Earnings Watch: E-commerce earnings to show high growth in Q4 Earnings Watch: E-commerce earnings to show high growth in Q4 Earnings Watch: E-commerce earnings to show high growth in Q4

Earnings Watch: E-commerce earnings to show high growth in Q4

Peter Garnry

Chief Investment Strategist

Summary:  This week's earnings will be about e-commerce with Amazon and Alibaba, the two e-commerce giants from the US and China, reporting earnings with both expected to deliver revenue growth y/y above 30% as consumer demand for e-commerce continues to be strong and driven by lockdowns. Google will likely post strong growth due to underlying robust online advertising growth and healthy demand from businesses for its cloud services. UPS is interesting for many reasons such as the link to our reflation theme for 2021 which in the short-term is driven by global supply bottlenecks including logistics and longer term driven by excess demand due to stimulus.

The earnings season continues at full speed this week with another 175 companies out of the 2,500 companies we track during the earnings season reporting Q4 earnings. The list below shows the 30 most important earnings to watch this week with the most important day being tomorrow when the digital and e-commerce complex consisting of UPS, Amazon, Alphabet (Google), and Alibaba reports earnings.

Monday:Thermo Fisher Scientific

Tuesday:UPS, Exxon Mobil, AmazonAlphabet, Amgen, Alibaba, Pfizer

Wednesday: Ping An Insurance, Novo Nordisk, Siemens, Sony, GlaxoSmithKline, PayPal, Qualcomm, AbbVie

Thursday: Unilever, Royal Dutch Shell, Chugai Pharmaceutical, Philip Morris, T-Mobile US, Roche, Merck & Co, Bristol-Myers Squibb

Friday: NTT, Linde, Sanofi, Estee Lauder, Deutsche Telekom

The positive earnings surprise ratio has come down during last week’s earnings from 91% to 82% which is still very high. The aggregate growth rate on revenue and earnings from the 185 companies in the S&P 500 that have reported earnings are -0.2% and 3.1% y/y respectively highlighting that companies are driving earnings growth through cost efficiencies. As the chart below shows, quarterly earnings per share is down only 1% y/y in the MSCI World Index which means that corporate profitability has recovered. This recovering will likely lead to increased investments and risk taking by corporate throughout the year as more stimulus will create a strong growth outlook driven by strong demand from pent-up demand and excess savings in the private sector that will be unleashed when the Covid-19 vaccines are rolled out in every major economy.

Can strong earnings from e-commerce continue?

E-commerce stocks have done extremely well during the pandemic driven by necessity from consumers with limited buying options in the physical world. As we wrote back in November, the Q3 earnings from 48 of the largest e-commerce companies in the world showed 30% revenue growth y/y although return on invested capital as a group is negative (it is positive for the 10 largest e-commerce companies). Analysts are very positive and the overall index weight in global equity markets is around 4% so there is plenty of room for more growth. But e-commerce stocks come with an expensive valuation as growth is not cheap these days.

Amazon is expected to report 37% revenue growth and 61% growth in earnings fueled by strong consumer demand and strong growth in its cloud business AWS, but we expect growth rates to come down meaningfully from current levels as major economies lift restrictions with the rollout of vaccines. Alibaba is expected to deliver 33% revenue growth y/y and 48% earnings growth y/y demand driven by strong rebound in consumer spending as China has managed the pandemic without impacting the economy too much. The quick question is whether investors will care about Alibaba’s strong result as the recent government crackdown on monopolies including Alibaba has caused global investors to worry about how it will limit future growth and profitability of Alibaba.

We expect a strong quarter for Alphabet as its Google search engine division has likely had a good quarter given the good numbers Facebook reported on online advertising last week and the good numbers on cloud business from Microsoft. Earnings are expected to be up 21% y/y but the last six quarters have seen volatile earnings growth figures from Alphabet and investors are generally not as positive on Alphabet compared to five years ago. The company needs a new major product besides search and cloud to maintain the love of investors.

UPS is probably the most interesting earnings release because of its link to our reflation theme announced in early January and the soaring logistics costs that we have regularly mentioned in our daily Saxo Market Call podcast and in a research note back in November. In our research note from December on logistics companies Are logistic companies long-term winners? We show that a basket of global logistics companies have outperformed the global equity market over the past nine years. Demand is soaring for logistic services in a globalized world and increasing e-commerce is the main driver increasing profitability and large-scale global logistics operations come with a good moat to protect these companies against competition. UPS is expected to deliver 11% revenue growth y/y but no earnings growth which we find too pessimistic by analysts. UPS has recently sold its freight business to TFI International in a streamlining of the business under the slogan of “better not bigger” with UPS focusing more on creating a more efficient logistics network around e-commerce.

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

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/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)

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

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.