By Emily Bary
U.S. companies have barely managed to eke out positive earnings growth so far in this quarterly results season, but the big test arrives in the week ahead.
Nearly a quarter of the S&P 500 /zigman2/quotes/210599714/realtime SPX -2.45% is set to report results, with those companies representing 39% of the index by market value, according to calculations based on FactSet data. Given that the S&P 500 is weighted by market capitalization, this roster of companies will have an outsize impact on the profit trajectory for the index.
Earnings are expected to decline for the fourth consecutive quarter once all results are in for the latest period, but those companies that have reported thus far have been beating expectations in aggregate.
The FactSet consensus now models a 5% earnings decline for the index, compared with the 6.3% drop projected a week ago . If profit growth for the S&P 500 ultimately ends up positive, it would mark an end to the current earnings recession, which takes place when corporate profits drop for two or more consecutive quarters.
Apple Inc. /zigman2/quotes/202934861/composite AAPL -3.48% and Facebook Inc. /zigman2/quotes/205064656/composite FB -3.64% are among the highlights of next week’s slate, along with Tesla Inc. /zigman2/quotes/203558040/composite TSLA -8.06% , which will deliver results for the first time since it became a member of the S&P 500 . All three high-profile companies are scheduled to report Wednesday afternoon and expected to have produced record revenue in the holiday quarter.
The holiday quarter is always crucial for Apple, which releases new iPhones in the fall. With a slightly later launch than usual this year due to the pandemic pushing sales into the period, Apple is widely expected to post its largest quarterly revenue total ever and its first ever total above $100 billion . The technology giant likely also continued to see benefits from remote-work and remote-schooling trends, which have driven strong iPad and Mac sales throughout the COVID-19 crisis.
Full preview: Get ready for Apple’s first $100 billion quarter in history
Facebook is also expected to post what should easily be a record quarter given strong digital advertising trends during the holiday period. Still, the company will face questions about user engagement and a decision to ban Donald Trump from the platform indefinitely over his role in inciting the violent riot at the U.S. Capitol. Bernstein analyst Mark Shmulik points to “continued usage fatigue” across social media as well as a “conversation skewed towards unmonetizable political events.”
Full preview: Facebook earnings still flourishing amid pandemic, economic slowdown and antitrust scrutiny
Tesla already disclosed delivery numbers for the full year that came in ahead of analyst expectations , and all eyes will be on the company’s outlook for 2021 . RBC Capital Markets analyst Joseph Spak anticipates a delivery forecast of 825,000 to 875,000 million units for the full year, even though Chief Executive Elon Musk said on Tesla’s last earnings call that an analyst was “not far off” for expecting 840,000 to a million deliveries during 2021.
Full preview: Can Tesla’s sales growth match stock’s rise?
Here’s what else to watch for in the week ahead, which brings reports from 117 members of the S&P 500 and 13 Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.75% components.
Boeing Co.’s /zigman2/quotes/208579720/composite BA -5.62% journey remains turbulent even as the company’s 737-MAX jets were recertified after being grounded for almost two years. Though the company began deliveries of these aircraft, “the pace of delivering all 450 parked 737-MAX will be dictated by airline customers ability to absorb aircraft as well as air traffic demand,” according to Benchmark Company analyst Josh Sullivan.
Boeing’s Wednesday morning report will offer perspective on the company’s recovery expectations amid the pandemic, though Sullivan sees volatility ahead stemming from a recent equity offering and the impact of the COVID-19 crisis on airlines.
The fourth-quarter reports from U.S. airlines have been bleak so far , and American Airlines Group Inc. /zigman2/quotes/209207041/composite AAL -4.40% and Southwest Airlines Co. /zigman2/quotes/201071949/composite LUV -1.65% offer more on Thursday morning.
Verizon Communications Inc. /zigman2/quotes/204980236/composite VZ -1.09% leads off a busy week of telecommunications earnings Tuesday morning, followed by AT&T Inc. /zigman2/quotes/203165245/composite T -2.55% Wednesday morning and Comcast Corp. /zigman2/quotes/209472081/composite CMCSA -2.17% Thursday morning.
For the wireless carriers, a key issue will be the impact of iPhone 12 promotions on recent results . Investors will also be looking for information about a recent wireless auction offering spectrum that will be crucial for 5G network deployments. Though the bids haven’t been made public yet, the auction drove record spending and AT&T and Verizon are both expected to have paid up handsomely to assert their standing. The question for investors is what impact these bids will have on the companies’ financial positioning.