One thing that could salvage the stock market from its current vicious cycle of volatility is corporate America’s reassurance that its earnings momentum is still intact. The upcoming, earnings report-packed week should provide early evidence of whether this will prove to be true.
Last week’s equity meltdown, which sent the S&P 500 tumbling 5.28% over the course of two days, has fueled fears of a bursting bubble after the past decade’s bull run. That plunge was mainly triggered by rising interest rates which forced investors to question stocks’ lofty valuations, particularly in the high-flying tech sector which has propelled indices to record highs this year.
Some of the biggest tech companies and consumer giants are scheduled to report their third-quarter earnings in the coming week. Right now investors aren’t sure how sustainable Friday’s rebound will be. Here are three big earnings reports that might provide more clarity on market direction.
Streaming entertainment giant Netflix Inc. (NASDAQ:NFLX) will have a chance to crush the bears that have been circling its shares when the company reports third quarter earnings on Tuesday, October 16, after the market close.
The biggest concern that has dragged the stock down almost 20% from its record high of $423, reached in early July, was the slowing subscriber growth in the second quarter. If the company can show that the weakness was temporary, its shares will resume their upward journey.
Analysts are expecting earnings of $0.68 a share, up from $0.29 a share it reported in the same period a year ago on sales of $4 billion, according to consensus estimates.
International Business Machines (NYSE:IBM) needs to show that its new businesses—on which the success of its turnaround strategy hinges—are not just growing, but also contributing significantly to sales. When the blue-chip tech giant reports third quarter earnings on Tuesday after the market closes, investors will be able to zero in more accurately on the company’s “strategic imperatives,” group, which includes cloud computing, Watson artificial intelligence, and security software, for proof of sustained growth.
With shares of IBM, which closed Friday at $140.85, hovering around the 52-week low of $137.45, any positive surprise on this front could induce a powerful rally, especially now that the company’s dividend yield has become quite attractive, exceeding 4%. Analyst consensus on IBM is for EPS of $3.43 on revenue of $19.12 billion for the quarter ended September 30.
3. Procter & Gamble
Procter & Gamble (NYSE:NYSE:PG) will report first quarter 2018 earnings before the market opens on Friday, October 19. Right now, the consumer goods multinational giant is under pressure to adapt quickly to a changing retail environment in which it’s losing market share to new entrants.
Organic sales — or revenue excluding currency swings and the impact of M&A — only grew 1% in the latest fiscal year over the previous period, falling short of the company’s guidance of 2-3% growth. That dismal performance has dragged its share down 14% in the past one year.
P&G’s baby-care business in the U.S. is facing competition from ultra-low priced products by private-label diaper lines. At the same time, it continues to struggle in the men’s shaving category where Dollar Shave Club and others are challenging its leading position.
According to analyst consensus, P&G will report $1.1 a share profit on $16.59 billion sales.