After gaining some strength over the past week, US markets are poised to enter perhaps one of their most crucial earning seasons this coming week. Depending on Q4 2018 results, investor sentiment could improve, on the back of positive developments in the US-China trade talks and the Fed’s more dovish tone regarding rate hikes in 2019. Conversely, disappointing reports and weaker outlooks could easily destroy what little optimism investors are currently harboring.
Our first peek into the health of corporate America starts midweek, when the nation’s largest banks report, in what’s become the official kick-off to earning season. As the first entities in the line of fire if the economy is slowing, banks are an important indicator of the overall soundness of the economy, a key driver of consumer risk appetite.
Below are the three most important earnings announcements from a trio of sectors investors should be monitoring in the coming week.
Wall Street’s powerhouse commercial and investment bank, JPMorgan Chase & Co. (NYSE:JPM), will report fourth quarter earnings on Tuesday, January 15, before the market opens. On average, analysts are expecting $2.21 a share profit, up from $1.76 a share during the same period a year ago. Revenue is expected to jump to $26.9 billion from $25.45 billion a year ago.
JPM Weekly 2016-2019
JPMorgan, which has a strong presence in all major banking areas of the US economy, must meet these expectations in order to calm investors who are increasingly convinced a recession is just round the corner. During the past quarter, the lender benefited hugely from the Federal Reserve’s drive to hike interest rates.
Its interest income surged to $13.9 billion, which was the highest three-month total in the firm’s history. But despite reporting strong earnings, its stock fell victim to the general risk-aversion, plunging more than 20% from the 52-week high of $119.33 during the past quarter. Shares closed at $99.88 on Friday.
If the bank’s earnings momentum continues, its report this coming week may help recover additional losses for this well regarded financial stock.
Video-streaming giant Netflix ((NASDAQ:NFLX) reports fourth quarter earnings on Thursday, January 17, after the market close. Analyst consensus is calling for earnings of $0.24 a share, down from $0.41 a share during the same period a year ago. Average sales, however, are forecast to surge to $4.21 billion, a 28% jump from the same period a year ago, as the company benefits from an increasing number of subscribers globally.
NFLX Weekly 2016-2019
On these bullish expectations, Netflix’s stock has already gained 30% during 2019, outpacing all its FAANG peers, many of which are still struggling to regain momentum after a devastating 2018. However, this powerful rally, just ahead of its Q4 2018 earnings report makes the stock vulnerable to a selloff if Netflix fails to show strong growth in its subscriber number.
Up to now, investors have ignored the company’s huge spending on new programming and marketing, believing that there remains a lot of room for expansion since the internet TV and video service has no real competitor in the field. Shares of Netflix closed at $337.59 on Friday.
The world’s largest oil and gas industry services provider, Schlumberger (NYSE:SLB), will report before the market opens on Friday, January 18. Analysts on average are expecting EPS of $0.37, down from $0.48 during the same period a year ago. Sales are likely to remain flat, around $8 billion according to expectations.
Last month, Schlumberger said it expects sales in the US and Canada to drop by 15% in the final three months of the year, compared with the third quarter a year ago, a result of the plunge in crude prices, exhausted exploration budgets and maxed-out pipelines in America’s busiest field, the Permian.
“We are seeing a significantly larger drop in activity than we expected, which is leading to a larger drop in pricing than we anticipated,” Patrick Schorn, executive vice president at the Houston- and Paris-based company, said in prepared remarks for an investor presentation in December. “We continue to see the weakening of the hydraulic fracturing market as temporary, with the expectation of a gradual recovery taking place over the first half of 2019.”
These concerns have contributed to a more than 40% decline in the company’s share price during the past six months. Investors will be looking for some evidence of oil prices bottoming out after their recent plunge, during Schlumberger’s forward guidance. Shares of the stock closed at $41.74 ahead of the weekend.