Earnings This Week: Big Tech, UK banks and oil giants

Corporate earnings calendar: July 24 - 28

Buckle up, because earnings season begins to approach its peak and the calendar is jam-packed with big names to watch out for.

Big Tech earnings season begins with results out from Microsoft, Alphabet and Meta. Telecoms has been under the spotlight lately and it will remain there with results out from Verizon and AT&T, as well as T-Mobile and Comcast. Payments giants Visa and Mastercard, oil giants Exxon Mobil and Chevron, travel stocks Southwest Airlines and Royal Caribbean, carmakers General Motors and Ford, and apps Spotify and Snap are among the other updates to watch this week. Coca-Cola, McDonalds, Boeing and Intel are also among those scheduled to report.

It will also be a busy week in the UK, where banks will take centre stage as Lloyds, Barclays, NatWest and Standard Chartered report first half results. Telecoms will also be a theme here with BT Group and Vodafone posting earnings. Pharmaceutical firms GSK and AstraZeneca, oil firm Shell, broadcaster ITV, pest controller Rentokil, Warhammer miniatures maker Games Workshop, property investors Hammerson and Segro, as well as mining giants Anglo America and Rio Tinto will also feature.

In Europe, we have luxury brands LVMH and Hermes, airplane maker Airbus and airline Air France, pharmaceutical firm Sanofi, chemical company BASF, oil producer Total and carmakers Stellantis, Mercedes Benz and Volkswagen.

Big Tech stocks: Q2 earnings preview

Big Tech has outperformed the broader market and have been the driving force behind the rally in US indices this year. They look set to come to the rescue once again considering Microsoft, Alphabet, Meta, Amazon and Apple are forecast to report earnings growth this season while the broader S&P 500 is set to see bottom-lines contract at its sharpest rate in three years! Wall Street has incorrectly predicted that earnings have bottomed-out in recent quarters, but easier comps are coming into play and make this less likely this time around. Aggressive cost-cutting, including series of layoffs, is starting to pay off and many are set to grow their toplines quicker than costs for the first time in years.

None of the five have seen a huge valuation boost from AI, which could provide a major catalyst if they can monetise their efforts quick enough, with Microsoft appearing to carve out an early lead. Still, the surge in valuations in 2023 means multiples are much higher today than at the start of the year. These will be tested this earnings season. It will not take a lot to prompt a pullback and a significant beat or markedly rosier outlook will be needed to keep up the momentum. Still, Big Tech has what it takes to keep outperforming, although higher multiples will make gains harder to come by in the second half. Find out everything you need to know in our Big Tech Q2 Earnings Preview. Keep an eye out for individual previews on these five stocks next week.

UK banks: Q2 earnings preview

UK banks report this week with results out from Lloyds, Barclays and NatWest, with HSBC to follow the week after. US big banks have already reported and often set the scene with what to expect for banks' results in the UK and Europe. US earnings within the sector were very mixed: Banks more heavily focused on deal-making and investment banking, such as Citigroup and Goldman Sachs, underperformed. Meanwhile, the other major banks benefited from rising net interest margins. While UK banks are less diversified than their US peers and are more retail and commercial-focused, could we see a similar pattern in the UK? It is also worth noting that US banks have risen over the past week on the back of US bank earnings, meaning that some of the optimism could already be priced in.

Net interest margins will rise thanks to higher interest rates, although provisions are also rising as banks put more aside given the uncertain outlook. You can find out what to expect from the industry and each individual bank in our UK Banks Earnings Preview.

Exxon Mobil, Chevron and Shell: Q2 earnings preview

Oil giants saw profits peak last year as the war in Ukraine pushed oil prices up, but the cost of a barrel has eased since hitting the highs we saw just over a year ago. Refining margins have also followed that trend. The industry is still flush with cash but may have to eat into their balances to fund buybacks, although this is not sustainable over the longer-term. The pace of buybacks should be kept on track this quarter but any signs of a slowdown will not be welcome.

Exxon Mobil is forecast to report to see adjusted EPS more than halve from the year before to $2.00. We should also hear more about the recent deal to buy Denbury, which will help it expand its lower carbon projects and see it buy the largest CO2 pipeline network in the US and 10 sequestration sites.

Chevron is forecast to see adjusted EPS also halve to $2.91 in the quarter.

Shell is forecast to see adjusted earnings, its headline measure, drop 36% from last year to $2.4 billion, with EPS set to decline 45%. One key area of focus will be on its clean energy ambitions and what it plans to do with its renewables business as it starts to shift investment back into oil and gas in order to close the valuation gap with its US rivals.

