The equity desk will be running low in July due to holiday but of all the major earnings expected over the next three weeks the following ones are the most important one to watch.
- JPMorgan Chase: US banks have not reacted positively on rising US interest rates since November last year as the market is expecting a muted increase in the net interest margin, which is likely offset by falling activity from the consumer across mortgages and card spending. Higher credit provisions are also likely given the tighter financial conditions.
- Lockheed Martin: US defence stocks have not moved much compared to their European competitors since the war in Ukraine broke out. While Europe will prioritise their own defence industry the increased spending will also flow to US defence companies and Lockheed Martin’s Q2 earnings release will give the first hint if that is indeed the case.
- Netflix: the world’s largest online streaming service is seeing a user decline, increased competition, increased costs for content production, and customers are generally hit by the cost-of-living crisis. Investors will focus on whether the company will announce a new ads-based tiering model to lower entry costs for streaming for those households hit the hardest by inflation.
- Halliburton: the oil and gas industry is still reluctant about investing too much in new oil and gas fields due to the political pressures against fossil fuels. Halliburton is a big oil services company and will see the pick up in capital expenditures in the oil industry.
- Tesla: Covid lockdowns in China have severely constrained the EV-maker in Q2 with deliveries falling q/q for the first time in more than two years. At the same time, the EV-maker has production difficulties at its factories in Texas and Germany, and competition is heating up from most notably Volkswagen and BYD.
- ASML: several semiconductor manufacturers such as Micron and Samsung have recently issued gloomy outlooks and these forecasts could also dent the outlook of ASML which delivers semiconductor equipment. The company has also recently been pressured by the US to halt sales to China of certain equipment.
- ABB: with the galloping energy crisis in Europe industrials are under pressure as industrial activity is difficult at punitive electricity prices. A general slowdown in the global economy could also negatively impact the outlook.
- Alphabet: since Q1 earnings Snap has been out cutting its revenue growth guidance on weaker advertising demand, but Alphabet has not done this. However, there is a lot of evidence that businesses are cutting down on marketing expenses to offset the pressure on operating margin. Outside the advertising business we expect the cloud computing division to still doing well.
- Microsoft: steady as a ship as the company is still running a near monopoly globally in computer operating systems and its cloud business is winning market share. Business spending has not taken a hit yet but Samsung said yesterday that they are beginning to see that so this might be a risk factor going into Microsoft earnings.
- Meta: same story as Alphabet, but with a caveat. Meta is spending $3bn per quarter on its new Metaverse bet and investors might be running out of patience with Mark Zuckerberg’s ambitions to create a new computing platform for the future. Especially, if the advertising business continues to lose momentum over the data privacy change that Apple made on its iPhones making it more difficult for Meta to deliver efficient ads.
- Apple: being a high-end consumer electronics maker Apple could be faced with bigger headwinds from inflation than what the market is currently betting on. Samsung’s outlook was ignored by Apple investors but that might come back and haunt them when Apple releases earnings. Supply chain constraints are also a critical issue for Apple which could lead to a negative revenue growth surprise.
- Amazon: the ‘everything store’ overspent during the pandemic and is being pressured on operating margins from higher fulfillment and logistics costs. In its cloud computing division Microsoft and Google are also adding more pressure. There is a lot of pressure on the new CEO to restore operating margin in its e-commerce business.
The most important earnings releases the next three weeks are listed below. Please note that some of these earnings dates might be moved after this publication.
- Tuesday 12 July: Tryg, DNB Bank, PepsiCo
- Wednesday 13 July: Fastenal, Delta Air Lines
- Thursday 14 July: Fast Retailing, Ericsson, SEB, EQT, JPMorgan Chase, Morgan Stanley, Cintas
- Friday 15 July: Investor, Sandvik, EMS-Chemie, UnitedHealth, Wells Fargo, Charles Schwab, BlackRock, Citigroup, Progressive, US Bancorp, PNC Financial Services
- Monday 18 July: Bank of America, IBM, Goldman Sachs, Nordea
- Tuesday 19 July: Johnson & Johnson, Novartis, Lockheed Martin, Netflix, Atlas Copco, Volvo, Halliburton, Assa Abloy, Hasbro, Yara International
- Wednesday 20 July: Tesla, Abbott Laboratories, ASML, CSX, Nidex, Biogen, Baker Hughes, Kone, Volvo Car, Aker, Dassault Aviation, United Airlines, ASM International, Alfa Laval
- Thursday 21 July: Roche, Danaher, AT&T, Blackstone, SAP, Intuitive Surgical, ABB, Freeport-McMoRan, Kinder Morgan, Nucor, DR Horton, Nokia, Essity, Seagate Technology, MarketAxess
- Friday 22 July: Verizon, NextEra Energy, American Express, Schlumberger, Twitter, Danske Bank, Norsk Hydro
- Monday 25 July: NXP Semiconductors, Kuehne + Nagel, Philips, Ryanair
- Tuesday 26 July: Alphabet, Visa, LVMH, Coca-Cola, McDonald’s, UPS, Texas Instruments, Raytheon Technologies, Unilever, Christian Dior, General Electric, UBS Group, General Motors, Archer-Daniels-Midland, Southern Copper, DSV, UniCredit
- Wednesday 27 July: Microsoft, Meta, Bristol-Myers Squibb, Qualcomm, AMD, Equinor, GSK, ServiceNow, Rio Tinto, Mondelez, Boeing, Airbus, 3M, Kering, Humana, Mercedes-Benz, Ford Motor, Kraft Heinz, Shopify, BASF, Danone, Fanucm Enphase Energy, Spotify, Garmin
- Thursday 28 July: Apple, Nestle, Pfizer, Merck, L’Oreal, Shell, Comcast, Intel, Linde, TotalEnergies, Sanofi, Honeywell, Anheuser-Busch InBev, Keyence, Volkswagen, Air Liquide, Schneider Electric, Banco Santander, Valero Energy, Stellantis, Neste, BAE Systems, Arcelor Mittal
- Friday 29 July: Amazon, Exxon Mobil, P&G, Mastercard, Chevron, AbbVie, AstraZeneca, Sony, Caterpillar, Colgate-Palmolive, BNP Paribas, Twilio, Pinterest
Biotechnology rebound rally at odds with financial conditions
Our NextGen Medicine basket which is reflecting a large part of the innovative biotechnology industry is up 25% from the recent lows rallying on a combination of easing inflation and interest rates expectations, and potentially short covering. This part of the equity market has the absolute highest duration (sensitivity to interest rates) as many of these companies are many years from break-even because many of them have high equity valuations and are most research-driven companies.
While biotechnology stocks have rebounded recently we remain cautious on the industry over the next six months as financial conditions continue to tighten (see chart) and the current levels and direction will continue to negatively impact financing for these companies which is a necessary feature of the industry to fund their drug research activities.