No one will deny that last week was a dud by and large as far as earnings go. However, my macro theme of companies that report good numbers and guidance getting rewarded and those that don't getting smashed played true to the script.
The week started with Netflix (NFLX) reporting a sizable beat in terms of earnings and subscriber additions, domestic and international. However, the company provided disappointing subscriber- addition guidance for the June quarter and was promptly given a haircut of 10% or so for the week.
We also had numbers from two of tech-land's biggest companies, Alphabet (GOOGL) and Microsoft (MSFT), both of which missed versus expectations and got whacked for roughly 6% and 7%, respectively, yesterday.
On the flipside, we have ServiceNow (NOW), which beat estimates by two cents per share versus expectations of seven cents per share and saw its shares soar 14%, its price/earnings multiple of 120x not mattering at all and its 9x 2016 revenue multiple brushed aside completely, too.
A couple of important statistics to take note of as far as the first-quarter earnings season are as follows:
- Of the 111 companies in the S&P 500 that have reported, 77.5% have had positive EPS surprises, 9% have had neutral EPS results and the balance have had negative EPS surprises.
- Earnings growth for Q1 is running at a negative 6.8% rate versus expectations of negative 9.4%, while revenue growth is a plus 0.5% versus expectations of negative 1.09%.
Next week on the international economic data front, we have GDP data in the U.K. (expectations of 0.4% growth quarter over quarter and 2% growth year over year) and Japanese industrial production on Wednesday, the German Consumer Price Index on Thursday and European Union CPI and GDP quarter-over-quarter growth (an expected 0.4% increase) on Friday.
Here at home, we have Dallas Fed Manufacturing on Monday, durable goods, Markit PMI and Richmond Fed manufacturing on Tuesday, the Federal Open Market Committee decision on Wednesday, Q1 GDP data on Thursday and Chicago Purchasing data on Friday.
Of course, who can forget yet another Fed meeting next week beginning on Tuesday and ending with the FOMC announcement the next day? There is no chance of a rate hike next week by our Fed heads, but what they say going forward takes on increasing importance as we progress through each Fed meeting, especially given what seems to be their itchy finger to raise rates as soon as they can.
Why they are in such a hurry is beyond me, especially when one looks at the tenuous global economic conditions and just glances at the headlines of the majority of companies that have reported earnings in the past couple weeks. Have our Fed heads heard of a company called Intel (INTC)? Did they hear that Intel will be laying off 12,000 employees? Do the pointy-heads at our Federal Reserve realize these are not exactly your $10- or $15-per-hour jobs being lost?
Next week we also will be continuing with earnings, with NXP Semiconductor (NXPI) reporting on Monday along with Xerox (XRX) and Halliburton (HAL), followed on Tuesday by 3M (MMM), Corning (GLW), DuPont (DD), Eli Lilly (LLY), Lockheed Martin (LMT), Akamai (AKAM), Apple (AAPL) and Panera Bread (PNRA). Wednesday we have Facebook (FB) and PayPal (PYPL) and Thursday will bring us Dow Chemical (DOW), Altria (MO), Raytheon (RTN), Amazon (AMZN), Baidu (BIDU), Expedia (EXPE) and LinkedIn (LNKD). Finally, we wrap up the week on Friday with Chevron (CVX), Exxon Mobil (XOM), Phillips 66 (PSX) and Tyco (TYC).
Finally, with the beatdown in Apple (AAPL) pretty much every day of this last week, I wonder if the worst is built in ahead of its earnings for Q1 on Tuesday after the close? It's not like Apple had guided the March quarter spectacularly by any means. Indeed, its guidance for the March quarter was downright depressing when first issued back in January.
In addition, if any investor, long term or short, or any trader expected the June quarter to be booming just ahead of the iPhone7, call me pronto. I have some fast selling-out oceanfront property in Dallas priced for a quick sale for you.
With that, I wish each and every one of you a safe and joyful weekend with your loved ones.