The Q3 earnings season is little more than half-way done in the S&P 500 with as usual an aggregative positive surprise on both revenue and EPS. While aggregate revenue growth is staying in positive territory at 3.2%, the growth in EPS has turned negative 0.4% with energy, materials and information technology sectors leading the decline.
Tonight, Facebook and Apple will deliver quarterly earnings with analysts expecting Apple to deliver its third straight quarter of negative earnings growth and flat revenue growth. The quarter could be impacted negatively by the iPhone 11 release as buyers have postponed purchasing decisions in previous models. Judging from recent released smartphone numbers in China, the big negative surprise for Apple could be significant decline in revenue in Greater China as Chinese consumers prefer local smartphones over Apple.
Facebook is likely to deliver strong top and bottom-line growth with analysts looking for 26% revenue growth y/y and EPS growth of 29% y/y. The key focus will be on advertising revenue from Instagram Stories and updates on Instagram Checkout which is likely to become the future growth driver for Facebook. But all the good business results may easily be overshadowed by the negative headlines hitting Facebook over how easy it is to place ill-informed political ads on its platforms. The potential negative surprise for Facebook investors could come from higher guidance on operating expenses in 2020 in order to better monitor content placement by advertisers.