Stocks - Q2 Earnings Note

Q2 Earnings

Last Week

BlackRock – worse than expected but kept capital inflows positive despite political/macro uncertainty, extremely low yields and market volatility. All of that made clients to deposit money with banks/cash instruments and fixed income.

Brexit vote impact – institutional investors rebalancing/redesigning portfolios while retail is pulling money out. Worried about yields going lower but good Q2 earnings can justify highs of stock market. Prefers Deutsche Borse/LSE headquarters to be based in continental Europe over UK.

JPMorgan Chase Inc – reported better than expected across all apart from AUM decline, higher provisions and non-performing loans. Consumer, corporate, commercial and investment banking better (both fixed income/equity trading higher). Overall strong in retail, credit cards, loans (especially mortgages & commercial real estate) what is a good sign for US economy. Looking at increasing buyback program.

Brexit - negative impact on UK economy now and in the future, also effecting US & global economy but to small extent. Too early to speculate about reshuffling of UK’s operations and moving them to continental Europe.

Citigroup Inc – reported EPS higher/revenue lower than expected, other mixed. Able to generate earnings despite volatile/uncertain global environment, continues in focusing on core (almost all profits from core), reducing non-core, improving efficiency, return on assets. Globalization and its effects not fading away, will stay despite isolationist policies.

Brexit - was positioned for Brexit vote volatility, developing story but no financial crisis resulting from it. Sees lower rates longer.

Wells Fargo & Co – results mixed to worse than expected, Tier 1 common equity ratio under Basel III. Continues in improving efficiency, non-performing assets lower, and provisions higher, solid growth in loans, deposits and customers. Credit loan losses heavily due to energy and gas book.

Brexit – lower impact as more US focussed while US improving but impacting rates decisions.

Upcoming Week

Monday

Bank of America - estimated EPS 0.33, -24.9% Y/Y; Revenue 20 371 mln

The similar questions as for Citigroup, JPMorgan Chase and Wells Fargo would need BofA answer.

Charles Schwab Corp – estimated EPS 0.30, +24.8% Y/Y; Revenue 1 798 mln

Increased trading activity from Brexit, asset reallocation due to low yields and higher market volatility may boost its numbers. The retail and institutional figures will be reviewed by investors closely.

IBM – estimated EPS 2.89, -24.8% Y/Y; Revenue 20 084 mln

Yahoo! Inc – estimated EPS 0.09, -41.9% Y/Y; Revenue 840 mln

Tuesday

Philip Morris International Inc – estimated EPS 1.19, -1.8% Y/Y; Revenue 6 773 mln

Goldman Sachs Group Inc – estimated EPS 3.08, -31.6% Y/Y; Revenue 7 547 mln

Q2 results should are expected to be boosted by higher trading activity over Brexit period and as the legal costs from last year are off the table.

Interactive Brokers Group Inc – estimated EPS 0.35, -20.9% Y/Y; Revenue 377 mln

Similar comment as for Charles Schwab Corp…

TD Ameritrade Holding Corp – estimated EPS 0.38, +4.4% Y/Y; Revenue 829 mln

Similar comment as for Charles Schwab Corp…

Johnson & Johnson – estimated EPS 1.68, -1.8% Y/Y; Revenue 17 982 mln

Expecting better sales of drugs offsetting declines in other activities. Since the company generates substantial sales internationally, the rising USD may have negative effect.

Novartis AG (CH) – estimated EPS 1.19, -6.2% Y/Y; Revenue 12 160 mln

UnitedHealth Group – estimated EPS 1.89, +15% Y/Y; Revenue 45 038 mln

Lockheed Martin Corp – estimated EPS 2.93, -0.5% Y/Y; Revenue 12 582 mln

Microsoft Inc – estimated EPS 0.58, -6.1% Y/Y; Revenue 22 125 mln

Rising cloud business versus decline in PC sales…which one will win?

Wednesday

American Express Co – estimated EPS 1.96, +37.4% Y/Y; Revenue 8 481 mln

Morgan Stanley – estimated EPS 0.60, -23.8% Y/Y; Revenue 8 344 mln

Similar questions as for JPMorgan Chase, Goldman Sachs and other brokers…

Abbott Laboratories – estimated EPS 0.53, +2.7% Y/Y; Revenue 5 248 mln

eBay Inc – estimated EPS 0.42, -45.0% Y/Y; Revenue 2 172 mln

Intel Corp – estimated EPS 0.53, -8.7% Y/Y; Revenue 13 554 mln

QUALCOMM Inc – estimated EPS 0.97, -1.6% Y/Y; Revenue 5 588 mln

SAP SE (GE) – estimated EPS 0.87, +8.3% Y/Y; Revenue 5 223 mln

Thursday

Daimler AG (GE) – estimated EPS 2.01, -5.3% Y/Y; Revenue 38 910 mln

General Motors – estimated EPS 1.49, +15.4% Y/Y; Revenue 38 550 mln

Why are shares declining when company’s profits are on the rise? Market may be feeling that the cyclicals are losing steams what is also underlined by GM losing market share in its home market.

Johnson Controls Inc – estimated EPS 1.03, +13.3% Y/Y; Revenue 9 618 mln

Biogen Inc – estimated EPS 4.70, +11.3% Y/Y; Revenue 2 795 mln

At attractive levels with ROIC at 34% and revenue growing at 11% (last quarter) vs 17% past 5 years. The company has a strong business and is looking at positive momentum in its Alzheimer pipeline despite recent negative drug updates. Of note are also upcoming trials of Alzheimer drugs in H2, putting the company high risk/reward pool. From technical perspective, the stocks corrected 50% from peak in early 2015.

Roche Holding AG (CH) – estimated EPS 7.41, ---% Y/Y; Revenue 12 307 mln

Southwest Airlines Co – estimated EPS 1.21, +17.0% Y/Y; Revenue 5 403 mln

Union Pacific Corp – estimated EPS 1.16, -10.5% Y/Y; Revenue 4 789 mln

Starbucks Corp – estimated EPS 0.49, +16.0% Y/Y; Revenue 5 341 mln

Swatch Group AG (CH) – estimated EPS 7.58, -23.9% Y/Y; Revenue 3 906 mln

Unilever PLC (GB) – estimated EPS 0.92, +1.4% Y/Y; Revenue 26 594 mln

Schlumberger Ltd – estimated EPS 0.21,  -75.8% Y/Y; Revenue 7 136 mln

E*TRADE Financial Corp – estimated EPS 0.38, 36.7% Y/Y; Revenue 470 mln

Visa Inc – estimated EPS 0.67, -9.9% Y/Y; Revenue 3 639 mln

Not only profits will be reviewed but after Brexit situation in merger with its European activites will be too.

AT&T Inc – estimated EPS 0.72, +3.8% Y/Y; Revenue 40 626 mln

Friday

Whirlpool Corp – estimated EPS 3.37, +24.7% Y/Y; Revenue 5 132 mln

Valeant Corp – estimated EPS 1.57, -38.7% Y/Y; Revenue 2 478 mln

FDA in its preliminary review said that suicide risks from its psoriasis drug are hard to assess due to limited data.

General Electric Co – estimated EPS 0.46, +63.2% Y/Y; Revenue 31 354 mln

Honeywell International Inc – estimated EPS 1.64, +8.7% Y/Y; Revenue 10 128 mln

Syngenta AG (CH) – estimated EPS 13.83, -6.0% Y/Y; Revenue 7 133 mln

Good luck Champs!

Mr Hawk

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