Welcome to the most anticipated week on Wall Street’s earnings calendar.
Following a couple of weeks of boring bank reports, narrative-loving investors finally get some juicy headlines to bite into as their favorite tech stocks step up to the earnings confessional. Apple, Facebook, Amazon.com … and that just scratches the surface.
So, without further ado, here’s what you should know about five earnings reports that Wall Street will be following this week:
Apple (ticker: AAPL). Market sadists everywhere will be watching Apple’s fiscal third-quarter earnings report with rapt attention. That’s because this could end up being an ugly report on so many fronts.
Among the weak expectations for Tuesday’s afternoon report:
— A 15.1 percent year-over-year decline in revenues to $42.11 billion.
— A 22 percent decline in iPhone revenues to $24.5 billion.
— A 25.4 percent decline in earnings to $1.38 per share.
If things go as expected, those numbers would represent only the second quarter that Apple’s iPhone revenues declined from the previous year, and the second quarter since 2003 that Apple revenues fell. That’s worrisome by itself, but doubly so considering the only other quarter in question was just last quarter. On top of that, UBS analyst Steve Milunovich wrote recently that the popularity of the low-cost iPhone SE, while a potential tailwind long-term, could weigh on Apple’s margins.
Wells Fargo recently lowered its earnings expectations on Apple, saying that “our sense is that sentiment on Apple is at one of the lowest (points), if not the lowest (point), it’s been since we’ve been covering the company.”
Desperate for a reason to be optimistic? This whirlwind of negativity is a contrarian’s delight, and given the underperformance of Apple this year, a beat and some better-than-expected guidance could lead to a significant pop in AAPL shares.
[Read: Why Warren Buffett Snapped Up Apple Stock (AAPL).]
Facebook (FB). On the other end of the spectrum is social media titan Facebook, which has some awfully high bars to clear — but then, it also has a history of showing up for its quarterly financial examination.
When Facebook reports earnings Wednesday after the bell, it’s expected to show revenue growth of 48.8 percent to $6.01 billion, and profit growth of 62 percent to 81 cents per share. And sentiment? Facebook has it in spades.
“Facebook continues to be a sector favorite within the internet. It is one of the few names excelling on every level, from user growth (despite its large scale) to engagement improvements to advertising leadership to adjacent platform buildouts that should extend the growth trajectory,” Canaccord analyst Michael Graham says in a report.
But a word of caution: Facebook hasn’t seen an earnings miss since early 2013. Despite the fact that its user base reached a whopping 1.65 billion last quarter, that still came on amazing 15 percent growth. Facebook investors have been spoiled by a lot more good news than bad news, and with shares right up against all-time highs, expect any chinks in the armor to be severely punished.
Amazon.com (AMZN). Amazon will be sitting at a similar crossroads on Thursday night, with the company expected to put up some pretty lofty results as shares sit around all-time highs.
Analysts see Amazon’s revenues growing 27.5 percent in its second quarter, but the eye-popping number to watch is profit. The estimate is for $1.11 per share, which would be an explosive move from the year-ago quarter’s 19 cents per share.
The driver of this party bus is a familiar face: Amazon Web Services. Amazon started breaking out results for its suite of cloud services in the first quarter last year, and it was a hit. Amazon Web Services is an exceptionally profitable venture compared to the core e-commerce business and its grocery-esque low margins. AWS has lifted Amazon earnings and generated a few surprise profits that have pushed AMZN shares 140 percent higher since the start of 2015. This quarter, Deutsche Bank’s Ross Sandler predicts 53 percent growth in AWS.
Amazon has the potential to reach its highest sales rate since the first quarter of 2012. If it does — and if AWS continues to buoy the bottom line — Amazon could keep resetting all-time highs.
[See: 10 Tips for Couples and Young Families to Build Wealth.]
Alphabet (GOOG, GOOGL). Last among this week’s reporting Big Four tech companies is Alphabet, which also reports Thursday after the bell. Its expectations are sexy, though its path there surely isn’t.
Analysts on average are looking for revenues of $20.75 billion, up 17.1 percent from last year, which should fuel earnings of $8.04, up 15 percent. But it’s not high-speed Google Fiber, autonomous cars or Google Glass (oops!) fueling this fire — just growth in things such as core search, improved mobile market share and YouTube advertising revenues.
However, there’s one growth area that could be of concern — traffic acquisition costs, which is one of the most crucial costs of doing business for Google Search. These costs rose 33 percent last quarter, and continued swelling of this figure could hold back Alphabet’s earnings.
And at least one analyst house thinks the Street is too optimistic about Alphabet’s second quarter. Bernstein Research noted a couple weeks ago that Alphabet would need to significantly accelerate Google Sites revenues or cut deeply into expenses to beat second-quarter estimates. In the same note, it pared back both EBITDA and earnings estimates.
Ford Motor Co. (F). Ford will report earnings before the bell on Thursday, and shareholders will be looking for enough good news to propel the stock into the black for 2016.
Of course, given the past year, maybe investors will continue ignoring the good news.
Ford has posted some attractive headlines in 2016, including rising and Street-beating earnings for the fourth quarter, the company’s best first quarter ever this year and the company’s best first-half U.S. sales in a decade, driven by strong demand for the company’s F-series pickup trucks. Yet shares are off 2 percent in 2016.
This quarter, Wall Street is expecting 27.6 percent earnings growth to 60 cents per share on 3.4 percent revenue growth to $36.31 billion. And given the great quarter put up by General Motors Co. (GM) last week, it looks likely that Ford will follow suit.
Ford trades at a ludicrously low 7 times next year’s earnings estimates and a price/earnings-to-growth ratio of less than 0.7, further indicating a value. Meanwhile, shares offer a generous 4.3 percent dividend yield.
[Read: 7 Great Stocks That Cost $10 or Less.]
Given all this, Wall Street might finally fly to this quality name should Ford continue its 2016 run of providing positive news.
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5 Big Stocks Reporting Earnings This Week: AAPL AMZN F FB GOOGL originally appeared on usnews.com
