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Monday Jul 3 2023 16:33
10 min
Earnings season is perhaps the most important time for investors because it indicates where companies are headed in the long term.
Earnings season is a period each fiscal quarter, that usually lasts for several weeks, when many of the biggest publicly traded companies announce their latest financial results.
Their reports include information on a company’s revenue, net income, earnings per share (EPS) and forward outlook. They are released a few weeks after each quarter ends.
Apart from giving investors an insight to where a company (and its stock) is headed, earnings season also helps investors understand where the broader index may be headed.
For example, a strong earnings report from Apple may see investors bullish on NASDAQ 100 futures.
Earnings releases are oftentimes accompanied by an earnings call – a conference between the company and analysts, press and investors which discusses the outcome of an earnings report and allows people to address a company’s management with the most vital questions.
Are you intrigued and want to give trading a shot? Here are the five stocks this earning season we think are worth looking into.
The aviation industry was one of the biggest losers emerging from the COVID-19 pandemic with a big blow to companies’ wallets and earnings.
The American aerospace company, Boeing Co, has been missing revenue as well as EPS estimates for the last three quarters, however, analysts are bullish on the company’s stock (BA). Fourteen out of 17 analysts consider Boeing stock a strong buy.
Since the start of the year, the firm’s share price fell by more than 25%, but Boeing’s order book seemingly keeps on growing as it has received attractive requests with Delta Air Lines buying 100 Boeing 737 Max 10 planes, with an option of an additional 30 planes.
Major analysts are also betting on Boeing with Goldman Sachs naming the company its favourite name heading into the earnings season. BA stock was up more than 20% this month and analysts have reason to expect a bigger bull run as the company attended the Farnborough airshow where it signed more deals with Qatar Airways, Vietjet, ANA, and more.
In the last quarter, the company missed its EPS expected target by 995.84%, heavily impacted by the war in Ukraine. The company reported a revenue amounting to $13.99 billion, down by over 12% with the expected $15.91 billion.
This quarter, the company is expected to deliver $17.52 billion in revenue and $-0.11 in EPS.
The energy sector has been performing awfully well so far in 2022, as petrol prices surged worldwide in the aftermath of Russia’s war in Ukraine.
Chevron, the American multinational energy firm, was on a bull run this year as its stock (CVX) surged by more than 20% and even jumped to its all-time high of $181.13 on 8 June 2022. Despite the bull run, CVX stock is still considered to be a buy by 10 out of 17 analysts.
Major banks are bullish on Chevron’s stock with HSBC upgrading the company to a buy from hold on 20 July.
“Oil price-driven sector correction leaves valuations looking attractive once more — we see >20% upside to our targets.”
In addition, Chevron shares have outperformed the Zacks Oil and Gas – Integrate- International industry over the past year.
In the last quarter, the company missed its EPS expected target by 2.68%, however, reported earnings of $6.3 billion for the first quarter of 2022, compared with $1.4 billion in the first quarter of 2021.
This quarter, Chevron expects its revenue to amount to $57.69 billion. This compares to last quarter’s expected $52.75 billion and reported $54.37 billion. Expected EPS for the second quarter of 2022 stands at $5.04.
In addition to Chevron releasing their earnings report this week, investors can also anticipate earnings reports from other energy giants in the likes of Exxon (29 July), Shell (28 July) and BP (2 August).
The tourism industry, just like the aviation industry, was also hit hard first by the COVID-19 pandemic and then by Russia’s war in Ukraine.
Airbnb, however, the popular American firm that operates a marketplace for renting vacation homes, has been reporting positive results these past few quarters, even noticing a surge in summer bookings that surpassed 2019 levels by more than 30%.
“Guests are booking more than ever before. In Q1 2022, gross nights booked grew 32% compared to Q1 2019 despite ongoing pandemic concerns, the war in Ukraine, and macroeconomic headwinds. People are becoming increasingly confident in booking travel further in advance, with lead times even surpassing 2019 levels by the end of Q1. Looking ahead, we see strong sustained pent-up demand. As of the end of April 2022, we had 30% more nights booked for the summer travel season than at this time in 2019, and the growth from 2019 is higher the further we look out this year,” the company said in its Q1 2022 letter to shareholders.
