The first earnings season of 2017 is almost upon us, and there are a few earnings reports that I am looking forward to reading. Those reports will show us how the economy is doing and if my reading of some of the prevailing economic trends is correct.
In particular I want to see how the tech, energy and retail sectors are doing because they are excellent gauges of the modern economy. Tech in particular can show us what consumer sentiments are, how much consumers are spending and how much growth is going on. It can also expose the amount of investment and venture capital in circulation.
Retail is a great measure of consumer spending and of sentiment. It is also an excellent metric for the technology-driven changes in the economy particularly the rise of online retail. Energy is another sector that is being heavily disrupted by technological change.
Earnings Reports I’m anticipating
Here are some upcoming earnings reports that I’m eagerly anticipating:
- Amazon (NASDAQ: AMZN) – scheduled for January 26. I want to see if this company’s seemingly limitless revenue growth is continuing and if media reports that it owned the holiday season are true. The most telling sign at Amazon will be its revenues, the Everything Store added $7.35 billion in revenue during third quarter 2016; rising from $120.64 billion to $127.99 billion in just three months. If that can be bested it will be incredible, and proof that Jeff Bezos is the future of retail.
- eBay (NASDAQ: EBAY) – scheduled for January, 25. This company’s revenues have been growing at a glacial for some time. Growing from $8.64 billion in June 2015 to $8.906 billion in September 2016. If they start picking up again it might mark a turn around. Another possible development is that eBay is trapped in a small but lucrative niche of the market. Despite the PayPal spinoff eBay still managed to report $8.045 billion in cash and short-term investments; $3.246 billion in cash from operations, $617 million in free cash flow and $1.807 billion in net income on $8.906 billion in revenues for third quarter 2016. eBay generates a lot of cash on very limited revenues, if the revenues growth is e-tailer could be a real money maker.
- Facebook (NASDAQ: FB) – also scheduled for January 25. Mark Zuckerberg’s money machine has been a real roll lately. It added $2.51 billion in revenue in third quarter 2016; during that period revenues rose from $22.16 billion to $24.67 billion. Facebook is also generating a lot of cash it reported $26.14 billion in cash and short-term investments, $1.66 billion in cash from financing, $12.58 billion in cash from operations, $2.482 billion in free cash flow and $7.505 billion in net income for the third quarter of 2016. The next earnings report will tell us whether that’s a fluke, or if the cash growth will continue.
- JC Penney (NYSE: JCP) – Scheduled for February 23. This department store operator has bucked industry trends by avoiding the massive revenue drops seen at competitors like Macy’s. Yet it’s revenues did drop slight during third quarter 2016, falling from $12.62 billion in July to $12.58 billion in October. It’ll be telling if Penney’s risky bet on mall-based department stores pays off or not.
- PayPal (NASDAQ: PYPL) – Scheduled for January 26. This fintech provider has long been demonstrating impressive revenue growth. It added $440 million in revenue during third quarter 2016; rising from $10.01 billion in June to $10.42 billion in September. PayPal’s also been highly lucrative turning in a 12.11% profit margin and a 10.05% return for third quarter 2016. PayPal is also a cash rich company with $15.85 billion in cash and short-term investments, $2.963 billion in cash from operations, a free cash flow of $618 million and a net income of $1.378 billion at the end of third quarter 2016. I really want to see if this company’s cash flow got a boost from the holiday season and online shopping.
- Target (NYSE: TGT) – Scheduled for February 22. Target has suffered a serious revenue collapse over the past year but its income has not been affected. Between October 2015 and October 2016, Target’s revenues fell by $3.48 billion dropping from $73.91 billion to $70.43 billion. Yet it still managed to report a profit margin of 3.7% and a net income of $3.346 billion for third quarter 2016. I want to see if the revenue fall is beginning to affect Target’s income if it has expect a major drop in this company’s stock.
- Walmart (NYSE: WMT) – Scheduled for February 21. Walmart has bucked retail trends lately with slight revenue growth in third quarter 2016, revenues rose from $483.83 billion in July to $484.60 billion in October. The revenues will show us whether this company’s big bet on ecommerce paid off over the holiday season. One likely revenue booster is the acquisition of Jet.com in August.
- Exxon Mobil (NYSE: XOM) – Scheduled for January 31. This is the biggest earnings report date that’s coming up soon. The telling number here is net income which has been dropping like a stone for some time. The world’s largest public oil producer’s revenues fell by $11 billion over the course of the year that ended in September 2016. Exxon reported revenues of $19.94 billion in September 2015 and $8.94 billion September 2016. A telling sign will be if Exxon starts reporting negative income, which might occur sometime this year. Investors should watch to see how much the income drop is slowing. Something to consider is that Exxon Mobil’s closest competitor reported a negative net income of -$1.5 billion for third quarter 2016.
These are the earnings reports to watch because they will show us what to expect from the entire sector. Massive growth in Amazon’s revenues will indicate that the pain and disruption in brick and mortar retail is far from. Continued revenue growth at PayPal and Facebook will demonstrate that fintech and social media can still pay off.
Revenue collapses at Target and JC Penney will show us how far brick mortar retailers can fall. Major problems at Penney will also affect mall operators and other mall based businesses. Troubles at Target might cause pain at other retailers. Any revenue drop at Walmart might drag both retail and consumer products stocks. A good season at Walmart will boost consumer products shares. Turnaround at Exxon will boost oil stocks, while continued collapse there will drive oil producers into the toilet.
Watch these earnings reports carefully because they might show us where Mr. Market is going and what he is planning. More importantly they might tell what shares to hold or to short.