Stocks - Q2 Earnings note – Week 4

Q2 Earnings – Week 4

By the end of the last week 314 out of S&P 500 companies reported what gives us a pretty decent overview of how the companies and economy is doing. The overall expectations declined as more companies from real economy and consumer staples reported. A sort of mirror view of the US economy in the form of Q2 GDP miss just underscored the real situation on Friday. Actually, the worse Advance Q2 GDP figure was a bit of surprise as the US data of late would point to +2.6% growth while the actual number was +1.2% only. At the same time the final Q1 was revised down to +0.8% from +1.1%. In other words the US GDP rose less than 2% over the past three quarters. The revenue of US companies is slightly higher, EPS stay negative while their EU peers reported even gloomier picture with both revenue and EPS declines.

Last Week

Caterpillar Inc – its results pointed to lower global demand for its products, thus indicating that world economy has still some bumps ahead.

As mentioned last week, consumer names face some headwinds and despite the better headline figures from McDonald’s, the closer look revealed some issues.

Ford Motor Co – as the market was checking on North American sales that were strong in Q1 and good results from Europe, we learnt from the CEO that the US market is still under pressure and company may have difficulties to keep up with its plans and forward guidance.

The tech giants Alphabet Inc, Amazon.com Inc and Facebook Inc briefed the market on their business model Brexit resistance, cloud business and web services. All of them beat the market expectations on internet services.

Apple Inc – the lower iPhone sales translated to lower revenue already 2^nd consecutive quarter but apparently, the company is gaining optimism on new smartphone cycle. Here, we should stay very cautious as Samsung and especially Chinese manufactures can offer the same if not better devices at much lower price.

Chevron Corp & Exxon Mobil Corp – the market was not expecting any deviation from industry trend on weaker commodity prices and both companies experienced the 20% decline in revenue, while Exxon also suffered the 60% fall in profits on y/y basis.

Enbridge (pipelines) and Imperial Oil (integrated refiner and oil producer) were hurt by wildfires what was seen in the earnings reports as well.

This Week

Well, after last week’s avalanche of earnings reports from big names we keep going with smaller companies despite more summer kind of mood everywhere.

The biotech or health care names will be watched from their valuation and regulatory perspective, especially in US in the light of upcoming US presidential elections (Obamacare).

EU banks – not only Italian banks but the whole Eurozone banking system that is still under stress will catch some attention of market even after Friday’s stress results. There are also signs of some issues with USD funding of EU banking system appearing.

One would think that ECB is helping banks by providing them liquidity and buying bonds but on the other hand all the liquidity provisions are being sterilized via other channels and keeping the interest rates extremely low is not helping the banks at all as it bites into their profitability.

Let’s see how it goes….check the below:

Monday

Heineken Holding NV (NL) – estimated EPS 3.34, +15.0% Y/Y; Revenue 21 225 mln

Loews Corp – estimated EPS 0.57, +26.9% Y/Y; Revenue … mln

Veolia Environment SA (F) – estimated EPS 0.51, +9.9% Y/Y; Revenue 11 952 mln

Tuesday

BMW AG (DE) – estimated EPS 2.67, +0.6% Y/Y; Revenue 24 552 mln

In case of BMW the German precision and technology combined with Italian kind of emotions is still perfectly working. But really is? The emerging markets (especially China) are still strong as Daimler-Chrysler showed.

Ferrari NV (IT) – estimated EPS 0.44, …% Y/Y; Revenue 773 mln

Tuesday

CVS Health Corp – estimated EPS 1.30, +6.8% Y/Y; Revenue 44 281 mln

METRO AG (DE) – estimated EPS 0.19, +272.0% Y/Y; Revenue 13 816 mln

Procter & Gamble Co – estimated EPS 0.75, -25.5% Y/Y; Revenue 15 832 mln

The market will be interested in seeing how the company copes with its product portfolio vs cost cutting.

Saputo Inc (CA) – estimated EPS 0.40, +18.5% Y/Y; Revenue 2 662 mln

American International Group Inc – estimated EPS 0.92, -33.7% Y/Y; Revenue 13 217 mln

The recent market volatility and lower investments in hedge funds will definitely leave a print on earnings.

Intesa Sanpaolo SpA (IT) – estimated EPS 0.04, -39.0% Y/Y; Revenue 4 034 mln

The results may brief us on the situation in Italian banking sector coping with excessive amount of troubled loans. For those looking at having an exposure to European banks that are trading at lowest levels in more than two decades, of course after considering all the risks even after stress test results, the better option in Italy may be Unicredit.

Pfizer Inc – estimated EPS 0.62, +11.1% Y/Y; Revenue 13 005 mln

The investors will check the comments on unfinished merger with Allergan Inc and the cash flow from off patent drugs.

