Fourth quarter earnings season is underway and expectations are running high. Data from FactSet shows that companies listed on the S&P 500 index are forecast to generate an average 21.7% year-over-year increase in earnings per share for the fourth quarter of 2021. If accurate, the growth would represent the fourth consecutive quarter where corporate earnings have grown by more than 20%. A healthy amount of positive earnings reports will help to keep the stock market buoyant even in the face of looming interest rate hikes.
Earnings season kicked off today (Jan. 14) with four major U.S. financial institutions releasing earnings reports. Over the coming week, the remaining U.S. banks will announce their Q4 numbers before ending the week with the start of big tech and airline earnings.
Here are seven influential, widely held stocks with quarterly earnings reports the week of Jan. 17.
- Charles Schwab (NYSE:SCHW)
- Goldman Sachs (NYSE:GS)
- Bank of America (NYSE:BAC)
- Morgan Stanley (NYSE:MS)
- U.S. Bancorp (NYSE:USB)
- Netflix (NASDAQ:NFLX)
- American Airlines (NASDAQ:AAL)
7 Earnings Reports to Watch the Week of January 17: Charles Schwab (SCHW)
The week kicks off with Q4 numbers from financial services giant Charles Schwab, whose share price has been on fire lately.
SCHW stock has risen nearly 20% in the past month to $94 a share and has now gained 31% over the last six months. The rally has been sparked by a general rise in bank and financial stocks as higher interest rates approach, and also the company’s strong earnings throughout 2021. For the third quarter, Charles Schwab announced $4.6 billion in revenue and a record $1.5 billion in net income, which was a 119% increase from a year earlier. Those kinds of numbers attract attention.
Through the first nine months of 2021, Charles Schwab’s revenue totaled $13.8 billion, up 84% over the previous year, along with $4.3 billion in net income, up 98% from the same period of 2020. At last count, Charles Schwab was managing $7.6 trillion of client assets, up from $6.7 trillion at the start of last year. Can the Westlake, Texas-based company finish off an already exceptional year strong?
Analysts think so. Wall Street is calling for the financial company to report earnings per share (EPS) of $0.87 on revenues of $4.77 billion for the fourth quarter. Anything better than that and the momentum in SCHW stock could accelerate.
Goldman Sachs (GS)
Leading investment bank Goldman Sachs is coming off a record year for deals with the value of mergers and acquisitions (M&A) and initial public offerings (IPOs) at an all-time high.
IPOs around the world last year raised a record $594 billion, according to the Reuters. And Goldman Sachs once again topped the global league tables of deal advisors. However, Goldman Sachs’ success has not been reflected in its share price, which has not kept pace with its peers. In the last six months, GS stock gained only 5%, including a 2% advance over the past month. And it just to lost all those measly gains early in today’s trading.
The prominent Wall Street bank’s stock now trades at just under $376 a share, 12% below its 52-week high.
A strong Q4 showing could be the catalyst needed to again move GS stock above $400 a share, a level it has struggled to stay above since early November.
Analysts are forecasting Q4 EPS of $11.77 and revenue of $12 billion, which would be 2.6% higher than a year earlier. Any beat to the upside will be viewed favorably by investors. However, it is worth noting that Goldman Sachs stock looks cheap right now with a price-to-earnings (P/E) ratio of 6.21, which is low when compared to the average P/E ratio for stocks listed on the S&P 500 index of 15.96. The median price target on the stock is currently $462.50, which implies an 23% gain from current levels.
7 Earnings Reports to Watch the Week of January 17: Bank of America (BAC)
Bank of America reports Q4 earnings on Jan. 19 and investors will be looking for evidence that the second largest financial institution in the U.S. is emerging from the global pandemic in a strong position.
So far, all indications are that Bank of America is in a better spot today than before the Covid-19 pandemic. The average checking account balance at the lender is 40% higher than it was in 2019 before Covid-19; its digital sales such as online loans are 33% greater than pre-pandemic levels; and its investment banking market share has grown to 6.9%, which is larger than before the pandemic.
While its growth has been impressive, Bank of America is positioned to perform even better as the Federal Reserve raises interest rates over the course of this year to cool down inflation that reached 7% in December, a 40-year high. The lender has estimated that a 100-basis-point rise in the interest rate yield curve will provide it with $7.2 billion in additional net interest income annually. Higher rates and continued growth could help to propel BAC stock higher. The share price has gained 9% in the last month as the Fed has made clear that rates are going up. For its fourth-quarter results, Wall Street expects Bank of America to report EPS of $0.76 on revenue of $22.31 billion.