As the company’s Q2 2022 earnings report will be announced in the midst of the summer holidays, analysts are anticipating the results to be positive. In addition, the company itself said that it anticipates its bookings growth rate in the second quarter to approximate that of the first quarter.
“We expect to deliver Q2 2022 revenue between $2.03 billion and $2.13 billion. As we approach peak travel months, we expect our revenue as a share of GBV to increase in Q2 2022 relative to Q1 2022, consistent with historical seasonality,” the company notes in its letter to shareholders last quarter.
Airbnb shares (ABNB) fluctuated quite a bit in 2022, surging by around 8% between January and the middle of February and then dropping by around 44% by the end of July.
The overall analyst consensus rating on Airbnb share is hold, with 16 analysts expressing this opinion, however, 14 said it was a buy, out of a total of 31 analysts. The company expects its revenue in the second quarter to stand at $2.10 billion and EPS to be at $0.52.
The American financial services and digital payments company, Block, which was formerly known as Square Inc., lost more than 57% of its shares (ticker SQ) since the beginning of the year, however, the overall analyst consensus on SQ is currently a buy, based on 35 analysts.
RBC analysts are adding that while Q2 expectations are low, the stock remains a buy with potential to emerge with big gains of 85% next year.
The company also announced great results in the first quarter of 2022, as it saw its gross profit surge by 34% year over year. Meanwhile, its mobile payment service, Cash App generated gross profit of $624 million, up 26% year over year. Despite the positive results, Block missed its EPS estimate of $0.20 by 10.59% in Q1 2022 as well as reported a revenue of $3.96 billion, down by 4.39% from the expected $4.14 billion.
In Q2, the company is expecting its EPS to amount to $0.16 and its revenue to reach $4.34 billion.
Block itself was bullish when it came to its forecast of its Q2 earnings report noting: “For the second quarter of 2022, we expect non-GAAP operating expenses across product development, sales and marketing, general and administrative expenses, and transaction, loan and consumer receivables losses, in aggregate, to increase by approximately $245 million compared to the first quarter of 2022. Excluding contributions from Afterpay, we expect to increase overall non-GAAP operating expenses by approximately $180 million compared to the first quarter.”
The cryptocurrency industry has struggled quite a lot in 2022 with its overall market capitalisation declining by around 55% between January and July.
Coinbase, the American crypto exchange platform, was directly impacted by the bear trend in crypto markets in the first quarter of 2022, which saw the company’s EPS index miss its expected value of $0.91 by 112.65%. A decline of nearly 21% follows the company’s revenue which reached $1.17 billion in Q1, as opposed to the expected $1.48 billion.
Meanwhile the company’s stock (COIN), dipped by more than 70% so far in 2022, however, the overall analyst consensus for the stock is buy, based on 20 analyst estimates.
In its Q1 letter to shareholders, Coinbase noted that it will continue to “prudently, throughout this year to continue building the future of crypto.”
“While we are navigating uncertain and volatile markets, we have a decade of experience to draw from and will continue to invest wisely to drive long-term growth. We continue to expect that during a prolonged and stressful scenario for our business, we will aim to manage our 2022 potential Adjusted EBITDA losses to approximately $500 million on a full-year basis.”
The firm’s stock performance highly depends on whether overall crypto markets are either on a bullish or bearish run and seeing how many cryptocurrencies were falling in the second quarter of 2022, Coinbase expects its EPS to amount to $-1.13. The company expects its Q2 revenue to be around $855.93 million, down by 26.8% from the reported $1.17 billion revenue in the first quarter.
Just like the first quarter of 2022, the second quarter of the year also remained tough for many markets as inflation remained elevated at a 41-year high and the Fed decided to further hike its benchmark interest rate. In addition, the bank has started to reduce the size of its $9 trillion balance sheet systematically from June.
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As inflation does not seem to be seizing any time soon, and investors are anticipating more rate hikes by the Fed, markets have much more to go through.
Please note that this article is not investing or financial advice. Please conduct your own research and due diligence before investing and never invest money you cannot afford to lose.
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