Netflix and Goldman Sachs headline major report
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The third quarter earnings season is off to a solid start and will get into full swing next week. JPMorgan Chase, Citigroup and Wells Fargo on Friday reported better-than-expected quarterly results. On Thursday, Delta Air Lines reported better-than-expected profits and revenue. Overall, about 6% of S&P 500 companies have reported third-quarter earnings, with 81% beating expectations, according to FactSet. Expectations for the overall earnings season are muted. Analysts had expected profits to decline 0.3% year over year heading into the reporting period, according to FactSet data. This is the fourth consecutive quarter of declining profits for the S&P 500 index. This week, 54 companies in the S&P 500 index are scheduled to report, including investment banking giants Goldman Sachs, Morgan Stanley, and Netflix. Here’s CNBC Pro’s breakdown of what to expect from each of these major reports. Bank of America is scheduled to report earnings before the bell on Tuesday. Management is scheduled to call at 8:30 a.m. ET. Last quarter: BAC posted better-than-expected earnings thanks to higher interest rates. Current quarter: Analysts surveyed by FactSet expect the bank to report modest revenue and revenue growth compared to the same period last year. What CNBC is watching: Bank of America stock has struggled this year, dropping more than 19%. However, UBS analyst Erika Najarian thinks the banking giant will see improvement in future reports. “The market is focused on yesterday’s factors, the two ‘B’s’ of bond losses and deposit beta (which BAC has managed to contain, by the way), and not enough on the two ‘C’s’ that we think “We feel that there is a catalyst for progress (credit and capital),” Najarian said in the memo. History shows us: Bank of America beats earnings estimates 78% of the time, according to Bespoke Investment Group. However, stock prices fell by an average of 0.8% on closing days. Indeed, BofA stock soared more than 4% after the company released its second-quarter numbers. Johnson & Johnson plans to report earnings in the premarket followed by a call at 8:30 a.m. ET. Last quarter: JNJ raises its full-year outlook due to strong medical technology sales. This quarter: Analysts expect profits to decline slightly from a year earlier, according to FactSet data. What CNBC is watching: Bank of America says investors are looking forward to the third-quarter report, given that J&J has already updated its guidance to reflect the Kenvue spinoff earlier this year. It could be something trivial. Indeed, the bank said, “Investors remain focused on the pharma business’s 2025 outlook (BofA’s guidance of $55 billion vs. $57 billion) given the looming LOE and Talc litigation.” It pointed out. History shows us: According to Bespoke, J&J has a strong track record of beating analyst revenue estimates and beating earnings 95% of the time. In fact, the last time J&J missed out on revenue was in the second quarter of 2003, according to FactSet data. Goldman Sachs is expected to release financial results before the deal. Company executives will hold a conference call at 9:30 a.m. ET. Last quarter: GS revenue was lower than expected due to hits from GreenSky and real estate. This quarter: According to FactSet, Goldman’s third quarter report expects profits to fall by more than 30% over the previous year. What CNBC is watching: Goldman last week warned that its third-quarter results would be hit by a deal to ease GreenSky’s burden. This is due to the company stepping back from entering the retail banking field. Investors will also be paying attention to how well the company’s trading business has performed. History shows us: Big investment banks have missed earnings estimates in two of the past three quarters, according to FactSet. Shares rose nearly 1% after Goldman’s second-quarter results, but fell after the previous two announcements. United Airlines is scheduled to report its financial results after the bell. A conference call with management is scheduled for Wednesday. Last quarter: UAL expects strong earnings this quarter. The company also shortened its schedule in Newark, New Jersey. This quarter: Analysts expect the airline’s revenue to decline by double digits, according to FactSet. What CNBC Airlines’ Leslie Josephs is watching: “Investors will be watching how United fares in the offseason after a hot summer, especially in international travel, which is United’s strong suit. Airlines are working to return to seasonal and higher booking patterns.”United Airlines’ Big expenses are also in focus: new pilot contracts and future orders for Boeing and Airbus jets. The war in the East has suppressed demand for international travel overall. ” What History Shows: According to Bespoke data, United Airlines beats his revenue forecasts 69% of the time. After the second quarter report was released in July, the stock price rose 3.2%. On Wednesday, Morgan Stanley is scheduled to report earnings in the premarket, with calls scheduled for 8:30 a.m. ET. Last quarter: MS beat expectations, supported by record revenue from its wealth management business. This quarter: Morgan Stanley is expected to report year-over-year profit and revenue declines, according to FactSet data. What CNBC is watching: Investors will look at Morgan Stanley’s report to look for anything that could snap the big banks out of their recent rut. Morgan Stanley stock has fallen more than 12% in the past month. Last week, UBS downgraded the stock to neutral, saying: “Despite its successful transformation into a WM-focused company with a strong growth profile that leads its peers, MS faces hurdles such as deposit sorting and yield-seeking. We are facing this,” he said. What history shows: According to Bespoke, Morgan Stanley’s earnings beat analyst expectations by 77%. Additionally, his average price-to-earnings ratio increase is close to 1%. Netflix plans to release its earnings after the market closes. A call with management is scheduled for 6 p.m. ET. Last quarter: NFLX announced an 8% increase in subscriptions and an increase in revenue due to the company’s crackdown on password sharing. This quarter: According to FactSet, the streaming giant’s revenue is expected to increase by more than 10% year-on-year. What CNBC is watching: Netflix stock has been underperforming since the company announced its second-quarter earnings, dropping more than 25% in that time. Indeed, recently added shows like “Suits” have garnered billions of minutes of viewing time on the platform. Investors will be looking for clues about whether the company can maintain its viewership momentum and how it will build an ad-supported subscription tier. “NFLX plans to invest in ad technology and content, which will dampen profit growth but should accelerate revenue,” said Wells Fargo analyst Stephen Cahall. “However, buyers will be patient.” What history shows: According to Bespoke, Netflix beats his earnings estimates 81% of the time. But that usually doesn’t lead to an increase in stock prices. Netflix’s stock price fell an average of 0.2% following the results. Indeed, the stock price rose after two of the last three reports were published. On Thursday, American Airlines is scheduled to report earnings in the premarket, with a conference call scheduled for 8:30 a.m. ET. Last quarter: AAL raised his 2023 revenue forecast. This quarter: The airline is expected to report a significant year-over-year revenue decline, according to FactSet. What CNBC aviation reporter Leslie Josephs is watching: American Airlines executives will be asked about offseason demand. The airline has already said it expects third-quarter profits to be weighed down by rising costs such as fuel, and it is unclear how much profit airlines will make during the slow travel season, when business travel demand has not returned to 2019 levels. There are still doubts whether it will be possible to raise the level. Airline executives are also likely to be asked about ongoing labor negotiations with flight attendants, the largest labor group, after signing contracts with pilots earlier this year. History shows: According to Bespoke, American Airlines beats his revenue expectations 90% of the time. Share prices also fell by an average of 0.3% on earnings day, but the stock has increased after two of the past three releases. —CNBC’s Michael Bloom contributed reporting.
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