Outside of US financials, Tesco on Wednesday is an interesting earnings release to watch because of the galloping food prices also seen today with UN World Food Price Index hitting the highest level ever rising 33% y/y. Fast Retailing, the parent company behind Uniqlo, is reporting on Thursday and will give good insights into consumer demand in Japan. Ericsson also reports on Thursday and is expected to see revenue growth accelerate to 7% y/y as investments in telecommunication equipment are going up.
The most important earnings releases next week are:
- Monday: Yunnan Energy New Material, Zijin Mining Group
- Wednesday: Tesco, JPMorgan Chase & Co, BlackRock, Fastenal
- Thursday: China Northern Rare Earth Group, Fast Retailing, Ericsson, UnitedHealth, Wells Fargo, Morgan Stanley, Goldman Sachs, Citigroup, US Bancorp, PNC Financial Services, Coinbase, State Street
- Friday: Hangzhou Hikvision Digital
Technology earnings during inflation is a key outstanding question
Investors are well aware of inflation and to what extent it can negatively impact equity valuations and equity returns, especially in real terms, and many are drawing conclusions from the 1970s. The big difference between the 1970s and today is that back then the profit engines of S&P 500 were companies that generated those profits with significant input costs from commodities. Today, the profit engines of S&P 500 are technology companies which generate profits with very little input from commodities. In theory, technology companies should be able to be able to grow earnings, so the main question is the impact on equity valuations of technology companies from higher inflation. This is a topic will discuss more as the Q1 earnings season progresses as the market’s reactions to technology earnings will give us clues about these dynamics.