The stock market will be dominated by cloud-related news this week. Earnings are reported by cloud service providers Amazon.com, Microsoft and Alphabet. The stock market is being clouded more and more by the steep pullbacks of major indexes. As the Middle East searches for a solution to its new conflict, threatening clouds are hanging over too many lives, both in Israel and Palestine. The outlook for Washington is even cloudier, as the House of Representatives struggles to find leadership before a deadline in mid-November.
There's a great deal of uncertainty in the air as the market heads full speed into the reporting season for the third quarter. Here are some guidelines for the week. Use them.
Stocks To Watch: Keep A Tight Rein On Capital
Investors are advised to look for stocks that have held up well at buy points. However, it is not the best time to increase exposure. Adobe (ADBE), UnitedHealth(UNH), SLB(SLB), Costco WholesaleCOST and Fair IsaacCOST are all good candidates. A bonus is that none of them plan to report their earnings until at least two weeks from now. UNH and SLB have recently reported. Adobe's weekly chart shows a flat basis. UNH has been moving to the right of a chart base and is likely to finish a handle by Friday. SLB has a flat bottom, and the high of Wednesday marks an early entry. Costco and Fair Isaac have similar buy points. Adobe and Fair Isaac have the highest relative strength ratings of the group. Each one has a rating of 97.
Goldilocks data for the Fed's Economic Calendar
In the coming week, we'll likely see more data on the economy that are way too hot to be comfortable for Fed officials. Expect another brush with a 10-year Treasury yield of 5%. The data are mostly retroactive, as the big 10-year yield breakout, which should have been a drag on large-ticket purchases such as autos, didn't happen until September 21. Highlight will be Thursday's first official estimate for Q3 GDP growth. ET is expected to be above 4% due to an increase in consumer spending.
The initial jobless claims for the week ending October 14 fell to an 8-month low. Also, durable goods orders will be released at 8:30 am on Thursday. On Friday, at 8:30 am, personal income and expenditure data from September will reveal how the Fed's core PCE price index finished the third quarter. The economists expect a 0.3% increase after three months of tame growth.
The new home sales report for September is due Wednesday at 10 am, and the pending home sale report, which gives an early look at existing homes sales before they close, is due Thursday at 10. The preliminary S&P Global buying managers index for October will be released Tuesday at 9:45 a.m., providing an early indication of both manufacturing and service activity in this month.
Microsoft Earnings - Cloud, Office 365, and Artificial Intelligence
Microsoft will report its first quarter results on Tuesday evening. FactSet polled analysts who expect Microsoft to earn $2.65 per share, an increase of 13% over the previous year. Microsoft's sales are expected to increase 9%, reaching $54.5 billion for the third quarter. Microsoft's cloud computing business, such as Azure infrastructure services and Office 365 software will be the focus of this report. Wall Street will also be looking at growth in Microsoft’s artificial intelligence offerings. This will be Microsoft's first fiscal Q1 report since its $69 billion purchase of video game publisher Activision Blizzard.
Meta-Earnings – Facing The Doubters
Meta (META) is expected to report its Q3 earnings on October 25, after the market closes. Meta has been a leading performer within S&P 500, with a gain of 160% this year. The social media giant is expected to announce its earnings on October 25, after the close of the stock market. FactSet reports that analysts expect earnings per share of $3.64 on revenues of $33.6 billion. This is a 122% increase in earnings and a 21% increase in sales. Meta stock has moved into a range of buys after moving past an entry point at 312.87, on October 6.
Analysts are looking for signs that advertising is continuing to recover and the momentum of monetizing Reels, a short-video product. Analysts will be keeping an eye on the operating expenses and losses of Reality Labs, a division focused on metaverse. Although investors are worried that FY24 operating expenses guidance could be raised at 20% YoY, we believe it is unlikely given the narrow metaverse product roadmap and the headcount not likely to increase meaningfully. Mizuho has given Meta a 400 price target and a buy rating.
Amazon Earnings: Pullback Before High Hurdle
Amazon will report its third-quarter results after the close of the markets on Thursday. Amazon's AWS cloud business will be closely monitored, as well as expectations for the holiday shopping season in Q4. FactSet reports that analysts expect the company to report earnings of 58c per share, on revenue of 141.5 billion. This represents an annual earnings increase of 107%, and a sales growth of 11.3%. AMZN is up almost 60% for the year, but has struggled with a loss of 5% since September. Analysts have largely given AMZN stock buy ratings ahead of earnings. Wedbush believes Amazon will have catalysts in the future "as retail profit margins continue rising and AWS growth accelerates despite easing comparisons."
