Research Blog

The Short List - Earnings season at the halfway mark - Wall Street gears up for another busy week

Key Takeaways: 

  • Big tech continued to support Q4 2021 earnings growth last week with better-than-expected results, now reaching 29.2%

  • Revenue results are also strong, showing that US companies are flush with cash, as many increase dividend and capex spending as a result

  • Cons include decelerating growth expected in 2022

  • Potential negative surprises this week: Amgen (AMGN), Pfizer (PFE) and Harley-Davidson (HOG)

  • Peak earnings season continues this week with 1,431 companies expected to report, all eyes will be on PTON, UBER, DIS and more

How Are Things Looking at the Halfway Mark?

Last week showed what a good earnings season is capable of, lifting markets that had otherwise been beaten up. Tech continued to do the heavy lifting, with Alphabet and Amazon wowing investors and giving all major indices the boost they needed to finish the week strong. Market participants hope next week will bring more results like those from GOOGL and AMZN, and less negative surprises like the doozy we saw from Meta Platforms (FB) which lost $237B in market cap the day after its disappointing report, the biggest 1 day drop for a US stock ever. 

Here’s a quick recap on where we stand at the halfway point of Q4 2021 earnings season:

The Good: 

  1. This is another robust quarter for S&P 500 top and bottom-line growth. A strong showing from tech companies last week lifted YoY profit growth nearly 5 percentage points, to 29.2%, according to FactSet. This is the fourth consecutive quarter of earnings growth over 25%. 

  2. Similarly, revenue growth has also improved to 15%. US corporations are flush with cash, and this is a good thing for investors. Approximately 31% of companies (in our universe of 9,500 publicly traded names) have announced dividend increases in Q1 2022, the highest amount since Q1 2021. 

The Not So Good: 

  1. Expectations for future quarters are decreasing. Currently FactSet expects Q1 2022 profit growth to come in at 5.6%, and for the full calendar year to record an 8.6% increase. This pales in comparison to the double digit growth figures we’ve seen over the prior 4 quarters. While difficult YoY comparisons are partially to blame, this does suggest corporate profits will begin to normalize this year. 

  2. S&P 500 companies aren’t beating expectations by as much as they historically have. According to FactSet, while the actual number of companies that are surpassing EPS estimates (76%) is in-line with the 5-year trend, the amount by which they beat is slightly below the 5-year average. While this may be seen as a con to many, to me it suggests analysts were just more accurate this time around, and in actuality that is a good thing.  

Potential Surprises this Week

As always we’re keeping a close look at earnings date outliers, companies that are reporting earnings on a date outside of their historical range, which could provide a clue as to what the upcoming report and call will reveal. Academic research shows that when a company delays earnings, bad news typically follows on the earnings call. Similarly, advancing an earnings date is highly correlated with good news being shared on the quarterly call. Amgen, Pfizer and Harley-Davidson have all confirmed off-trend earnings dates.

Amgen Inc. (AMGN)
Company Confirmed Report Date: Monday, February 7, AMC
Projected Report Date (based on historical data): Tuesday, February 1
Z-Score: 3.35

For the last 15 years, Amgen has reported Q4 earnings results from January 23 - February 2. On January 7 the company confirmed they would report on February 7, nearly one week later than we had anticipated based on their historical reporting range, suggesting there may be bad news shared on the upcoming call. 

Pfizer Inc. (PFE)
Company Confirmed Report Date: Tuesday, February 8, AMC
Projected Report Date (based on historical data): Tuesday, February 1
Z-Score: 4.03

Since 2006 Pfizer has reported Q4 earnings results on either the last Tuesday of January, or the first Tuesday of February. Their historical date range is January 22 - February 3. On December 28 the company confirmed they would report on February 8, one week later than their norm. The delayed date after reporting in a tight range for the last 15 years suggests Pfizer may have disappointing news to share with investors. 

Harley Davidson (HOG)
Company Confirmed Report Date: Tuesday, February 8, AMC
Projected Report Date (based on historical data): Wednesday, February 2
Z-Score: 4.72

Harley Davidson tends to report fourth quarter results on a Tuesday during the last two weeks of January. Their historical date range is January 18 - February 2. On January 13 the company confirmed they would report on February 8, over a week later than we had anticipated, indicating uncertainty ahead. 

Peak Earnings Season Rolls On

This week has more tech earnings in store, but the smaller enterprise tech variety such as Twilio, HubSpot and Zendesk. We also hear from cult favorites such as Peloton, Uber and Disney, gaming names such as Take-Two and Zynga, as well as a few Consumer Staples names (KO, K). 

Earnings Wave

This week marks the second of peak earnings season, which will stretch on for a total of 4 weeks for Q4 2021, through February 25. February 24 is predicted to be the most active day with 741 companies anticipated to report. At this point 58% of companies have confirmed (out of our universe of 9,500+ global names).