Deutsche Lufthansa AG (DE) – estimated EPS 0.69, -42.2% Y/Y; Revenue 8 167 mln

Mitsubishi Corp (JP) – estimated EPS 40.46, -12.6% Y/Y; Revenue 1 734 520 mln

Wednesday

Continental AG (DE) – estimated EPS 4.10, -2.7% Y/Y; Revenue 10 534 mln

Tesla Motors Inc – estimated EPS -0.56, -16.7% Y/Y; Revenue 1 647 mln

For more on Tesla and SolarCity you can check our Trade idea: http://landoftrading.blogspot.sk/2016/07/trade-idea-tesla-short.html

Twenty-First Century Fox Inc – estimated EPS 0.37, -5.4% Y/Y; Revenue 6 683 mln

Tesoro Corp – estimated EPS 1.76, -61.8% Y/Y; Revenue 6 146 mln

AXA SA (FR) – estimated EPS 1.08, -10.4% Y/Y; Revenue … mln

HSBC Holdings PLC (GB) – estimated EPS 0.13, -45.7% Y/Y; Revenue 13 602 mln

ING Groep NV (NL) – estimated EPS 0.28, -10.8% Y/Y; Revenue 4 214 mln

Komercni Banka a.s. (CZ) – estimated EPS 14.16, -15.5% Y/Y; Revenue 8 076 mln

May be a nice exposure to CEE region via bank name. Komerni Banka is a traditional retail bank from Czech Republic offering complete services to retail or corporate clients.

MetLife Inc – estimated EPS 1.35, -13.3% Y/Y; Revenue 17 266 mln

Societe Generale SA (FR) – estimated EPS 1.18, -27.9% Y/Y; Revenue 6 777 mln

Standard Chartered PLC (GB) – estimated EPS 0.29, -41.0% Y/Y; Revenue 6 697 mln

Unicredit SpA (IT) – estimated EPS 0.13, +9.6% Y/Y; Revenue 5 714 mln

Check the comment at Intesa Sanpaolo SpA above (Tuesday).

Humana Inc – estimated EPS 2.22, +33.2% Y/Y; Revenue 13 594 mln

First Solar Inc – estimated EPS 0.54, +5.1% Y/Y; Revenue 869 mln

Check the comment for more at Tesla above (Wednesday)

Rio Tinto PLC (GB) – estimated EPS 0.80, -49.6% Y/Y; Revenue 16 520 mln

Thursday

Toyota Motor Corp (JP) – estimated EPS 145.46, -29.2% Y/Y; Revenue 6 583 510 mln

Kraft Heinz Co – estimated EPS 0.72, +17.3% Y/Y; Revenue 6 802 mln

Manulife Financial Corp (CA) – estimated EPS 0.46, +4.5% Y/Y; Revenue 12 158 mln

Merck KGaA (DE) – estimated EPS 1.52, +17.2% Y/Y; Revenue 3 817 mln

LinkedIn Corp – estimated EPS 0.78, +41.82% Y/Y; Revenue 898 mln

The acquisition from Microsoft and especially rising demand for hiring services will be of interest.

Nokia OYJ (FI) – estimated EPS 0.04, -64.3% Y/Y; Revenue 5 872 mln

The company once the leader of the segment now benefits from extensive portfolio of patents that brings a steady cash flow and its corporate business.

BCE Inc (CA) – estimated EPS 0.91, +4.7% Y/Y; Revenue 5 383 mln

Bell Canada is the largest telecommunication company in Canada that will provide us with an insight on how this sector performs in maple leaf country.

Duke Energy Corp – estimated EPS 1.01, +6.2% Y/Y; Revenue 5 682 mln

Friday

Magna International Inc (CA) – estimated EPS 1.34, +4.1% Y/Y; Revenue 9 217 mln

Allianz SE (DE) – estimated EPS 3.60, -20.8% Y/Y; Revenue 28 218 mln

Power Corp of Canada (CA) – estimated EPS 0.74, -19.2% Y/Y; Revenue … mln

For those who search for a Berkshire Hathaway kind of diversified across many sectors company focussing on finding the value deals, this Canadian peer to Warren Buffet’s imperium may be a good choice.

Royal Bank of Scotland Group PLC (GB) – estimated EPS 0.05, -62.2% Y/Y; Revenue 3 055 mln

Novo Nordisk A/S (DK) – estimated EPS 3.88, +20.0% Y/Y; Revenue 28 360 mln

Bombardier Inc (CA) – estimated EPS -0.03, -153.3% Y/Y; Revenue 4 183 mln

A short of cash company that had troubles to finalize their CSeries jets will be under the scrutiny of the market especially, after receiving a hand from Province of Quebec. The green light for CS 300 jets was awarded, so let’s see how they can fly…

LafargeHolcim Ltd (CH) – estimated EPS 0.82, -46.2% Y/Y; Revenue 7 622 mln

The results of the merger company having a significant market share in producing construction materials can give us some hints on how the construction business in Europe looks like.

Good luck Champs!

Mr Hawk

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