Welcome to the biggest week of the fourth quarter earnings season. Over the next 5 days in excess of 300 companies will be reporting their holiday period results. The list of blockbuster companies releasing earnings goes on and on, but here are five of the more interesting names to keep an eye on this week.
Monday - Microsoft
Monday evening, Microsoft (NASDAQ:MSFT) releases its 4th quarter results. CEO Satya Nadella has been at the helm of the company for nearly 1 year now. Nadella is trying to shift Microsoft from its previous focus of productivity software licenses for the PC to a more cloud and SAAS-centric business model.
Contributing analysts on Estimize are looking for Microsoft to put up earnings of 72 cents per share while Wall Street is forecasting 70 cents. There’s been a downward trend at Microsoft over the past couple years as the PC business has been more or less stagnant. Microsoft has offset some of that weakness by finding growth in software and its hardware lineup including the tablet-PC hybrid, the Surface. Monday investors expect earnings to come in slightly ahead of the Street’s view, but still come in 6 cents lower per share than they did at this time last year.
Tuesday - Apple
In one of the most highly anticipated earnings reports of all time Apple Inc (NASDAQ:AAPL) will share its holiday results and initial earnings from the launch of the iPhone 6 on Tuesday. Expectations for this release have climbed steadily over the past quarter and the guidance the company released at the end of the third period now looks quite conservative relative to the Estimize consensus which includes over 225 estimates.
Most quarters for Apple there is a wide gap between forecasts from Estimize and Wall Street which reflects the fact that the market is pricing in a solid earnings beat. This period the difference between Wall Street’s forecast and the Estimize consensus is much smaller which means on Tuesday there may be upside opportunity here if Apple can top expectations.
On the other hand both the Street and Estimize are predicting that Apple lowballed its guidance here as company’s often do. If Apple reports at or near its guidance of $65 billion in sales, that would be considered a pretty large miss.
Tuesday - Yahoo
Tuesday evening also features a report from Yahoo (NASDAQ:YHOO). Yahoo put up an unsuspected beat of 19 cents per share on the bottom line against the Estimize consensus last quarter. This period Wall Street and Estimize are as far apart as they’ve ever been ahead of a Yahoo earnings report.
While Yahoo did put up a good earnings number last quarter in the wake of the Alibaba IPO, some investors are becoming impatient with CEO Marissa Mayer. To their frustration revenue growth at Yahoo has been close to nil in recent periods. On Tuesday Estimize analysts are looking for an in-line revenue print which would be roughly flat compared to last year’s 4th quarter results.
Another important factor for Yahoo is how Mayer plans on disposing of the company’s Alibaba stock. Strategic financial maneuvering by Mayer has the potential to save the company billions in future tax bills.
Tuesday - American Airlines
The price of gasoline fell quite low last quarter. Considering that gasoline is a major expense for the airlines and ticket prices haven’t seemed to get any cheaper, we could see an earnings beat from American Airlines Group (NASDAQ:AAL) on Tuesday. The Estimize consensus is now well ahead of Wall Street’s forecast. Contributors on Estimize expect revenue to come in 2.3% ahead of the Street’s view, but also predict an earnings beat of 8 cents per share (5.3%). When the earnings beat is larger than the revenue differential that normally implies higher margins would could be driven by lower costs, in this case the price of fuel.
As discussed in our 4th quarter earnings season overview podcast, it shouldn’t be too surprising that airline prices are so insensitive to changes in the cost of gasoline. In industries with high barriers to entry such as airfare or utilities, you often find cartel-like behavior which means companies are less likely to compete on price and pass savings to consumers. Airlines are under far less price control than a natural monopoly like a water company, which is why tickets remain expensive. This is expected to carry through to an earnings beat for American Airlines.
Wednesday - Alibaba
Alibaba's (NYSE:BABA) second report as a public company is set for Wednesday. The Chinese e-commerce giant is expected to post a quarter of tremendous growth. Contributors on Estimize are looking for 39% year over year EPS growth and a massive 48% improvement in yoy revenue.
Expectations on Estimize are moderately ahead of the Street’s on both the top and bottom line. Alibaba met its IPO with fanfare and this remains a promising company which is projected to continue skyrocketing fundamentally. The stock is priced richly with Alibaba’s market cap now over $250 billion but the market is looking for huge surging numbers which could validate the company’s valuation.