Morgan Stanley (MS)
Another prominent investment bank, Morgan Stanley, reports earnings next week and, like Goldman Sachs, it is coming off a strong year of global deals. And the firm is rewarding its staff handsomely for the 2021 results with media reports saying that Morgan Stanley plans to raise its annual bonuses by 20%, setting a tone across Wall Street.
MS stock has been a relatively strong performer over the last six months, having climbed 5% higher to its current price of $98 per share. For the fourth quarter, analysts have forecast that Morgan Stanley will announce EPS of $39.33 on revenues of $2.99 billion.
In the previous third quarter, Morgan Stanley beat Wall Street estimates across the board on strong stock trading and investment banking performances. The firm continues to operate the world’s biggest equities trading desk. However, there has been some concern about Morgan Stanley’s bond trading unit, which underperformed in the third quarter, with revenue coming in at $1.68 billion, below the $2 billion that had been expected. Analysts will be parsing the fourth quarter results for signs of how Morgan Stanley’s wealth management business is doing. A key priority of Chief Executive James Gorman, Morgan Stanley has built its wealth management offering into one of the world’s largest through a series of acquisitions over the past two years.
7 Earnings Reports to Watch the Week of January 17: U.S. Bancorp (USB)
Minneapolis-based U.S. Bancorp is the fifth largest banking institution in America with more than $550 billion in assets. Like other banks, USB stock has been on an upswing lately having risen 12% in the last 30 days to $63.43 a share. Over the past 12-months, USB stock has gained 27%.
The bank’s earnings over the past year have been a tale of two sides of the business. In the third quarter, U.S. Bancorp’s payments service grew 3% as consumers spend more as we emerge from the pandemic, while the corporate banking side of the ledger decreased 13% compared to the same quarter a year earlier.
This year, U.S. Bancorp should also be a beneficiary of higher interest rates.
Also this year, U.S. Bancorp is making it a priority to integrate its payments and commercial banking businesses as 70% of the bank’s business banking customers don’t currently have one of its payments products. Plus, U.S. Bancorp is in the process of acquiring the U.S. banking division of Mitsubishi UFJ Financial Group (NYSE:MUFG), a deal that gives U.S. Bancorp an additional 190,000 business banking customers and a greater presence in California, the most populous state in the union. As far as analysts are concerned, they are looking for U.S. Bancorp to report EPS of $1.1 on revenues of $5.75 billion when it announces earnings on Jan. 19.
Where does streaming giant Netflix go from here?
That’s the question a number of analysts are asking ahead of the company reporting its latest numbers on Jan. 20. Many are fretting about slowing growth coming out of the pandemic and as Netflix faces an onslaught of competition that is only intensifying. Indeed, subscriber numbers tend to be what moves NFLX stock more than any other metric.
Research firm MoffettNathanson recently lowered its price target on Netflix by $5 to $460 per share and maintained a “neutral” rating on the stock. The concerns seem to be impacting sentiment around Netflix, whose stock has fallen 15% in the last month to $516.55 a share.
For its part, Netflix will no doubt be looking to show that popular movies such as “Don’t Look Up” and international hits such as the series “Squid Game” attracted more subscribers in the fourth quarter.
Any signs of a slowdown in the company’s subscriptions will likely push the share price lower. And, to be fair, Netflix faces some tough comparables after it added 4.4 million new subscribers in the third quarter of 2021 for a total of 214 million paid global subscriptions, which beat the 3.5 million Q3 goal the company had set for itself.
Wall Street is looking for Netflix to announce EPS of $0.82 on revenues of $7.71 billion when it reports next week.
7 Earnings Reports to Watch the Week of January 17: American Airlines (AAL)
Shares of the largest airline in the world are popping ahead of its earnings on Jan. 20.
On the day of this writing, AAL stock is up 5% in one trading session to just under $20 a share.
News that rival airline Delta (NYSE:DAL) reported better than expected earnings (the first airline to report Q4 numbers) lifted the entire sector. Delta reported that it earned $0.22 per share in the fourth quarter on revenues of $9.47 billion. That was much better than the consensus estimate of $0.14 EPS on sales of $9.2 billion. Delta attributed the better-than-expected results to strong bookings during the November and December holiday period.
Expectations are that American Airlines can also produce a strong Q4 print, especially given its international exposure (it travels to more foreign destinations than any other carrier) and as travel demand continues to strengthen. Of course, the omicron variant of Covid-19 could put a damper on American Airlines earnings but investors appear ready to look beyond the pandemic when it comes to the aviation sector. In the last month, AAL stock has climbed 9% higher. Analysts are forecasting that American Airlines will report EPS loss of -$1.58 on revenues of $9.33 billion for Q4.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.