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April 18th, 2019

Earnings Season

By PRATTE

Blogue 17 nov EN

 

Earnings season was full on this week, as these reports are highly expected by analysts who feared that they could be worse than expected. Financial analysts now estimate a decline of 1.8% in index profits compared to the first three months of 2018, when they had forecast a decline of 2.3%. So far, more than 78% of S&P 500 member companies have reported better than expected quarterly results. So here is what happened in the markets this week.

Market Brief

Difficult start for the markets that opened Monday session down. Investors did not seem to digest the quarterly results from the Goldman Sachs (-2.43%) and Citigroup (-0.24%), which are not as good as expected. “This morning’s results highlight the fact that we could also have a problem with turnover,” said Peter Cardillo of Spartan Capital. Tesla’s was down 2.66% at the open, Boeing yielded 0.96% while Best Buy lost 0.53%. On Tuesday, the three major US indexes opened positive. They benefited from the filing of strong quarterly results from many companies. The Dow gained 131 points, the S&P 500 and the Nasdaq both advanced 0.3%. United Health Group gained 2% after good earnings. Moreover, Johnson & Johnson also was up 2.1% after performing better than expected in the last quarter.

Hard day for the three leading indexes on Wednesday which closed the session lower, pulled down by mixed quarterly results of companies and a sharp decline in the health sector. Markets opened with gains Thursday, helped by the release of good retail sales data, up 1.6%. Figures that restore confidence in the strength of the US economy while analysts expected gains of 0.9%. The US and Canadian markets were closed Friday for Good Friday.

In Canada, the TSX ended up 34 points on Monday unable to accumulate more points due to losses in the health sector. Aphria finished the day down 14.2% while Cronos lost 6.6%. The Toronto stock market continued its good performance on Tuesday, supported by rising oil prices. The TSX closed Wednesday’s session up, investors were confident following the election of the Conservative party in Alberta supporting the energy sector. “Clearly, conservative leadership is good for business. So that could also be what fuelled the energy sector in Canada,” said Bangsund, Portfolio Manager at Fiera Capital. On Thursday, the Toronto Stock Exchange was trading at a new sustained high helped by news of an agreement by Canopy Growth to acquire Acreage Holdings.

First Quarter From US Banks

US investment bank Goldman Sachs posted lower-than-expected quarterly earnings this week. The latter recorded a net profit down 20% and a decline of 13% of its turnover. The company earned $2.25 billion over this period, or $5.71 per share, exceeding the estimate of $4.89. Among the six largest US banks, Goldman Sachs is the most dependent of Wall Street’s activities, which greatly exposes the decline in transactions recorded during the last quarter.

Citigroup has reported a slight increase in net income through savings and lower taxes. However, the institution also disclosed a decline in its turnover of 1.6%. On Wednesday, it was Bank of America’s turn to file its quarterly results. The bank posted a net profit of $6.87 billion, up 5.8% year-on-year. Its sales declined by 0.3% to $23 billion. According to FactSet, market analysts expect an average decline of about 4.3% in corporate profits for the S&P 500.

Netflix

Despite the growing competition, Netflix continues to be the darling of streaming platforms with around 150 million subscribers worldwide. The company posted better-than-expected quarterly results in terms of revenue and earnings per share this week. Netflix recorded its largest quarter in terms of revenue growth, adding 9.6 million new subscribers.

Its earnings per share forecast for the second quarter (55 cents) is below analysts’ expectations. The company estimates it will add around 5 million subscribers in the second quarter, 1 million less than predicted by Wall Street. Investors will monitor the company’s turnover closely over the next few months. Netflix could be affected by the arrival of two major rivals, Apple and Disney, who will launch their streaming platform in the upcoming months. Netflix’s stock plunged 9% in extended hours after the release of the report but resumed tone at the opening of markets. The stock is up 16% over the past year.

Qualcomm

An amicable agreement between Apple and Qualcomm were announced Tuesday late in the session. The deal finally ends the lawsuits and includes a financial settlement from Apple to Qualcomm, a licensing agreement over the next six years (with an option to extend for two more years).

The markets applauded the agreement, Qualcomm’s share price jumped 23%, up 29% over the last three months. While Apple’s stock was up slightly but has recorded gains of 28% since the last three months.

 

 

 

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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