Earnings Watch: All eyes on Netflix as Disney makes its entrance

Earnings Watch: All eyes on Netflix as Disney makes its entrance

Equities 5 minutes to read
Peter Garnry

Chief Investment Strategist

Summary:  The financial services sector is dominating the start of the new earnings season, but an allied sector – insurance – may provide some surprises. Elsewhere, the battle for content streaming supremacy has kicked off.


The Q1 US earnings season started on Friday with good results from JPMorgan beating on both the top and bottom line while Wells Fargo disappointed on its interest income outlook. Financials will dominate this week with earnings today from Goldman Sachs, Citigroup and Charles Schwab. Tomorrow, Bank of America and BlackRock will follow and then midweek Morgan Stanley and US Bancorp, and ending the financials’ super week on Thursday we’ll have American Express.

Our takeaway from Friday’s financials earnings is that these companies will pose a downside risk to overall earnings and thus if technology companies can deliver then the earnings season will support the current momentum in US equities. In total 130 companies will report earnings this week out of the 2,000 companies we track during the earnings season.

Insurance surprise or not?

Last week the Danish insurance giant Tryg reported its Q1 earnings and the result was very positive against expectations as investment income was very strong. In our view insurance companies will be lifted during the earnings season and the S&P 500 Insurance Index is only 0.2% from taking out its peak from September.

Even more interestingly, insurance companies have shown in the current business cycle phase to have some defensive characteristics and are thus an industry investors should overweight during an economic slowdown. In our recent Equity Monthly publication we focus on the fact that Asia seems to be turning a corner, led by South Korea. If the global business cycle is indeed moving into the recovery phase over the next couple of months then insurance should no longer be overweight and investors should instead overweight banks.

Earnings to watch

As usual we highlight the three most important earnings in the upcoming week. In today’s Earnings Watch we are zooming in on Netflix, TSMC and Schlumberger that each will have a major impact on the technology and energy sector respectively.

Netflix

Last Friday the big moment finally happened with Disney officially entering the on-demand video streaming business with a subscription price below Netflix’s standard plan. The market was very positive on the announcement of Disney+ while lowering the market value of Netflix. However, Netflix is still the strongest player with around 140 nillion subscribers whereas Disney expects to have around 60-90m subscribers in five years.

The main driver for Netflix’s share price is still international subscriber growth and improving operating margins. Netflix is expected to report $4.5 bllionn in revenue up 22% y/y and EBITDA $522m up from $466m a year ago. Overall, our current view is that there is room for video streaming services so we don’t see any significant downside risk to Netflix from Disney’s entry – at least in the short term. Netflix reports Q1 earnings on Tuesday after the market close.

TSMC

Q4 was a bloodbath for smartphone makers and Apple’s profit warning on iPhone sales in the beginning of the year was seen as the culminating moment of smartphone saturation. TSMC, being a big supplier for smartphone makers, has also felt the slowdown and revenue in Q1 is expected to decline 11%. y/y. Last week the company reported March revenue figures that were down 23% y/y missing estimates. However, the market was indifferent as expectations have risen that the outlook will dramatically improve during the year as China seems to have turned a corner. TSMC reports Q1 on Thursday (no time reported).

Schlumberger

The energy sector was in disarray in Q4 but has recovered in Q1 as the demand picture has improved. Oil services companies such as Schlumberger have not rebounded to the same degree as the oil price. This leaves room for an upside surprise to the company’s earnings and more importantly its outlook for oil services. The market is expecting Africa, Asia and Latin America to be the near-term growth drivers for Schlumberger as the North America continent continues to be more about capital spending discipline and less about investments. Schlumberger reports Q1 earnings on Thursday at 11:00 GMT.

The table below shows the most important earnings releases this week:

Source: Bloomberg, Saxo Bank

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.