The Big Oil Earnings: An Overview of Supply Chains, Outlooks and Forecasts
ExxonMobil and Chevron report their third-quarter revenue and earnings early on Friday, as the Middle East’s Israel-Hamas conflict clouds the outlook for the oil market. ExxonMobil's earnings are expected to fall by 46%, to $2.37 a share. This is after the company announced its $60 billion acquisition of Pioneer Natural Resources. Revenue is expected to drop 17% at $93.41 billion. Wall Street predicts that Chevron's earnings per share will decline 35%, to $3.60, while its sales will drop 23%, to $51.38 Billion.
ExxonMobil, as well as Chevron, saw record profits in 2022 due to the soaring prices of oil and gas. Prices have fallen in 2023, but the Middle East war is forcing traders to assess the global supply of oil as the U.S. considers increasing sanctions against Iran. There are concerns about the oil supply if war escalates. Israel ordered Chevron last week to stop natural gas production on one of two major offshore platforms located in the eastern Mediterranean.
Alphabet Q3 - Earnings and Allegations
Alphabet, the parent company of Google (GOOGL), reports its Q3 results on October 24. Analysts expect EPS to be $1.37, a 29% increase from the year before. The revenue is expected to increase 4.3%, to $72.06 Billion. The government claims that Google has a monopoly on internet searches "through exclusive distribution agreements" which direct billions of queries to Google every day. Google's contract (AAPL) with Apple, which makes Google Safari's default search engine, is at issue.
Cadence Design Systems, a manufacturer of electronic design automation (EDA) software, will announce its third quarter results on Monday. Analysts predict Cadence will earn $1.20 per share, an increase of 13% over the previous year, and to have sales of $1 billion up by 11%.
Logitech plans to announce its second quarter fiscal results on Monday evening. Wall Street expects that the computer peripherals manufacturer will earn 59c per share, down 30 percent from the same time last year. Sales are expected to drop 15%, reaching $973 million.
General Electric (GE), reports early on Tuesday. FactSet reports that analysts expect GE to earn 56 cents per share on revenues of $15.511 Billion. The health care spinoff has muddyed the comparisons year-over-year. GE intends to spin off its renewable energy and power unit as GE Vernova in early 2024. This will enable the "new GE", an aerospace-focused independent company, to emerge. Investors will be watching the progress of onshore wind, and whether it's close to breaking even as GE’s big breakup nears its finish line. GE's stock has formed a base of a flat with a 117.96 purchase point.
Halliburton reports its Q3 results and revenue on Tuesday morning before the markets open. Analysts expect profit to increase 28%, to 77 cents a share. Sales are expected to rise 9%, to $5.85 Billion. HAL's EPS has grown by an average of 88% over the last three quarters, and full-year earnings are expected to grow 40%.
General Motors (GM), reports its third quarter results early on Tuesday. Analysts predict a 17% decline in EPS on a revenue increase of 1%. This would be the lowest growth rate in sales for seven quarters. GM will not be affected by the UAW's strike that began on Sept. 15 in the last weeks of Q3. Analysts fear that supply issues will turn into demand problems amid high interest rates and inflation. Ford and GM have both reduced their investments in battery plants and electric vehicles due to the macro-uncertainty. We will keep an eye on the updates.
Visa (V), a credit card company, announced its Q4 results on Tuesday evening. Analysts anticipate the credit card giant will report a 16.6% increase in earnings to $2.25 a share, on ten percent revenue growth of $8.57 billion. V stock has a flat trading base and a buy point of 250.06.
Snap, the parent company of Snapchat (SNAP), will report its Q3 earnings on Tuesday after the close of stock markets. FactSet reports that analysts expect Snap to report an adjusted loss per share of 4 cents on $1.1 billion in sales. This is a 15% drop in earnings and a 1.6% decrease in sales compared to last year.
Range Resources (RRC), announced its third-quarter revenue and earnings late Tuesday. Wall Street predicted that EPS would drop 74% to 35cents, and revenue would fall 37% to 615 million. Over the past three months, the natural gas producer's earnings have fallen by an average of 19% as the low price of natural gas has lowered EPS from its highs in 2022.
IBM (IBM), reports its Q3 earnings at the close of business on Wednesday. FactSet's analysts expect Big Blue to report adjusted earnings of $2.12 a share on revenue of $14.75 billion. This represents an increase of 17% in earnings and 4.6% in sales.