Anglo American and Rio Tinto: H1 earnings preview

Prices for major commodities like iron ore and copper are both sitting higher than they were a year ago, but far from the last peaks. Thankfully, we have seen a recovery in prices since the end of the first quarter, which bodes well for the second half. Prices for other commodities has proven more of a mixed bag.

Rio Tinto is forecast to report a 20% year-on-year drop in adjusted Ebitda to $12.5 billion, although there should have been a significant improvement in the second quarter compared to the first following the rebound in iron ore prices. Production of most commodities rose in the first half, with output of iron ore up about 7%. Net earnings at the bottom-line will be down 33% from last year at just under $6.0 billion. Dividends may be lower than last year as a result as Rio links payments to 50% of earnings. Earnings are expected to rebound strongly in the second half of 2023, partly thanks to easier comps.

Anglo American is forecast to report a 39% year-on-year drop in adjusted Ebitda to $5.3 billion and net earnings are estimated to almost halve to $2.0 billion. Copper production was significantly higher and iron ore saw improvements, but output of other commodities, including diamonds, PGMs and nickel, was lower. Prices for the likes of coking coal, palladium and other metals has not fared as well as some other commodities, suggesting the outlook for earnings is more at risk. The outlook for the reminder of the year is not as rosy for Anglo American, which is forecast to deliver much more tepid, single-digit earnings growth in the second half.

Verizon and AT&T: Q2 earnings preview

US telecom stocks have been rocked this month as investors become worried about old cable networks lined with lead that could be harming the environment and expose them to potentially huge liabilities. AT&T sank to its lowest level in three decades while Verizon plunged to levels last seen in 2010, but both have since started to rebound. AT&T has already said less than 10% of its network is impacted and shrugged off the fears.

Barclays said the selloff was overdone, which appears to have been the case as value investors take advantage. Still, others see a significant risk. Bloomberg Intelligence has calculated the industry could face a bill of $43 billion to clean up the cable, and said it could take up to five years to sort out in the courts to suggest the overhang could be here to stay for some time.

AT&T is forecast to report a 7.6% year-on-year decline in adjusted EPS to $0.60 in the second quarter.

Verizon is forecast to report an 11.1% year-on-year drop in adjusted EPS to $1.16.

BT Group share price: H1 earnings preview

In 2022, we saw BT Group deliver its first annual growth in revenue and Ebitda in six years! The pressure is now on to keep on the right trajectory despite the challenging backdrop, having slashed costs and reduced its workforce while continuing to roll-out 5G and full-fibre broadband.

The consensus figures point toward a tepid 0.2% year-on-year rise in first-half revenue to £10.39 billion, but earnings should perform much better. Adjusted Ebitda is expected to edge 4.5% higher to £4.05 billion and pretax profit at the bottom-line is seen jumping 26.5% to £1.05 billion. BT Group has said sales and Ebitda should keep growing this year thanks to inflation-linked price increases and its lower cost base. The fact it won’t be paying any cash tax in the UK for the next three years should help free-up more sums for fibre rollout. There have been reports CEO Philip Jansen could be preparing to step down within the next year, which would raise more questions about BT’s strategy.

Vodafone share price: Q1 earnings preview

Vodafone releases a trading update this week that will focus exclusively on the topline. Analysts forecast total revenue will be down 6.2% from last year at £10.58 billion. Spain and Italy remain the drag and are offsetting mild growth in the UK and Germany. Organic growth has been accelerating and is expected to hit 2.9%, which would be the fastest growth seen in two years.

We may hear commentary on the recent deal to combine its UK telecoms arm with its rival Three, which is owned by CK Hutchinson. That will also heighten the pressure on the turnaround in Germany, which is central to its prospects. Watch for any changes to guidance. Vodafone is aiming to keep adjusted Ebitdaal – its headline earnings measure – to stay ‘broadly flat’ at EUR13.3 billion over the full year and is targeting adjusted free cashflow of around EUR3.3 billion.

Visa and Mastercard: Q2/Q3 earnings preview

The determination of consumers to keep travelling regardless of the economic climate should keep cross-border transactions elevated, countering the cooling spending in the US. Both Visa and Mastercard have recently pulled back from recent highs, with both trading at a premium to smaller rivals and above their 5-year averages.

