Another chance for mega tech to impress investors

This week the megacaps get another chance to prove themselves when Microsoft (MSFT, Financial), Amazon (AMZN, Financial), Meta Platforms (META, Financial) and Apple (AAPL​) all report second-quarter earnings.

Tesla (TSLA, Financial) and Alphabet (GOOGL, Financial) got the reporting party started on Tuesday after-the-bell to little fanfare. Disappointing results from both those names led to a general selloff on Wednesday, which saw the S&P 500 and Nasdaq Composite clocking their worst performance since 2022. Weakness was obvious in Tesla's results, which missed earnings per share expectations by 9 cents and saw auto revenue slip 7% year over year.[1] On the other hand, Alphabet handily beat expectations on both the top and bottom line, but it was worse-than-expected YouTube advertising revenue that caused investors to punish the stock.[2] Alphabet shares took another leg lower on Thursday when OpenAI announced the prototype of its search engine, SearchGPT. As a result of these early earnings results, other mega-cap tech names such as Nvidia (NVDA, Financial), Meta and Apple fell in sympathy.

The markets climbed their way out of the trenches late last week, boosted by a better-than-expected gross domestic product report which saw the U.S. economy expanding by 2.80% [3] and the June Personal Consumption Expenditures Price Index (PCEPI) that showed inflation continuing to ease.[4] Despite that, many tech names ended the week lower, with Meta, Microsoft and Apple down approximately 2% for the week, Nvidia falling 3% and Alphabet down nearly 6%.

The bar was set high coming into the second-quarter season with little room for error for corporations releasing results. Despite the recent rotation out of tech, many of these names still have very rich valuations and investors want to see they are justified by strong fundamentals. Thus far, the trend of investors rewarding positive surprises less than usual and punishing negative surprises more than usual remains in play.

According to FactSet, the current consensus for S&P 500 EPS growth is for 9.80% year over year, an increase from 9.70% last week.[5] Thus far 78% of companies that have reported have surpassed analyst profit estimates, while only 60% have beaten on revenues.[6]

Second peak week

This week marks the second peak week of the second-quarter earnings season with nearly 2,500 companies anticipated to release results. All eyes will be on mega tech once again, as Microsoft reports on Tuesday, Meta on Wednesday and Apple and Amazon on Thursday, all after the close.​

Source: Wall Street Horizon

Outlier earnings dates this week

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 the company will share bad news on their upcoming call, while moving a release date earlier suggests the opposite.[7]

This week we get results from a number of large companies on major indexes that have pushed their second-quarter 2024 earnings dates outside of their historical norms. Ten companies within the S&P 500 confirmed outlier earnings dates for this week, eight of which are later than usual and therefore have negative DateBreaks Factors*. Those names are F5 Inc. (FFIV, Financial), McDonald's Corp. (MCD, Financial), IDEX Corp. (IEX, Financial), Meta Platforms, Boeing Co. (BA, Financial), The Hershey Company (HSY, Financial), Biogen (BIIB, Financial) and Intel Corp (INTC, Financial). The two names with positive DateBreaks Factors are ANSYS Inc. (ANSS, Financial) and Smurfit WestRock PLC (SW, Financial).

* 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.

McDonald's Corp (MCD, Financial)

Company Confirmed Report Date: Monday July 29, BMO
DateBreaks Factor: -2*

McDonald's Corp is set to report second-quarter 2024 results on Monday, July 29. While this is only two days later than they reported last year, it would be the latest they've ever reported for the second quarter.

McDonald's rang the alarm on the U.S. consumer last quarter after disappointing earnings per share results pointed to a pull-back in discretionary spending. “Consumers continue to be even more discriminating with every dollar that they spend as they faced elevated prices in their day-to-day spending, which is putting pressure on the industry,” CEO Chris Kempczinski said on the company's first-quarter earnings call.

The Boeing Company (BA, Financial)

Company Confirmed Report Date: Wednesday July 31, BMO
DateBreaks Factor: -2*

Boeing is set to report second-quarter 2024 results on Wednesday, July 29, the latest they've ever reported for the second quarter, but still sticking with their Wednesday reporting trend.

After all of the setbacks and bad press Boeing has received this year, it probably isn't particularly surprising to see them move their earnings date later. On Wednesday the planemaker plead guilty to a criminal fraud conspiracy charge for misleading U.S. regulators in order to get the 737 Max jetliner approved before it was ready, leading to two fatal crashes.[8] It isn't just the issue with the 737 Max jetliners, but other models such as 777 freighters that are incomplete and awaiting additional parts or updated software, costing the company about $1 billion a month as they scramble to get these idle planes up and running.[9]

Second-quarter earnings wave

This season peak weeks will fall between July 22 and Aug. 9, with each week expected to see over nearly 2,000-plus reports. Currently Aug. 8 is predicted to be the most active day with 1,438 companies anticipated to report. Thus far only 69% of companies have confirmed their earnings date (out of our universe of 11,000-plus global names), so this is subject to change. The remaining dates are estimated based on historical reporting data.​

Source: Wall Street Horizon

1 Q2 2024 Update, Tesla, July 23, 2024, https://digitalassets.tesla.com
2 Alphabet Announces Second Quarter 2024 Results, Alphabet Inc., July 23, 2024, https://abc.xyz
3 Gross Domestic Product, Second Quarter 2024 (Advance Estimate), Bureau of Economic Analysis, July 25, 2024, https://www.bea.gov
4 Personal Consumption Expenditures Price Index, June 2024, Bureau of Economic Analysis, July 26, 2024, https://www.bea.gov
5 FactSet Earnings Insight, FactSet, John Butters, July 26, 2024, https://advantage.factset.com
6 FactSet Earnings Insight, FactSet, John Butters, July 26, 2024, https://advantage.factset.com
7 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
8 Boeing finalizes 737 MAX guilty plea deal, US outlines reasons, Reuters, By David Shepardson, Allison Lampert and Chris Prentice, July 25, 2024, https://www.reuters.com
9 Boeing's Most Relatable Problem: Finding a Parking Spot, Wall Street Journal, Sharon Terlep, July 21, 2024, https://www.wsj.com​​​

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