Earnings Watch: Uber will grab attention, but Siemens and Toyota are more important

Equities 3 minutes to read

Peter Garnry

Head of Equity Strategy

Summary:  The US earnings season is nearing its end as next week will see more European and Japanese companies reporting earnings. While Uber will most likely grab the headlines Siemens and Toyota are more important for the equity investor due to their global footprint and exposure to consumer and industrial demand.


The earnings season is still in full swing with 70% of S&P 500 companies having reported already and so far, headlines are mostly “better than expected” which is a bit empty given how low estimates have come down over the past year. Growth in S&P 500 revenue and earnings is around 4% and 0% y/y respectively. EBITDA growth y/y is just around 1% for MSCI World while -7% for MSCI Emerging Markets reflecting the global slowdown.

Next week more European and Japanese companies will take over releasing earnings but given their important the US earnings will get the most headlines. In particularly we expect Uber’s earnings release on Monday to be key focus as one of the most anticipated IPOs in recent years has disappointed with shares closing yesterday at 31.50 compared to the IPO price of 45.

Analysts are expecting revenue growth of 15% down from 37% a year ago highlighting the issue for investors; growth rates are coming down much faster than anticipated. In addition, cash flows from operations worsened in Q2 pushing the negative free cash flow to $1.1bn in just a single quarter. In our view, Uber only has a few couple of quarters to show a clearer path to profitability in order to avoid investors beginning to a more touch assessment of valuation multiples. The key issue for Uber is drivers costs which could jump by 20% if drivers are forced to be treated like employees as a recent bill in California is suggesting. European regulators also want Uber to be treated as a regular transportation company and it might give access to growth, but it comes with higher complexity and costs. If Uber is forced to treat drivers as employees can they then retain those drivers? And will the costs reach levels where Uber is not significantly cost competitive with normal taxi companies? Many unknown answers for investors.

Source: Saxo Bank

While Uber will surely get the media attention the most important earnings next week are from Siemens and Toyota which have much larger global footprint directly linked to consumer and industrial demand. Siemens is expected to deliver only 1.5% revenue growth and the key focus for investors is cash flow generation which has been a disaster the last three quarters.

Toyota is expected to deliver 2% revenue growth and showing margin pressure as global car demand is still weak as consumers are holding back. With 40% of its business in Japan and Asia the earnings release is a good indicator on consumer confidence in Asia.

The table below shows the 30 largest companies on market value reporting earnings next week.

Source: Bloomberg and Saxo Bank
Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

Saxo Capital Markets HK Limited
Rooms 2001-02, 20/F York House
The Landmark
15 Queen's Road Central
Hong Kong

Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract) and Type 3 Regulated Activity (Leveraged foreign exchange trading) licenses (CE No. AVD061). Registered address: Rooms 2001-02, 20/F York House, The Landmark, 15 Queen's Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

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

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.