Q4 Earnings Period Winds Down, Profiling Late-Reporters Ahead of Shareholder-Meeting Season

• Macro factors have shifted in recent weeks, but that has not upset the market’s rally a whole lot

• As the Q4 reporting period wraps up, our team spots three firms with later-than-usual earnings reports

• March is also an active month for shareholder meetings and other industry conferences

Almost two months in, 2024 has been a year of surprises. Perhaps the biggest macro story that has done an about-face is the forward interest rate market. Traders went into the year expecting upwards of seven quarter-point rate cuts by the Federal Reserve. Today, following a hot set of January CPI and PPI data and last week’s FOMC minutes that further pinched the prospects of an ease any time soon, odds favor just three or maybe four cuts for 2024, according to the latest Fed Fund futures data and analysis by Jim Bianco.¹ Of course, things will continue to change, but markets have proven to be generally resilient in this tighter outlook, at least according to the modest gain in the S&P 500® year to date.

A Quiet Oil Patch

What has also fooled some investors is the quiet price action in the oil markets. Go back in time just a few months, and geopolitical jitters were heating up amid tensions in the Red Sea and with the continued conflict in Ukraine. It turned out that economic weakness in China and record-high US oil production were bearish factors keeping WTI under the $80 mark.² Energy sector equities are collectively about flat for the year and remain among the cheapest areas of the large-cap space, according to the latest Factset sector P/E data.³

Earnings Dates & Shareholder Events on Tap

With the bulk of earnings season now behind us, single-stock stories may take center stage, as well as new developments learned at corporate events like conferences, trade shows, and investor days. 

Upcoming Off-Trend Earnings Dates

Academic research shows that when a company confirms a quarterly earnings date that is later than when they have historically reported, it’s typically a sign that the company will share bad news on their upcoming call, while moving a release date earlier suggests the opposite.⁴

This week, we feature two companies moving in opposite directions. Republic Services (RSG) has been flying high as the market for garbage is apparently far from a dumpster fire. Meanwhile, Bayer AG (BAYN.DE), listed on the German Xetra Dax, reduced its dividend sharply as it struggles with high interest rates and weak free cash flow.⁵ Both firms feature high Datebreaks Factors, suggesting that investors should pay particular attention to the firms’ respective upcoming earnings dates. We wrap up with a quick look at Devon Energy (DVN) which also has a confirmed earnings date later than usual.

Republic Services: A Post-Pandemic Winner

February 27 is trash day on Wall Street. That’s when RSG reports Q4 2023 results in the after hours. Wall Street Horizon’s data initially showed an unconfirmed earnings date of Thursday, February 15 AMC, but in January, the company confirmed its quarterly report to take place this Tuesday. The stock price has been among the S&P 500’s sharpest winners in the last year, rising nearly 40% in the last 12 months, even outpacing its industry counterpart Waste Management (WM). 

The later-than-usual report could raise some caution flags among investors, but data from Option Research & Technology Services (ORATS) shows that the company has topped analysts’ earnings estimates in each of the past 12 quarters. This time around, a small 2.7% earnings-related stock price move is priced into the options market, which is within historical norms. The action doesn’t end there for Republic Services – its management team is scheduled to speak at two upcoming corporate conferences: the Bank of America Global Agricultural and Materials Conference this Wednesday and Thursday and the Raymond James & Associates 45th Annual Institutional Investors Conference from March 3 through 6. 

Republic Services 3-Year Stock Price History: An S&P 500 Winner Since Early 2023

Source: Stockcharts.com

Bayer AG: Legal Issues Linger, Leading to A Bare-Minimum Payout

As RSG flies high, Bayer AG continues to disappoint shareholders. The ADR (ticker: BAYRY) is down about 80% from its all-time high just shy of $40 notched in early 2014. The embattled Health Care sector company, which has operations in crop sciences, announced last week that it would slash its dividend by 95% as it aims to improve its balance sheet by reducing debt.⁶ While the stock actually bounced after the news, bigger issues are in play. 

Bayer’s purchase of Monsanto years ago continues to cast dark clouds over the German firm due to financial liabilities associated with the Roundup® brand. In January, Bloomberg reported that Bayer remains wary of breaking up the company, but investor pressure remains.⁷ Be on the lookout for further updates from its management team when Bayer reports Q4 2023 figures on Tuesday, March 5 BMO. That same day, the company holds a Capital Markets Day which could draw added volatility.⁸

Bayer AG 3-Year Stock Price History: Legal Turmoil Has Pressured the German Health Care Stock

Source: Stockcharts.com

Devon Energy Shares Wobble Around Two-Year Lows

Shifting gears, Devon Energy (DVN), the low-P/E Energy-sector firm, has underperformed the S&P 500 by more than 30 percentage points year on year. With the prompt month of oil meandering in the mid-$70s, occasionally flirting with $80, the focus shifts to profitability trends, now two years removed from the last oil bull market. 

Devon is interesting to us since it previously featured an unconfirmed Q4 2023 earnings date of Tuesday, February 20. On January 17, however, it confirmed the earnings event to take place a week later on February 27, resulting in a high -3 Datebreaks Factor*. ORATS reports that DVN has traded lower post-earnings in each of the past six instances while a 4.8% earnings-related stock price swing is priced in.

* Wall Street Horizon DateBreaks Factor: statistical measurement of how an earnings date (confirmed or revised) compares to the reporting company's 5-year trend for the same quarter. Negative means the earnings date is confirmed to be later than historical average while Positive is earlier.

Devon Energy 3-Year Stock Price History: Shares Bounce from Multi-Year Lows​

Source: Stockcharts.com

The Bottom Line

As we put the finishing touches on the heart of the fourth quarter reporting period, keeping watch on companies with unusual reporting dates is important when it comes to managing a global portfolio. Furthermore, added color often comes at major industry conferences. Stay tuned for our upcoming look at key shareholder events as we inch closer to the second quarter.

1 How the Market Moved from Seven Cuts to Three Cuts in Five Weeks, Bianco Research, February 20, 2024, https://www.biancoresearch.com/
2 US oil output to touch a record high in 2024, but growth will slow - EIA, Reuters, Arathy Somasekhar, January 10, 2024, https://www.reuters.com
3 Earnings Insight, FactSet, John Butters, February 16, 2024, https://advantage.factset.com
4 Time Will Tell: Information in the Timing of Scheduled Earnings News, Journal of Financial and Quantitative Analysis, Eric C. So, Travis L. Johnson, Dec, 2018, https://papers.ssrn.com
5 Bayer plans to amend its dividend policy to reduce debt, Bayer AG, February 19, 2024, https://www.bayer.com/
6 Bayer plans to amend its dividend policy to reduce debt, Bayer AG, February 19, 2024, https://www.bayer.com/
7 Bayer Moves Away From Breakup Despite Investor Pressure, BNN Bloomberg, Eyk Henning, Tim Loh, January 18, 2024, https://www.bnnbloomberg.ca
8 Capital Markets Day 2024, Bayer AG, February 23, 2024, https://www.bayer.com​​

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