Peak Earnings Season Kicks Off This Week With 3 Potential Surprises

• S&P 500 blended EPS growth for Q4 continues to fall, now expected to come in at -5.0%.

• Peak earnings season kicks off this week with 1,104 global companies expected to report

• All eyes on Big Tech this week: META, AAPL, AMZN, GOOGL

• Potential surprises this week: WHR, SPOT, SNAP.

Another week of drab earnings results has passed, and despite some decent results from big names such as Microsoft (MSFT) and Tesla (TSLA) which both beat on the bottom-line, and IBM which beat on the top and bottom-line, investors are not impressed. Lowered expectations heading into the quarter had investors hoping for big beats once companies started to report, and while 69% of S&P 500 companies have surpassed estimates, that’s lower than the 5-year average of 77%. On top of that, companies are only beating by an average of 1.5%, well below the 5-year average surprise of 8.6%.¹

As a result, the blended EPS growth rate for the S&P 500 fell to -5.0% from -4.6% in the week prior. Revenue growth is still positive, and unchanged since December 31, at 3.9%.¹

The Stage is Set for Big Tech to Report This Week

Peak earnings season officially kicks off this week with 1,104 companies (from our global universe of 9,500 equities) anticipated to release results, 93 of those coming from the S&P 500. Among the most watched will be big tech names which endured major sell-offs last year, and have been announcing large workforce reductions. Among those, Meta (META), Alphabet (GOOGL) and Amazon (AMZN) all report in the days ahead. This week also includes reports from several names that are setting up to potentially surprise (to the upside or downside), including Whirlpool (WHR), Spotify (SPOT), Snap Inc. (SNAP) (detailed analysis below).

Source: Wall Street Horizon

Potential Surprises in the Week Ahead - WHR, SPOT, SNAP

This week we get results from a number of large companies on major indexes that have pushed their Q4 earnings dates outside of 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 Whirlpool Corp (WHR), Juniper Networks (JNPR), and PTC Inc. (PTC). Moody’s Corp (MCO) and Fortive Corp (FTV) confirmed earlier than usual dates. One Nasdaq name, Atlassian Corporation (TEAM) also confirmed a later than usual earnings date. Other notable dates movements come from Snap Inc (SNAP) and Spotify Technology (SPOT), which both confirmed earlier dates, suggesting they will report “good news” on their upcoming calls.  

Let’s dig into a few of these: 

Whirlpool Corporation (WHR)
Company Confirmed Report Date: Monday, January 30, AMC
Projected Report Date (based on historical data): Wednesday, January 25
DateBreaks Factor: -3*

On October 21, 2022, Whirlpool initially confirmed a Q4 earnings date of January 25, only to change it to Monday, January 30 as the new year rolled around. It’s important to note how unusual it is for a company, especially the size of Whirlpool, to confirm an earnings date and then subsequently change it just days before. Academic research has shown that this type of adjustment is usually a sign that the company is moving its earnings date back because they wish to delay bad news. The newly confirmed date, January 30, is also slightly later than the 5-year reporting trend for WHR, which tends to report fourth quarter results from January 24 - 28. 

While Whirlpool recently adjusted its FY 2022 EPS forecast to $19.25 from $19.00, that did little to excite investors who have been muted on the stock. That’s understandable since the appliance maker has been dealing with softening demand due to rising inflation, and higher costs stemming from increased materials and freight costs, as well as global supply-chain disruptions. 

Spotify Technologies (SPOT)
Company Confirmed Report Date: Tuesday January 31, BMO
Projected Report Date (based on historical data): Wednesday, February 1
DateBreaks Factor: 2*

For Q4 2022, streaming music service Spotify has confirmed an earnings date that is one day earlier than predicted. This may not seem like a big deal, but this will be the first time ever that they will report Q4 results in January, and the first time that report will come out on a Tuesday following a strong Wednesday trend since their 2018 IPO. According to academic research, this would suggest the company is getting ready to share good news with investors. But how can that be after recently announcing a 6% workforce reduction?

Currently, sell-side analysts expect the company to report EPS of -$1.23² for Q4, suggesting a 459% YoY decline. Revenue growth on the other hand is expected to come in with double digits at 14%. Despite the expected bottom-line decline for this and next quarter, the rest of 2023 is estimated to show healthy double-digit growth. 

Snap Inc. (SNAP)
Company Confirmed Report Date: Tuesday January 31, AMC
Projected Report Date (based on historical data): Thursday, February 2
DateBreaks Factor: 3*

Similar to SPOT, this will be the first time since IPOing in 2017 that Snap Inc. will report Q4 earnings in January, two days earlier than estimated. This suggests they could report better than expected results, or provide upbeat guidance. SNAP has a strong Tuesday and Thursday reporting trend which they are adhering to this quarter. 

Like their social media peers, SNAP is also expected to be negatively impacted by lower ad spend, with Wall Street analysts expecting EPS to fall 50% YoY and revenues to come in flat. However, that is anticipated to turn around in 2023, with the first two quarters estimated to result in profit growth of 250% and 300%, respectively.

Earnings Wave - Peak Week Begins

This week marks the beginning of Q4 peak earnings. This season peak weeks will fall between January 30 - March 3, with each week expected to see over 1,000 reports. Currently February 23 is predicted to be the most active day with 701 companies anticipated to report. Thus far only 54% of companies have confirmed their earnings date (out of our universe of 9,500+ global names), so this is subject to change. The remaining dates are estimated based on historical reporting data. Keep in mind the Q4 reporting season is always a bit more prolonged, typically stretching over 4 or 5 peak weeks rather than the usual three peak weeks seen in Q1 - Q3.

Source: Wall Street Horizon