CME Group (CME), announces its Q3 earnings on Wednesday morning. Wall Street expected the derivatives exchange operator would report 12% growth in earnings to $2.22 per shares on a 9.3% increase in revenue to $1.34billion. CME is currently trading in the zone of a flat base for a buy after achieving a breakout on Oct. 6.
Boeing (BA), reports early on Wednesday. Analysts predict that the plane maker will reduce its losses from $6.18 to $3.18, a sharp drop from the loss of $6.18 last year. Revenue is expected to grow 13%. This would be the third consecutive quarter in which sales growth has slowed. The escalating Israel conflict could have a new impact on global air travel. United Airlines (UAL), which has already expressed a dismal outlook, warned that flights to Tel Aviv may be suspended until October or possibly even the end of the year. Boeing's production ramp and delivery ramp of the 787 and 737 jets, which are key to the airline's operations, will also be under the spotlight due to ongoing problems at the supplier Spirit AeroSystems.
General Dynamics' (GD) Q3 earnings are expected to decline for the second consecutive quarter. Results will be released early on Wednesday. Analysts expect the defense manufacturer will report a 10% drop in earnings to $2.91 a share, while revenue increases to $10.07 Billion. GD stock has a 256.86 buying point.
Automatic Data Processing (ADP), a leading provider of data processing services, announced its Q1 results on Wednesday morning. The earnings are expected to increase 9.1%, reaching $2.03 per common share, after six consecutive quarters of double-digit growth. Revenue growth for the payroll and HR solutions provider is expected to slow down for the second quarter in a row, increasing 7% to $4.51billion. ADP's cup-with handle base has a buy point of 256.84.
Old Dominion Freight Line announces its Q3 results and revenue Wednesday morning before the markets open. Wall Street expects EPS to fall 13% to $2.91 and sales to decline 6% to $1.51billion. ODFL's stock has been flattened out ahead of its earnings, with most of it below the 50-day moving mean. The shares are still below the 438.05 buying point.
United Rentals (URI), announced its third-quarter revenue and earnings late on Wednesday. Wall Street predicted a 21% increase in EPS to $11.23, with sales increasing by 21%, to $3.69 Billion. URI shares outperformed the broader markets, rising 20% in 2023. Over the last three months, the industrial equipment rental outfit has seen an average 32% increase in EPS.
ServiceNow (NOW), a software maker, will report its Q3 earnings on Wednesday after the close of the markets. Analysts are expecting EPS to be $2.56, which is up 31% compared to a year ago. Analysts expect revenue to grow by 24%, or $2.27 billion.
Molina Healthcare will release its Q3 results on Wednesday after the close. Analysts predict that the managed-care provider's earnings per share (EPS) will rise by 12%, to $4.88. Revenues are expected to increase 4%, to $8.24billion. This is due to a declining Medicaid population following the end of the pandemic. MOH stock continued to rise on October 13 as part of the group's move, fueled by UnitedHealth earnings. It remains in a buying zone.
Allison Transmission (ALSN), reported late on Wednesday. Truck parts manufacturer Allison Transmission (ALSN) is expected to see a 20% increase in EPS on a sales gain of 7%. Apparently, the autoworkers' strikes is starting to affect suppliers because it has lasted more than a month. The pandemic, chip shortages and supply chain disruptions have caused automakers and suppliers to be in a state of recovery. ALSN has formed a flat bottom with a buy point of 61.53.
EQT (EQT), reports its third-quarter revenue and earnings late on Wednesday. Analysts predict EQT will report a loss per share of 11 cents, down from a profit per share of $1.04 a year earlier. Wall Street expects revenues to drop 32%, or $1.13 billion. This would be EQT’s second consecutive quarterly loss. Analysts project profit in Q4 as EPS grows 70% to 72 cents.
Boston Scientific (BSX), a medical technology company, is scheduled to release its third quarter earnings before the opening of the stock exchange on Thursday. FactSet polled analysts who expect the medical tech company to earn adjusted 48 cents a share on $3.48billion in sales. Sales would increase by about 10%, resulting in a 12% rise in earnings.
Edwards Lifescience (EW), is expected to announce a profit adjusted of 59 cents per share, on sales of $1.48 billion for the third quarter. Sales would increase by 12%, but earnings would drop almost 4%.
AbbVie will announce its third quarter earnings on Friday before the opening of the stock market. FactSet polled analysts who expect AbbVie to earn $2.88 per share on a adjusted basis. This is a 21% decline. Sales are predicted to drop 7%, to $13.7 billion.