Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Wisdom

A Batch of Earnings Reports to Watch For

One of the best ways to keep tabs on the economy is to identify bellwether companies and take a look at their earnings reports. Since a bunch of these companies are about to release their financial data for the first quarter of 2016 it’s a good idea to list them.

First Quarter Earnings Reports for 2017 that should provide interesting are:

Amazon (NASDAQ: AMZN) – Scheduled for April 27, 2017

The largest online retailer is the best gauge of consumer habits and economic activity in modern America. It’s also a pretty good indicator for other areas including entertainment and technology.

I want to see if Amazon can continue its breakneck revenue growth. It added $8 billion in revenues during fourth quarter 2016. If that performance repeats itself Amazon will report more than $140 billion in revenues on April 27.

If it continues for two more quarters Amazon’s revenues will exceed $150 billion at the end of third quarter 2017. A continued spurt of revenue growth might mean that Amazon will surpass CVS Health (NYSE: CVS) and become America’s second largest retailer sometime next year. CVS reported $177.53 billion in revenues on December 31, 2016.

Whole Foods Market (NASDAQ: WFM) – Scheduled for May 10, 2017

This market darling stumbled badly last quarter and started closing stores. The main thing I want to see is if revenue growth will resume now that the owners have put the brakes on the expansion plans. A major problem at Whole Foods is sluggish revenue growth which means it might have found the limits of its market. Whole Foods revenues went from $15.55 billion in December 2015 to $15.81 billion a year later, a far cry from the $1 billion a year growth the company reported earlier in the decade.

Dollar General Corporation (NYSE: DG) – Scheduled for May 25, 2017

Like Whole Foods, Dollar General has expanded fast and become a market favorite. It reported tremendous revenue growth in 2016 rising from $20.37 billion in January 2016 to $21.99 billion in January 2017. That growth might be slowing, which would indicate that the dollar store boom is ending. It might also indicate that deep discounting at competitors like Kroger (NYSE: KR) is beginning to hurt DG.

Target Corporation (NYSE: TGT) – Scheduled for May 17, 2017

This retail legend and market favorite is suffering from a revenue collapse. A continuation of that trend on May 17 will mean a big drop in Target’s share price. It might also force the discounter to start closing stores or cut back operations in some of its locations.

During 2016, Target saw its revenues fall by $4.28 billion. It started with $73.78 billion in revenues in January 2016 and ended with $69.5 billion a year later. If the trend continues Target’s revenues will be around $1 billion lower on May 17, falling to $68 or $67 billion.

Watch for any acceleration of the revenue losses at Target because it will indicate that this company is succumbing to the retail apocalypse. It also indicates Amazon’s success because the Everything Store is now Target’s biggest and most dangerous competitor.

American Express (NYSE: AXP) – Scheduled for April 19, 2017

The grand old name in the credit card game has had a lot of problems in recent years. Falling revenues and loss of important businesses including its Costco Wholesale (NASDAQ: COST) have brought this company to its knees.

April 19 will show us if that continues or if the company can stabilize. A strong possibility is that American Express’s losses will level out at some time. Then we will see if new growth or stagnation is Amex’s future. American Express did report a slight revenue boost in second quarter 2016, so there is hope.

Goldman Sachs Group (NYSE: GS) – Scheduled for April 18, 2017

Wall Street’s big dog had a bad time last year, its revenues fell by $3.21 billion. Goldman Sachs started the year with $33.82 billion in revenues in December 2016 and finished with $30.61 billion at the beginning of 2017. Revenues bottomed out at $28.4 billion in June 2016, but they started growing again.

Continued revenue growth would indicate that Goldman Sachs’ new focus on technology is paying off. It might also indicate a major turnaround at this investment bank.

PayPal Holdings (NASDAQ: PYPL) – Scheduled for April 26, 2017

Fintech has been paying off handsomely for the digital wallet provider. Its revenues grew by $1.592 billion during 2016, rising from $9.248 billion to $10.84 billion. Watch closely because slowed growth might indicate that PayPal has reached the limits of its markets. Another potential problem here is next generation payment tech like bitcoin which might start biting into PayPal’s business at some point.

Ford (NYSE: F) – Scheduled for April 27, 2017

Since Ford is the manufacturer of the most popular vehicle in America, the F150 pickup truck; its’ earnings report is a good barometer of consumer spending. Ford’s revenue hit a high of $155.6 billion in June 2016 but dropped to $151.8 billion in December.

Continued revenue drops might indicate that some of the problems in the auto market such as the used car glut and the high level of lease returns are beginning to hurt major automakers. Ford is very vulnerable because of the high number of leases it issues.

Any of these companies’ reports will provide a good glimpse of economic activity a look at them all might show us where the economy is heading. They might also show us if political and upheaval and destructive trends like the retail apocalypse will continue.