Written by Norman Isaac Mwambazi

Apple, Tesla, and Facebook set to report record sales in busiest week of earnings

This week, we are going to see numerous companies report their Q4 FY2020 earnings that round up a year that …

This week, we are going to see numerous companies report their Q4 FY2020 earnings that round up a year that has been filled with a lot uncertainties caused by the COVID-19 pandemic, so much so that U.S. companies have barely managed to report positive earnings growth so far in this quarterly results season.

According to FactSet, more than a quarter (39% to be exact) of the companies that make up the benchmark S&P 500 is set to report results this week and given that the S&P 500 is weighted by market capitalization, earnings results from these companies will have an outsize impact on the profit trajectory for the index.

As has been the norm for the previous three quarters, earnings are expected to decline for the fourth consecutive quarter once all Q4 FY2020 results are reported. However, companies that have so far reported their fourth-quarter earnings thus have been exceeding expectations in aggregate.

A week ago, FactSet was predicting earnings to decline by 6.3%, but that figure has now improved to 5% for the benchmark S&P 500 index. If profit growth for the S&P 500 ultimately ends up positive, it would mark an end to the current earnings recession, which takes place when corporate profits drop for two or more consecutive quarters.

Big tech companies releasing earning reports this week

Apple Inc.

Apple Inc., which is the largest company in the world by market capitalisation, is scheduled to report Q4 FY2020 earnings on Wednesday, January 27, 2021. The holiday quarter is always vital for Apple, which releases new iPhones in the fall.

Due to the COVID-19 pandemic, Apple launched its new products later than usual last year, which pushed sales into the period. The company is widely expected to post its largest quarterly revenue total ever, exceeding $100 billion in revenue for the first time.

As other companies struggled during the early months of the pandemic, Apple was a different case because it continued to see benefits from remote-work and remote-schooling trends, which have driven strong iPad and Mac sales throughout the COVID-19 crisis.

Facebook Inc.

Just like Apple, this social media giant is also expected to post a record quarter due to the strong digital advertising trends during the holiday period.

However, investors are equally interested to know how the company will address questions about user engagement and a decision to ban former U.S. President Donald Trump from the platform indefinitely for the posts he shared on the platform early this year which are believed to have incited the violent riot at the U.S. Capitol.

Bernstein analyst Mark Shmulik points to “continued usage fatigue” across social media as well as a “conversation skewed towards unmonetizable political events.”

Tesla Inc.

On December 21, 2020, automaker Tesla Inc. was included on the benchmark S&P 500 index after posting profits in four consecutive quarters. Tesla went on to sell more than $5 billion worth of shares, with each share going for $638.77 at that time. Teslas stock currently goes for $ per share.

With that said, the automaker is set to report their earnings for the first time since their inclusion on S&P 500, on Wednesday, January 27, 2021. Tesla already disclosed delivery numbers for the full year that came in ahead of analyst expectations, and all eyes will be on the company’s outlook for 2021.

Joseph Spak, an analyst at RBC Capital Markets expects Tesla to deliver between 825,000 and 875,000 units for the full year, even though Chief Executive Officer (CEO) Elon Musk said on Tesla’s last earnings call that an analyst was “not far off” for expecting 840,000 to a million deliveries during 2021.

Summary

Overall, 117 members of the S&P 500 and 13 members of the Dow Jones Industrial Average components are expected to report their earnings this week.

Airline stocks

Boeing

For almost two years, Boeing has had one wing of its production line paralysed when the company’s 737-MAX jets were grounded to rectify mistakes that had caused several crashes. The good news is that the jets have been recertified for flights but the company’s stock has been quite stagnant lately.

Though the company began deliveries of these aircraft, “the pace of delivering all 450 parked 737-MAX will be dictated by airline customers ability to absorb aircraft as well as air traffic demand,” according to Benchmark Company analyst Josh Sullivan.

Boeing will report its earnings on Wednesday morning, followed by American Airlines Group Inc. and Southwest Airlines Co. on Thursday morning.

Telecoms stock

Verizon Communications Inc. leads off a busy week of telecommunications earnings Tuesday morning, followed by AT&T Inc. on Wednesday morning and Comcast Corporation on Thursday morning.

iPhone 12 promotions and the ability to deploy the latest 5G network will greatly impact the earnings of the telecommunications stock, and investors are keenly looking out for those revenue earnings reports.

Though the bids haven’t been made public yet, the auction drove record spending and AT&T and Verizon are both expected to have paid up handsomely to assert their standing. The question for investors is what impact these bids will have on the companies’ financial positioning.

AT&T and Comcast have more media exposure than Verizon, and those two companies have been trying to contend with the new realities brought on by the pandemic. Both companies have made moves to emphasize streaming more with their film slates given theatre closures and the financial implications of these moves will be worth watching.

e-Payment stocks

The evolving situation with the pandemic is reflected perhaps no more clearly, than in the results of Visa Inc., MasterCard Inc., and American Express Co., which have a pulse on the global consumer spending landscape. The companies should provide insight on a travel recovery toward the end of the year, as well as the impact of recent lockdowns.

Susquehanna analyst James Friedman wrote recently that his MasterCard revenue projection of $3.97 billion is slightly below the consensus view, though he also asked, “does anyone really care about Q4 2020?”

Friedman is upbeat about mobile-payments and online-shopping dynamics that suggest “positive trends ahead” for MasterCard, which reports Thursday morning. Visa follows that afternoon, while American Express kicks off the week with its Tuesday morning report.

Chipmaker stocks

Advanced Micro Devices Inc. (AMD) will report earnings on Tuesday evening, January 26, 2021.

Texas Instruments Inc. will report on Tuesday afternoon; Xilinx Inc., which is in line to be acquired by AMD, on Wednesday afternoon, same as Lam Research Corporation; and Western Digital Corporation will wind up chip-maker companies on Thursday afternoon.

Other companies that are scheduled to report their earnings are Caterpillar, Microsoft, Johnson & Johnson, 3M Co., and Chevron Co. among others.