Can The FAANGs Sustain Their Momentum?
America’s 4th-quarter earnings season hits top pace this week with nearly 120 companies in the S&P 500 down to report results and that will be dominated in Wednesday and Thursday by the rest of the so-called FAANGs Amazon, Apple, Alphabet, Facebook and an extra in the shape of Microsoft (Netflix reported last Monday).
In fact it is true to say the longevity of the current markets boom will be determined on Wednesday when Facebook and Microsoft report their latest quarterlies, and then the next day when Amazon, Alphabet (Google) and Apple are due to report.
Netflix shocked investors on the upside with subscriber and financial numbers much better than forecast in its report and investors are looking for Facebook, Apple especially and Alphabet to repeat the dose.
Facebook’s figures will be examined for any signs of slowing growth in users and revenues - and for the impact of the growing campaign against the social media platform from rivals, governments and media companies.
Apple’s report will be watched for closely for solid data on sales of the iPhone 8 and its more costly X model (which retailers at $US999 and more in the US). It could ver well be the most important quarterly report this season - a weak set of figures and the shares will sell off.
Besides these giants, other tech companies reporting eBay, PayPal, Qualcomm and Electronic Arts.
Other companies reporting include struggling retailer, JC Penney, Boeing, Lockheed Martin, Corning, AMD, drug giants, Eli Lilly and Pfizer, AT&T and its takeover target, Time Warner, Meredith, which is taking over Time Inc, Nucor (the steelmaker), US Steel, packaged food group, Mondelez, DowDupont, Conoco Phillips, Mattel the toymaker, Ralph Lauren and UPS. New York Times also reports on Thursday.
Data group, FactSet said at the weekend that corporate earnings are running well ahead of normal with stronger than normal revenue growth and earnings (excluding the benefits of the tax cuts).
FactSet said that "as of January 25, 24% of the companies in the S&P 500 have reported actual earnings and sales numbers for the fourth quarter. Of these companies, 81% have reported sales above estimates and 19% have reported sales below estimates.
"During the past year (four quarters), 64% of the companies in the S&P 500 have reported sales above the mean estimate on average. During the past five years (20 quarters), 56% of companies in the S&P 500 have reported sales above the mean estimate on average.
“Thus, the percentage of companies reporting sales above estimates to date for Q4 2017 is running well above both the trailing one-year average and the trailing five-year average,” FactSet said.
Meanwhile the Australian December half 2017 earnings reporting season gathers pace this week. Only a couple of companies reported last week - this week companies including Navitas, GUD and James Hardie are down to report.
The AMP’s chief economist wrote at the weekend we can expect “to see a fall back to single digit earnings growth (after the resource driven surge seen in 2016-17) with overall earnings growth around 5%, with resources slowing to around 1%, banks around 3% and industrials up 8% with strong results for healthcare, gaming, building materials and consumer staples.”
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.