Blog

February 1st, 2019

Earning Season Is On

By PRATTE
21 avril EN

Earning Season Is On

This week was one of the most important of the season: the quarterly results. Indeed, investors were eagerly awaiting the turnover of several large companies. By the end of the week, more than a hundred S&P 500 companies will have unveiled their quarterly results. Here is what happened in the markets this week.

Market Brief
Wall Street started the week down following the announcement of weaker than expected quarterly results from the manufacturer Caterpillar. The announcement of a major cut in the revenue forecast from chip maker Nvidia (-17%) also played a role in this plunge. The Dow, meanwhile, lost 350 points at the open pulled down by Caterpillar (-9%), the S&P 500 lost 1.6% and the Nasdaq gave up 1.6%. The US markets opened slightly higher on Tuesday as investors looked forward to Apple’s earnings after the bell. The Dow gained a point, but the gains made by 3M and Caterpillar failed to offset Verizon’s losses. For their part, the Nasdaq and the S&P 500 opened the session without direction.

Good start on Wednesday for Wall Street as investors were enthusiastic following the announcement of quarterly results of Apple (+ 4%) and Boeing (6.33%). The performance of these companies also allowed the Dow to earn 275 points at the opening. Among other good results, note that McDonald’s gained 2.67%, Facebook advanced by 1.49% to a few hours of filing its quarterly results as Microsoft (+ 1.72%) and Tesla (+ 0.64%). After this good session, the three main indexes opened without direction Thursday, but should still end the month positive. Microsoft’s share was down 2%, and Tesla’s was down 4% after quarterly results were lower than expected while DowDuPont lost 8.4%.

Friday, Wall Street opened without direction despite a strong job report in the United States. The Dow gained 81 points at the open, the S&P 500 edged up 0.2% and the Nasdaq was down 0.4%. Amazon posted good quarterly results on Thursday but still warned investors of a decline in its forecast for the next quarter. After a difficult month of December, January was good for the three major US indexes.

The TSX opened up on Monday with the help of Cronos (+ 16%), Iamgold (+ 10.1%) and Alamos Gold (+ 6%). However, SNC-Lavallin’s share was down 27.8% at the open after cutting its profit forecast. Despite this poor performance, the TSX ended the day with gains of 12.57 points. Tuesday, the TSX closed up 84.52 points largely due to gains in oil prices due to recent US sanctions against the Venezuelan national oil company. With this performance of the black gold, the Toronto index opened just slightly higher Wednesday. A good start for the Toronto index on Thursday, helped by gains in the precious metals and energy companies’ sector. The TSX opened slightly higher on Friday, thanks to gains in the energy sector.

Nvidia
Nvidia, one of the world’s largest suppliers of processors and graphics cards, has lowered its revenue targets for the fourth quarter of 2018. The company cited the “deterioration of the macroeconomic situation,” especially in China as one of the reasons. Nvidia lost more than 17% at the opening of the markets, explaining to investors that the end of the explosion of the cryptocurrency contributed to the excess inventory of its microchips.
This fall brought other chipmaker companies in its downfall; Advanced Micro Devices lost 7%, Micron Technology gave up 3%. The stock has lost more than 34% in the last three months. Nvidia will publish its quarterly results on February 14th.

Apple

A few hours from the filing of its quarterly results, the stock was trading 30% lower than its record level reached last October. As it was widely anticipated by investors, its iPhone sales are down, and the company has had its first holiday season down since 2000. Apple believes that this poor performance comes down to the decline in demand from China. However, the company posted better than expected quarterly results, despite the fact that profits are down US $20 billion and that revenues are down 5% from the previous year.

However, its revenues from the App Store, Apple Music and Apple Care as well as other similar subscriptions are up 19%. Apple has lost more than a third of its value in less than four months and Tim Cook must prove to investors that the company is still successful, a difficult challenge while the overall economic situation does not help. “Our customers are holding on to their older iPhones a bit longer than in the past. When you paired this with the macroeconomic factors particularly in emerging markets, it resulted in iPhone revenue that was down 15 percent from last year,” CEO Tim Cook said on the company’s earnings call. Following those earnings, the company’s stock was up 6% and at the opening of markets on Wednesday, the stock gained 4%.

Boeing

The aircraft manufacturers announced record results this week, significantly higher than the expectations of analysts. Boeing’s results boosted the markets on Wednesday. The company has achieved annual revenues of more than $100 billion for the first time, delivering more than 806 commercial aircraft in 2018, a 6% increase since 2017. For 2019, Boeing estimates it will deliver between 895 and 905 aircraft. During the last quarter, it delivered 238 aircraft, a 14% increase compared to the same quarter last year.

The company therefore announced net profits of US $3.24 billion or US $5.93 in the fourth quarter. Its quarterly revenues reached 28.34 billion, while experts had estimated revenues of 26.65 billion US dollars. Boeing’s stock is up 13% since the beginning of the year and started the day Wednesday up 6%.

Facebook

It was a year of controversy for the social networking giant, which weighed heavily on the company’s stock, which has lost more than 33% since its last summit in July 2018. Despite a difficult year in 2018, the company filed Wednesday better than expected results, revealing record profits while attracting new users. The company’s profit is up 61%, important numbers for the company who is trying to convince investors to regain confidence in the company.

“We’ve fundamentally changed the way we run the business to focus on very important societal issues,” said CEO Mark Zuckerberg. The company who has more than 2.32 billion users demonstrated in the last quarter that the controversy surrounding Facebook did not have a huge impact on its number of users and on its advertising revenues. The stock ended Thursday session up 10.72%.

 

Pratte Portfolio Management is a firm registered with the Autorité des marchés financiers (AMF) and the Ontario Securities Commission (OSC).
Intended to provide general information about markets and securities and not to meet your specific needs, this report is the result of the author’s only work. The opinions (including any recommendations, if any) expressed in this report are those of the author only and do not necessarily represent those of Pratte Portfolio Management and do not constitute securities investment advisory activities designed to meet your specific needs.
The information contained in this report is derived from sources believed to be reliable, but the accuracy and completeness of this information can not be guaranteed and, in providing the information, the author and Pratte Portfolio Management assume no liability whatsoever. This information was current as of the date indicated in this bulletin, and neither the author nor Pratte Portfolio Management assumes any obligation to update it or to report any new developments with respect to this information. This report is intended for distribution in jurisdictions where the author and Pratte Portfolio Management are registered for trading in securities. Any distribution or diffusion of this report in another territory is forbidden. The author, Pratte Portfolio Management, its affiliates and their respective directors, officers and employees, and the companies with which they are associated may, from time to time, hold securities referred to in this report.

 

 

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