Earnings Watch and the great start for e-commerce Earnings Watch and the great start for e-commerce Earnings Watch and the great start for e-commerce

Earnings Watch and the great start for e-commerce

Equities 7 minutes to read
Peter Garnry

Chief Investment Strategist

Summary:  In today's equity update we go through next week's earnings releases which will include the first Q4 earnings starting with US banking earnings from Bank of America, JPMorgan Chase, and Citigroup. Analysts expect US banks to show another quarter of negative earnings growth before returning to earnings growth in Q1. We also dive into our theme basket performance in the first week of trading highlighting the e-commerce basket up 7% this week on three divers across falling container freight rates, robust consumer, and cost cutting driving the strong performance.


US banks saw earnings decline in Q4

The Q4 earnings season starts next week with major US banking earnings most notably from Bank of America, JPMorgan Chase, and Citigroup. Analysts remain muted on US banks with earnings expected to show another quarter of negative earnings growth compared to a year ago. The interest rate shock has been bad for banking earnings and activity levels across the investment banking division. As credit portfolios have an average maturity of around seven years banks will slowly begin rolling their assets into higher interest rate levels which will begin to accelerate their net revenue figures improving profitability over time. If the US economy just experience a shallow recession in real terms and strong nominal growth then US banks should be considered as a good tactical trade over the coming years.

For the overall Q4 earnings season we expect to see more industries experiencing margin compression than industries experiencing expanding margins. This will continue to be a headwind for earnings growth. Back in May last year we inserted analyst estimates of S&P 500 earnings for Q2- Q4 2022, and it is interesting to see how realized earnings have disappointed against those expectations. Analysts did not see the margin compression and judging from current estimates they have not materially revised down their expectations. That means that the Q4 earnings season and beyond could be paved with more disappointments.

The list below shows the most important earnings releases next week.

  • Tuesday: Albertsons
  • Thursday: Fast Retailing, Seven & I
  • Friday: DiDi Global, Aeon, Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, UnitedHealth, BlackRock, Delta Air Lines, First Republic

Could e-commerce stocks be the big positive surprise this year?

The best performing equity theme basket so far this year has been the Chinese consumer & technology basket because of the sentiment shift in China over the reopening policy, intentions to stimulate, bailout real estate developers, and finally the green light for Ant Group (Alibaba’s financial arm) to raise more share capital which could pave the way for an IPO later this year. While China is still a difficult trade the other strong performer in the first week of trading which is our e-commerce basket is more interesting.

The e-commerce basket (see constituents below) is up 7% this year which is in stark contrast to last year’s horrible performance. There are likely three drivers behind the positive performance and they can all continue throughout 2023 making potentially e-commerce the big positive surprise this year.

  1. Container freight rates are almost back to the lows levels from before the pandemic started taking costs and supply chain delivery times back to normal levels. This improves profitability and customer satisfaction.
  2. Resilient households in the US and Europe despite inflation and lower real incomes. Consumer companies surprised on revenue growth during the Q3 earnings season and those consumer companies that have reported for fiscal quarters ending in October and November have extended this trend.
  3. Cost cutting among e-commerce companies will also significantly improve profitability this year and beyond the wage costs online advertising prices have also come down reducing customer acquisition costs.

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.