straight quarterly losses before seeing profits in Q2 and Q3 of 2022. Revenue is forecast to jump 37% to $12.98 billion. That is slightly down from the previous two quarters.

Southwest is projected to see a loss of 4 cents per share in Q4, down from a 14-cent profit per share a year ago. Meanwhile, revenue is forecast to increase 23% to $6.22 billion. That is about in line with the past two quarters. Analysts predict Alaska Air will see earnings balloon 283% to 92 cents per share in Q4. ALK had six straight quarterly losses ranging from Q1 2020 to Q2 2021. Consensus is for sales to increase 32% to $2.51 billion. That is below the average 76% growth rate over the last three quarters.

Stock Market Earnings

Monday

Logitech (LOGI) will post its fiscal third-quarter results late Monday. The maker of PC peripherals is seen earning $1.17 a share, down 25% year over year, on sales of $1.35 billion, down 18%, in the December quarter.

Tuesday

General Electric (GE) reports earnings for the fourth quarter of 2022 early Tuesday, following its GE HealthCare Technologies (GEHC) spinoff in January. Analysts expect GE earnings to increase 61%, year over year, to $1.15 per share. Revenue is seen rebounding 6% to $21.247 billion after a string of flat to negative growth in recent quarters.

Verizon Communications (VZ) reports Q4 earnings early Jan. 24. Analysts estimate EPS of $1.19, down 9% from a year earlier. Revenue is expected to rise 3% to $35.1 billion. Verizon CEO Hans Vestberg, at a financial conference in early January, said the company expects positive consumer postpaid phone additions in Q4, rebounding from a loss of 89,000 in the September quarter. Analysts forecast 234,000 wireless postpaid phone additions, including consumer and business subscribers.

Intuitive Surgical (ISRG) is on deck to report its fourth-quarter earnings early Tuesday. Analysts polled by FactSet expect the robotic surgery giant to earn an adjusted $1.25 per share on $1.67 billion in sales. The company has already preannounced $1.66 billion in sales.

Paccar‘s (PCAR) fourth-quarter earnings are expected early Tuesday. Analysts predict earnings jumping 49% to $2.20 per share. This is slightly below the 59% average EPS growth Paccar enjoyed over the last three quarters. The outlook is for sales to advance 14% to $7.16 billion. Over the last three quarters Paccar has averaged 26% revenue growth.

Wednesday

AT&T (T) reports fourth quarter earnings before the market open on Jan. 25. Analysts estimate EPS of 57 cents, down 3% from a year earlier. Revenue is expected to fall 23% to $31.4 billion amid the divestiture of WarnerMedia, which merged with Discovery. AT&T added 620,000 wireless postpaid phone subscribers vs. 884,000 a year earlier, analysts estimate. AT&T’s free cash flow guidance for 2023 will likely move the stock. AT&T stock has a 5.8% dividend yield.

United Rentals (URI) will report Q4 results after Wednesday’s open. EPS is seen growing 37% to $10.10 a share as revenue rises 19% to $3.3 billion. The biggest U.S. equipment rental company, which is just beginning to see an uplift from the big infrastructure bill passed in the fall of 2021, is part of the IBD Leaderboard portfolio of elite stocks.

Freeport-McMoRan (FCX) will likely report a third-straight quarterly profit decline before Wednesday’s open. EPS is seen down 53% to 45 cents, with revenue down 12% to $5.4 billion. Though copper prices moved up in Q4 and have kept rising in January, they’re still below year-ago levels, while output costs also have jumped. But FCX stock has been a leader, helped by China’s Covid emergence and an intermediate outlook for solid demand amid the green energy transition.

Thursday

Visa (V) earnings and revenue are projected to rise for the seventh straight quarter with its Thursday report. Earnings are seen increasing 11% to $2.01 per share on 9% revenue growth to $7.7 billion.

Wall Street expects Mastercard (MA) to report a 9.4% jump in earnings to $2.57 per share on 10.9% revenue growth to $5.79 billion. The results would mark seven consecutive quarters of increasing earnings and eight quarters of revenue growth.

Investment banking giant Blackstone (BX) reports Q4 results Thursday. Analysts expect adjusted earnings to fall for the second quarter in a row, tumbling 43% to 97 cents per share. Wall Street forecasts a 37% drop in revenue, which would mark the second straight decline.

Valero Energy (VLO) will report fourth-quarter earnings before the market opens Thursday. Analysts foresee earnings ballooning 200% to $7.44 per share. Valero has been on an EPS hot streak throughout 2022 and saw EPS grow 2,266% in Q2. Revenue is expected to edge up 10% to $39.67 billion. This is below the 71% average growth rate over the last three quarters.

Comcast (CMCSA) reports Q4 earnings before the market opens on Jan. 26. Analysts forecast EPS of 78 cents, up 1% from a year earlier. Revenue is expected to be flat at $30.4 billion. Comcast’s outlook on capital spending and a network upgrade will likely be an earnings call topic, as well as competition versus fixed 5G wireless broadband.

Friday

HCA Healthcare (HCA) reports Q4 results before Friday’s open. EPS for the hospital operator is seen growing 8% to $4.42 after two quarterly declines that reflected a comedown from Covid’s boost to earnings. Analysts see revenue climbing 3.5% to $16 billion. The hospital group has surged into the stock market’s top tier since HCA’s Q3 report, helped by moderating labor-cost pressures.

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