Visa is expected to report a 10.8% year-on-year rise in revenue to $8.1 billion in the third quarter, which would mark a new record, and adjusted EPS is forecast to rise 6.7% to $2.11. Payment volumes are set to grow 7%

Mastercard is forecast to report faster growth, with consensus pointing to a 12.2% rise in revenue to $6.2 billion and a 10.7% increase in adjusted EPS to $2.83. Payments volumes could also outpace its rival at over 11%.

General Motors and Ford: Q2 earnings preview

Ford and General Motors have performed better than expected over the past two years. The electric vehicle arms of both companies will be under the spotlight as they try to find the right balance between investing in cleaner transportation and protecting profitability during the transition. Strike action also remains a threat.

General Motors is expected to report a 19% year-on-year rise in revenue to $42.6 billion, driven by higher volumes in the US, China and elsewhere as supply chain problems have eased. That, in turn, allowed General Motors to raise its full year outlook back in April. Adjusted Ebit is forecast to rise 39% to $3.2 billion in the second quarter and net income is seen rising 26% to $2.1 billion. We could see net income rise or fall in 2023 based on its guidance, although a decline is more likely based on the current range.

Ford remained the number one brand in the US in the first half of 2023, with truck sales surging higher while its electric vehicle business makes progress. Wall Street sees revenue rising 7.1% to $40.6 billion. Analysts are looking for adjusted Ebit of $3.0 billion and believe net income will soar to $1.9 billion from just $667 million last year. The F-150 will get a lot of attention as Tesla prepares to launch its Cybertruck.

Boeing and Airbus: H1 earnings preview

Boeing, having been plagued by issues in recent years, continued to lose ground to its European rival Airbus in the first half of 2023 and is still playing catch up. Airbus delivered 316 commercial aircraft in the first half and added 1,044 net orders to its backlog. Meanwhile, Boeing shipped 266 planes and only secured net orders of 415.

Boeing is forecast to report a 10.7% year-on-year rise in revenue in the second quarter to $18.5 billion but will remain in the red with a core loss per share forecast of $0.84, which would mark two consecutive years of losses. Boeing is attempting to deliver 400 to 450 narrowbody 737s this year and is aiming to deliver monthly production of 38, so keep an eye on progress here.

Airbus will focus on results for the first half rather than the latest quarter. It is expected to report a 12.5% rise in revenue to EUR27.9 billion and adjusted EPS is forecast to fall 16% to EUR2.04. Airbus is aiming to deliver around 700 planes in 2023.

Intel stock: Q2 earnings preview

Intel’s financial performance in 2023 has been shocking. We saw it reports its first quarterly loss in seven years between January and March – marking its largest quarterly loss on record - and that was a long time coming considering revenue has been under pressure for some time. That trend is set to have continued this quarter, when Intel is forecast to report a 21.5% year-on-year drop in sales to $12.0 billion and its adjusted loss per share is predicted to come in at $0.04.

Intel is the middle of a turnaround but it will be a very long journey. The plan is to lean more into foundries that can make advanced chips for other companies so it can rival the likes of TSMC but doesn’t think it can catch up until 2026. But the situation remains challenging in the meantime. Demand for its chips used in computers remains dire as appetite for devices remains subdued after booming during the pandemic and sales of chips used in servers and datacentres is also in freefall. Markets currently see a return to earnings growth in the third quarter and a rebound in sales starting in the fourth, so the outlook will remain highly influential on how the update is received by markets.

Intel shares are up 26% year-to-date as investors believed it had bottomed-out following the rout we saw in 2022, but that is a relatively poor performance considering the popularity we have seen in other chip stocks. That may be partly explained by the fact Intel is trading at 31.6x forward earnings, marking a 12% premium to the industry average – which is all the more significant considering this is being elevated by the likes of NVIDIA’s lofty AI-induced valuation.

Notably, spin-off Mobileye also reports results next week. While an independent and separately listed business, Intel is still a controlling shareholder and Mobileye contributes to its earnings. Mobileye has been a bright spot for Intel recently. 

Snap stock: Q2 earnings preview

Snap is up over 46% since the start of 2023 and the stock hit one-year highs earlier this month. We have already seen a pullback since then but its valuation may prove lofty and could be tested this week. Revenue is forecast to be down 5.3% from last year at $1.05 billion. Snap is expected to have ended June with over 395 million daily active users on its platform, up 14% from a year ago and growing from the 383 million it had at the end of March. But revenue per user remains under pressure due to softer ad conditions. Snap is particularly geared toward smaller and mid-sized businesses, which may prove more vulnerable to the increasingly challenging economic climate. Watch ad pricing as there are some green shoots here, although a recovery looks unlikely before the end of this year.

