Chief Investment Strategist
With AI being the new hyped trend in equity markets there will be a lot of focus on Snowflake and Salesforce this week as both companies are part of the booming US technology sector. Both companies report earnings after the US market close on Wednesday.
Analysts expect Salesforce to report FY24 Q4 (ending 31 January) revenue of $9.2bn up 10% YoY and EBITDA of $3.8bn up from $2.5bn a year ago as the business software maker remains focused on improving profitability. Analysts expect Salesforce to guide FY25 11% YoY revenue growth as rebound in cloud application software is still uncertain despite pickup in AI infrastructure spending.
Snowflake has a stronger link to the AI trend and analysts expect revenue growth of 29% YoY down from 54% YoY a year ago. There might be an upside surprise for Snowflake related to generative AI as companies are using their own data on top of foundational LLMs. The recent run-up in Snowflake’s share price has pushed it to very close to the consensus price target at $229.
Just as cocoa’s ascent is the only thing that can keep up with Nvidia’s share price, so is our defence basket the only theme that has done better this year than semiconductors. Our defence basket is up 11.2% as of Friday’s closing prices. As our defence basket table shows, it is the European defence stocks that are driving the return of this theme. One of those stocks is Italian based Leonardo which reports earnings on Thursday. Analysts expect 5% YoY revenue growth and EBITDA at $755mn up from $590mn a year ago.
Compared to expectations for other European defence companies such as German based Rheinmetall, the revenue growth expectations are quite low for Leonardo. Revenue growth is estimated at 6% YoY in 2024, 5% YoY in 2025, and 4% YoY in 2026. Far from the +17% growth rates expected for Rheinmetall. Analysts covering Leonardo have difficulties keeping up with the share price as the consensus price target sits 9% below the current price. So either analysts are too conservative or the market has entered a stage where it blindly buys everything with European defence label.
With a little more than 90% of the companies in the S&P 500 Index having reported earnings the earnings season is coming to its end this week. US technology companies have seen its operating earnings soar to a new record and the AI hype was captivated investors with especially Nvidia’s big earnings surprise last week fuelling a rally in AI related stocks.
While technology stocks have been a winner, the sector with the biggest 2-day price change over the earnings release has been materials. Within the materials sector Corteva was the big winner with a 18% price move over two days. Corteva is a seeds and crop protection leader and its FY24 operating EBITDA guidance of $3.5-3.7bn was well above analyst estimates at $3.56bn as farming demand remains robust.
As our US earnings scorecard shows, recent earnings releases from Nvidia and Berkshire Hathaway were significant surprises on revenue. On earnings the biggest surprises among the largest companies in the US are Nvidia, Eli Lilly, GE, Caterpillar, ConocoPhillips, and Freeport-McMoRan.
The list below shows all the most important earnings releases this week.
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Head of Fixed Income Strategy
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