Head of Equity Strategy
Next week, 283 companies out of the around 2,000 firms we track during earnings season are reporting their latest results. The US earnings season is already 80% done, so there will be no more fuel coming from source. Revenue is up 10% year-on-year and EBITDA is up 10.4% y/y, showing robust performance and no margin pressure.
US stocks have consequently outperformed European, Japanese, and Chinese equities over the summer months, rising close to their all-time high set on January 26.
Watch China and keep Italy on your radar
With the earnings season almost over, investors will concentrate on the trade war that could escalate over the coming weeks and then the recent depressed sentiment out of China that is seeing massive weakness in CNY and its equity market. Given China’s global importance, it’s staggering to watch the complacency in financial markets.
(Find more of our thoughts on China in our recent Equity Monthly update.)
As of the last couple of days, government spreads have widened on BTPs (Italian government bonds) in a sign that investors are nervous over comments coming out of Rome regarding to its debt and fiscal situation. The new government says it will put Italian interests first, which is an indirect way of saying that Italy will challenge the European Union, most likely on fiscal and debt constraints.
The message from the bond market is clear: go down this route and we will lose confidence in Italy.
The most interesting earnings next week
Walt Disney reports FY18 Q3 earnings on Tuesday (after-market). Analysts expect EPS to grow by 27% y/y helped by the US tax reform; revenue is expected to grow 8% y/y driven by a probable strong quarter for the films segment.
Novo Nordisk reports Q2 earnings on Wednesday (before-market) with analysts expecting negative revenue growth as the pricing environment remains challenging on insulin in North America.
Adidas reports Q2 on Thursday (before-market). Investors are prepared to see slower growth than the 2015-2017 period so the focus will be on outlook and particularly margin improvements. Adidas has a 12-month trailing EBITDA margin of 12.6% compared to Nike’s 14.3%, so margin expansion will continue to be the dominating theme and potential driver of performance for Adidas.
Below is a table of the 30 largest companies reporting earnings next week, including earnings and revenue estimates.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