Snap is forecast to report an adjusted Ebitda loss of $61.7 million, turning from a $7 million profit the year before. That would be the first quarterly loss in almost two years! It is also set to burn through cash. That is worrying considering the comps are easy following the pressure we saw on financials in 2022. The outlook suggests more losses and sales declines are to come in the third quarter, with a partial recovery seen emerging in the final three months of the year.

Southwest Airlines stock: Q2 earnings preview

It has been a fantastic earnings season for airlines so far, and the bar is high for Southwest Airlines ahead of the results this week after all three of its major rivals – American Airlines, United Airlines and Delta Air Lines – all beat expectations and raised their full year guidance as demand for international travel remains buoyant and prices sit at much higher levels than before the pandemic.

Southwest Airlines is forecast to report a 3.8% year-on-year rise in revenue to $6.9 billion, which would mark a new quarterly record as capacity grows and because fares are more than twice as high as a year ago. It is expected to deliver adjusted EPS of $1.10 in the quarter, which would be down over 15% from the year before as costs are still rising faster than revenue. Still, that would be a worse performance compared to its rivals, all of which grew earnings in the period. United Airlines has significantly underperformed its three competitors in 2023 and that could remain the case this quarter.

Royal Caribbean stock: Q2 earnings preview

Royal Caribbean Cruises has been the sixth best performer in the S&P 500 this year. While tech has been the driving force behind the rally in stock markets this year, the cruise line industry has been sailing higher as the prolonged recovery from the pandemic gains traction.

Rival Carnival posted record revenue and returned to profit for the first time since restarting operations post-lockdown. Royal Caribbean is forecast to report a 56% year-on-year rise in revenue to $3.4 billion. It is expected to report adjusted EPS of $1.56 – only the second profit since 2019. However, this time, Wall Street thinks Royal Caribbean will remain profitable going forward, which has what has got markets all excited this year. Sales growth will temper in the second half as comparatives start to be ironed out, but profits look certain to rise this year and adjusted Ebitda should surpass the record we saw back in 2019 - and markets believe they will surge higher in 2024, although the threat of a downturn or recession still poses a risk. With that in mind, commentary around bookings will remain key to shaping the outlook after they were much higher than expected in the first quarter.

GSK share price: Q2 earnings preview

GSK is forecast to deliver a 1.8% year-on-year drop in revenue to £6.8 billion in the second quarter as resilience in demand for vaccines is countered by a drop in sales of other medicines. Shingles drug Shingrix and respiratory drugs Nucala and Trelegy are among its fastest-growing and best-selling products right now. Speciality medicines is set to see a 12% fall in sales as the rise in its HIV drugs is offset by falls elsewhere. Adjusted EPS is predicted to fall 20% from last year to £0.35.

This will be the first full quarter since new chief financial officer Julie Brown joined back in April. It is set to soon launch Arexvy in the US, which could provide a noticeable boost to sales, and investors will also be keeping an eye on any updates regarding the Zantac litigation.

ITV share price: H1 earnings preview

ITV is expected to report a 5.5% year-on-year drop in external revenue to £1.58 billion. Growth at ITV Studios is expected to slow to 3.4% as it comes up against strong comps from the year before and the soft environment means advertising revenue could be down over 11%. Adjusted Ebita, a key metric, is forecast to be down 48% from last year at £166 million. Reported pretax profit at the bottom-line is estimated to be down 76% at just £52.5 million. Costs continue to rise so margins are being squeezed from both ends.

Watch out for how its new platform ITVX is performing as this is central to its streaming ambitions. We may also hear more about its growing investment portfolio. The broadcaster is providing ad space and time to companies to sweeten the price and utilise capacity. It has struck deals with pet health company PitPat and architectural tech firm Resi this year. It also recently said it was ‘no longer’ considering a takeover of All3Media after the media learnt about the deal. 

ITV Studios will remain the bright spot of the business in the second half considering the ad market is not seen rebounding until 2024 and earnings growth should accelerate considering it has its popular Love Island coming out. ITV Studios is aiming to deliver mid-single digit revenue growth over the full year. ITV is also hoping that the Rugby World Cup can draw eyes to screens. Still, analysts remain convinced 2023 will be another challenging year when earnings will drop but it is a potential recovery play for 2024 considering ITV is down 9% this year. It trades at 7.7x forward earnings, although this is slightly above the 5-year average.

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