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Despite some headline misses in big tech, markets ended last week with a significant rally and the Dow realized its fourth consecutive winning week.
Heading into Q3 earnings season, analysts significantly lowered the bar to adjust for headwinds, from inflation to the strong dollar. And a majority of S&P 500 companies have surpassed those EPS estimates (71%), although less than the five-year average. According to FactSet, the market is rewarding positive earnings surprises more than they are punishing negative earnings surprises.
While the mega-cap misses from Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META) and Amazon (NASDAQ:AMZN) have been front-page news as well as their plunging stock prices, many other well-known names were able to miss expectations and bounce back. Take two industrials for example, 3M (NYSE:MMM) and Whirlpool (NYSE:WHR). 3M missed revenue estimates when it reported before the open on Oct. 25, but after a brief pre-market dip closed the week up 7%. On Oct. 20, Whirlpool missed significantly on the top and bottom line, by 7% and 16%, respectively. It ended last week up 5% from that initial post-earnings collapse.
Overall, S&P 500 EPS growth for Q3 continued to increase to 2.2%, this is still the lowest rate since Q3 2020, but an improvement over last week’s 1.5% as positive reports outweighed the negative. (Data from FactSet)
What Will Second Week Of Peak Earnings Season Bring?
This week we get Q3 results from 167 S&P 500 companies in a smattering of sectors. One area that will be in focus is travel. We’ve already heard from the airlines, and despite inflation and recession fears, international carriers like American Airlines (NASDAQ:AAL) and United Airlines (NASDAQ:UAL) said they anticipated no slowdown in the fall and holiday travel season. This bodes well for names like Booking.com (NASDAQ:BKNG), Norwegian Cruise Line (NYSE:NCLH), Airbnb (NASDAQ:ABNB), Royal Caribbean (NYSE:RCL) and Marriott International (NASDAQ:MAR), which all report this week.
Source: Wall Street Horizon
Potential Surprises
This week we get results from a number of large companies on major indexes that have pushed their Q3 earnings dates past their historical norms. Five companies within the S&P 500 confirmed outlier earnings dates for this week, three of which are later than usual and, therefore, have negative DateBreaks Factors*. Those three names are Advanced Micro Devices (NASDAQ:AMD), AvalonBay Communities (NYSE:AVB) and Celanese Corporation (NYSE:CE). Sysco Corporation (NYSE:SYY) and CenterPoint Energy (NYSE:CNP) confirmed earlier-than-usual dates, as well as other notable names like Toyota Motor (NYSE:TM) and Hostess Brands (NASDAQ:TWNK).
Allegiant Travel Company
Allegiant Travel Company (NASDAQ:ALGT) typically reports Q3 results during the fourth week of October, and it has done so for the last six years. This is the first year since we began tracking Allegiant in 2013 that it will report Q3 results in November, potentially signalling bad news will be delivered on the upcoming call.
Despite generally upbeat results from the airlines this season due to a rebound in travel demand, Allegiant’s later-than-usual earnings date suggests it might be preparing to share bad news with investors when it reports for Q3. Peers in the space, like United Airlines, American Airlines (NASDAQ:AAL), Alaska Airlines and Southwest Airlines (NYSE:LUV) all beat expectations on the top and bottom line, while Delta Air Lines (NYSE:DAL) and JetBlue Airways (NASDAQ:JBLU) missed profit estimates, but beat sales expectations.
Earlier this month Allegiant updated its projections for Q3 based on the impact of Hurricane Ian, reducing revenue guidance by 1.5 percentage points. Total system capacity was also guided downwards by 1.5 percentage points, and scheduled service capacity was revised down by 1 percentage point.
AvalonBay Communities Inc.
Similar to Allegiant, AvalonBay Communities (NYSE:AVB) typically reports Q3 results during the fourth week of October, and it has done so for the last nine years. This is the first year since we began tracking AVB in 2013 that it will report Q3 results in November. This is also the first time it is reporting on a Thursday, historically favoring a Monday or Wednesday to report.
Apartment real estate investment trusts (REITs) like AvalonBay are still recovering from COVID fallout that included higher delinquency rates and no-eviction policies, which increased non-collectible accounts. On its Q2 call AVB said it may still be another year until some of its markets catch up. Rising construction costs are also a headwind for the REIT, however, with home prices being historically very high, purchasing a home is still out of reach for many, which benefits rental buildings and makes it easier for them to raise rents.
Q3 2022 Earnings Wave: Peak Season Continues
This week is the second peak week of Q3 earnings season with 2,454 companies anticipated to report (out of our universe of 10,000 global names). Nov. 3 is predicted to be the most active day, with 935 companies scheduled to release results. Thus far, 71% of companies have either confirmed their earnings date or reported already.
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