After the solid, bank-dominated start to the US third quarter earnings season last week, there’s a more testing set of releases this week with figures from streaming giant Netflix and electric vehicle/battery innovator Tesla.
The contents of both reports will quite likely to set the tone for the rest of season.
According to figures from financial data group FactSet, as of Friday 80% of the 41 S&P 500 companies that have reported third-quarter results have topped earnings-per-share expectations.
Taking into account these results and estimates for those yet to report, the blended third-quarter earnings growth rate for the S&P 500 is now 30%, up from around 27% a week earlier, according to FactSet analysis.
Another financial data group, Refinitiv (which used to be part of Reuters) sees profits of S&P 500 companies rising 32%, based on estimates and actual third-quarter reports
Refinitiv says companies are beating expectations so far by 15.6%, compared to the long-term average of 4%.
But that’s below the 18.4% average of the last four quarters.
Energy is expected to see the biggest profit gains, a huge 1,517% (the base in the 3rd quarter of 2020 was so low), while the utilities sector is forecast to have the lowest gain, just 0.2%.
But it will be figures from Netflix (Early Wednesday morning, Sydney time and Tesla (the day after) that will set the tone for the season and lead into results from other megatechs like Apple, Alphabet, Facebook and Amazon later in the month.
Netflix’s new subscriber figures are the key metric for investors.
While Netflix added 1.5 million subscribers in the June quarter (which was better than its weak 1 million estimate) that was lower than the 4 million in the March quarter.
But the comparison was with the June quarter of 2020 when it added 10 million subscribers after the huge 15.8 million added in the opening three months of 2020 when the world was locked down as the pandemic erupted.
Critically, the June, 2021 quarter saw a fall in subscribers in the US and all of the company’s growth came internationally. Netflix lost some 400,000 subscribers in the US and Canada. The Asia-Pacific region led growth with a net of more than 1 million subscribers (the region includes Australia).
The forecast for the September quarter is 3.5 million – which would be better than the 2.2 million added in the same quarter of 2020 (which was after the near 26 million added in the June half year).
As far as Telsa is concerned, it’s the projections that are important. The company delivered a record 241,300 vehicles in the three months to September – that’s the first time that deliveries have topped 240,000 and analysts are looking for a rise again on that level.
Chinese sales will be important because analysts feel the company, like so many western pioneers in technology, is facing more pressure from President Xi Jinping’s government.
Other key reports will come from consumer products giant, Procter & Gamble, pharma majors, Johnson & Johnson and Abbott Labs, United Airlines, American Airlines and Southwest, Verizon Communications, Intel, CSX, American Express, energy services groups. Halliburton, Baker Hughes (part of GE) and Schlumberger, Paypal, Honeywell, Snap, IBM, Nucor, Blackstone, AT&T and Mattel.
