The main attractions are coming: Apple, Microsoft, Google, Facebook, Amazon and Tesla headline the biggest week of earnings
The coming week will be the most important of this quarter’s earnings season – even if the coming weeks beat it in quantity, it will be nearly impossible to top this list in terms of dollars and attention.
That’s because all of Big Tech will report, and those five companies – Google parent company Alphabet Inc. GOOGL,
ecommerce and cloud computing powerhouse Amazon.com Inc. AMZN,
iPhone maker Apple Inc. AAPL,
social media titan Facebook Inc. fb,
and software giant Microsoft Corp. MSFT,
— can determine the course of the market at this point in history.
Consider these stats from Dow Jones Market Data Group:
The five Big Tech companies accounted for more than a fifth of the total market capitalization of the S&P 500 index SPX,
22% at the end of the second quarter.
In the first quarter, they accounted for nearly 10% of total 500 member index revenue and nearly 18% of total profit (9.7% and 17.8%, respectively).
That part of the profit that Big Tech actually delivers declined as of 2020, when the five companies provided nearly a quarter of the index’s annual revenue, 23.8%, and accounted for 9.1% of total revenue.
In the coming week, the five companies are expected to reveal some big profits and sales for the second quarter, which could typically be slower than the back-to-school and holiday buys in the second half of the year. Collectively, they are expected to report profits of nearly $60 billion on sales of more than $310 billion, according to analyst estimates gathered by FactSet.
Those estimates are likely conservative. According to FactSet, so far this quarter, 88% of S&P 500 companies have beat analysts’ average estimates for earnings per share, and 86% have beaten revenue by nearly a quarter of index reporting. Both numbers would be records for the total surprise rate, which FactSet tracked through 2008, according to senior earnings analyst John Butters.
For example, Facebook and Google are widely expected to top estimates after fellow online ad sales companies Snap Inc. snap,
and Twitter Inc. TWTR,
blew away expectations in their reports last week, leading Alphabet and Facebook to hit an all-time high along with Snap on Friday.
See also: Facebook Income Sample and Alphabet Income Sample
Stock movements are unlikely to be driven by the numbers those companies report, especially after Friday’s big jump; Forecasts have been more important to investors as they wait to see how long the current boom in corporate earnings will last. And all five companies have been cautious about their forward-looking statements during the COVID-19 pandemic.
Apple has stopped providing guidance during the pandemic, which will hamper the annual parlor game of trying to gather facts about the upcoming iPhone release of the company’s financial forecast. While Microsoft is expected to wrap up its fiscal year by breaking the records it set a year earlier with a healthy amount, it will likely only provide official financial guidance for the upcoming quarter rather than the full year, as executives in the have done in the past.
Full earnings preview: What will Apple say about the next iPhone during earnings? Maybe more than usual
Most of the Big Tech predictions shared ended up falling short of their actual performance, which can keep expectations low and produce big beats. Amazon, for example, surpassed the highest point of its sales forecast by 2.3% in the first quarter, equating to an additional $2.5 billion. And that was actually the closest Amazon came to an accurate forecast in Big Tech’s $1.2 trillion pandemic year, after beating the top of its quarterly guidance by 3.8%, 3.4% and 9.8. % looking back from the fourth quarter.
So expect at least some hefty gains and lots of questions about what comes next as these reports pour in over the course of the week. Apple, Google and Microsoft all expect to report on Tuesday afternoon after the markets close, with Facebook following Wednesday afternoon and Amazon finishing on Thursday afternoon.
The call to put in your calendar
Tesla Inc. When Tesla TSLA,
Chief Executive Elon Musk speaks, the markets listen.
The most controversial CEO in Silicon Valley has sent cryptocurrencies like bitcoin BTCUSD,
and dogecoin DOGEUSD,
on crazy rides with his tweets and statements so far this year, but when he kicks off the week’s earnings list Monday afternoon, the focus should be on Tesla and its stock.
As always, there are plenty of issues to discuss with the electric car manufacturer. Following the departure of a longtime CEO, the progress of Tesla’s Semi roadmap needs to be addressed, as well as the gross margin effects of the continuing shortage of semiconductors, a problem in the auto industry.
Full preview of Tesla earnings: Semi truck, Cybertruck pickup and chip shortage in focus
Tesla is also likely to tackle its plans to sell its advanced driver assistance features as a subscription package, even if Consumer Reports joins a chorus of criticism of Tesla’s approach to autonomous driving. Musk’s recent statement that Superchargers will be opened up to electric vehicles from other manufacturers, as well as demand amid heated competition in China, will also be topics to look into.
Also look out for comments about chip shortages from other more staid automakers, such as Ford Motor Co. F,
on Wednesday, as well as chip supplier Qualcomm Corp. QCOM,
- Hasbro Inc. and Mattel Inc. Could there be a more worrisome expression than “toy shortage” as we approach the Christmas shopping season?
Well, analysts raised the alarm last week that we could cope with just that, after parents bought bundles of off-season toys during the COVID-19 pandemic to entertain their kids while they were home from school, disrupting the supply chain of the industry came under pressure. Expect executives to address any issues in Santa’s workshop when Hasbro HAS,
reports on Monday and Mattel MAT,
The songs to watch
The bottom line of Boeing Co. Boeing BA,
is expected to post another loss in the quarter, but analysts predict it will go against the grain and post a loss much larger than the consensus average. “We think Boeing will announce another monstrous loss in the second quarter, with free cash outflows of ~$2.8 billion by our estimates,” Vertical Research analysts said, while Benchmark analyst Josh Sullivan last week predicted that Boeing would 1 per share in losses, while the average analyst estimate currently puts it at a loss of about 83 cents per share.
Sale of fast food. After strong reports last week from Chipotle Mexican Grill Inc. CMG,
and Domino’s Pizza Inc. DPZ,
burger makers and other casual restaurant chains will indicate whether their pandemic-influenced boom continued as certain parts of the US opened up. On the agenda this week are McDonald’s Corp. MCD,
Shake Shack Inc. SHAK,
Yum Brands Inc. YUM,
(and Yum China Holdings Inc. YUMC,
), and Wingstop Inc. WING,
Also look for signs of change from chain restaurants that rely more on internal traffic but are using more takeout during the pandemic, such as Cheesecake Factory Inc. CAKE,
and Bloomin’ Brands Inc. BLMN,
Winning this week
Exactly one third of the 30 Dow Jones Industrial Average DJIA,
components and more than a third of the S&P 500 components, up to 180, are expected to report gains in the coming week, according to FactSet. Notable reports from outside the major indices include Canadian ecommerce platform Shopify Inc. SHOP,
and streaming music service Spotify Inc. SPOT,
reporting on the same morning Wednesday, which will no doubt cause some confusion between the two eponymous companies, as well as growing software maker Twilio Inc. from Silicon Valley. TWLO,
on Thursday afternoon.
Dow Jones Industrial Average reports: 3M Co. mmm,
Apple, Microsoft and Visa Inc. v,
(Tuesday); Boeing and McDonald’s (Wednesday); Merck & Co. Inc. mrk,
(Thursday); Caterpillar Inc. cat,
Chevron Corp. CVX,
and Proctor & Gamble Co. PG,