Earnings Season: Week Ahead
Two weeks into the second-quarter reporting season, fewer S&P 500 companies are topping earnings estimates than they did in the whole year-ago period. Around 72% of companies that have announced results exceeded expectations so far, which is in-line with past trends but still lags the 88% seen over the full season in 2021.
Microsoft ($MSFT) and Alphabet ($GOOGL) report after the bell. Consensus estimates suggest Microsoft revenue growth on a constant currency basis may drop below 20% for the first time in three quarters. Bloomberg also expects a decline in demand for consumer PCs due to deteriorating macroeconomic factors.
Google’s parent may be more resilient in a recession scenario than peers given its breadth of advertisers, with Bloomberg seeing a 2Q estimate beat in YouTube ad segment as engagement holds up better for video-based ad platforms compared with other social media. BofA analysts anticipate some currency impact but expect core revenues to be in-line with consensus, which Alphabet has managed to exceed in all but two of the past 10 quarters.
Meta Platforms ($META) reports after the closing bell. Investors will watch revenue trends closely after the Facebook parent warned of softness exiting fiscal 2Q due to the war in Ukraine. Bloomberg pointed out that peaking engagement and macro headwinds could add to threats jeopardizing 2H growth outlook. Having recently slowed hiring and halted an office expansion in New York, the social media platform could also face questions on plans to pare spending.
Apple ($AAPL) and Amazon ($AMZN) report after market close. The iPhone maker, which generates more than half of its revenue overseas, could see sales growth trimmed by 1%-2% due to a strong US dollar and supply disruptions, according to Bloomberg. Management commentary on demand will be key, Wells Fargo says, as investors rush to gauge the recessionary impact to Apple’s earnings.
Amazon’s delay of its Prime Day sale event to July could translate to tempered growth in 2Q revenue, which is now projected to hit the higher end of the company’s guidance range, still according to Bloomberg. Higher costs on labor, transportation and warehousing could again squeeze operating margins, after the e-commerce giant acknowledged it was struggling with overcapacity. Investors will be eyeing the net sales outlook for the current quarter and seeking more color on its $3.49 billion deal to buy primary-care company One Medical.
- ESG in Focus: Alphabet, Meta, Apple and Amazon have, together, lifted their lobbying spending by 15% in the first half, in an effort to squash US antitrust legislation that could force them to fundamentally change their business practices. Bloomberg News reported that the industry in the last quarter outspent one of Washington’s biggest donors: big pharma and their major trade group.