By Jeremy C. Owens, MarketWatch
Earnings season isn’t even halfway over yet, but corporate profits have been coming in better than expected so far and another week of good results could help end the earnings recession.
Nearly 100 members of the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.62% are set to deliver results in the week ahead, meaning about two-thirds of the index will have reported by the end of the week. Results on the whole for the S&P have beaten estimates thus far, according to Credit Suisse Chief U.S. Equity Strategist Jonathan Golub, who said that 62% of components had topped earnings-per-share expectations as of Thursday. The average company exceeded estimates by 4.9%.
While FactSet still projects an overall decline in fourth-quarter net income for the index based on a blend of reported results and analyst forecasts, profit surprises over the past week from the likes of Apple Inc. /zigman2/quotes/202934861/composite AAPL +0.09% and Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -0.49% have made the view a bit less pessimistic. FactSet’s blended model calls for a 0.35% drop in net income once all companies have reported, compared with projections for a 1.9% drop a week ago.
Given the way companies so far have been exceeding expectations, corporate net income might actually finish in positive territory after the reporting season ends, which could snap the string of year-over-year declines in net income that occurred during the first three quarters of 2019.
See more: Earnings recession could end with a fourth-quarter comeback
Among the biggest names in the week ahead are Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.67% components Walt Disney Co. /zigman2/quotes/203410047/composite DIS +3.54% and Merck & Co. Inc. /zigman2/quotes/209956077/composite MRK -0.90% , as well as Alphabet Inc. /zigman2/quotes/202490156/composite GOOGL -0.88% Uber Technologies Inc. /zigman2/quotes/211348248/composite UBER +2.82% , and Chipotle Mexican Grill Inc. /zigman2/quotes/200781108/composite CMG +5.85%
The week ahead figures to be a quieter week for the Dow: After 14 companies reported in the past week alone, Disney and Merck are the only two components on the schedule.
This will be a crucial report for Disney as the company’s much-heralded Disney+ streaming service launched midway through the quarter. Investors will be looking for commentary from management on subscriber and engagement trends, as well as plans for the offering going forward. Another topic of interest heading into Disney’s earnings call is the impact of the coronavirus outbreak on theme-park attendance. The company began a temporary closure of Shanghai Disneyland in late January.
“We note the closure comes at a lucrative and peak travel time to celebrate Lunar New Year on 1/25, and the holiday season extends into February,” wrote J.P. Morgan’s Alexia Quadrani. The company reports after the closing bell.
Merck’s morning report will be all about Keytruda as Wall Street will be looking to see whether sales momentum kept up for the popular cancer drug.
Uber’s stock has shot up more than 20% in the past month, in part after the company showed that it’s paying more attention to costs. The ride-hailing giant agreed to sell its India food-delivery business to a local player, showing that the company is becoming more rational about where it conducts operations amid investor impatience over Uber’s steep losses. The company is on Thursday afternoon’s agenda.
In the more traditional world of car names, Ford Motor Co. /zigman2/quotes/208911460/composite F +12.92% reports Tuesday afternoon and General Motors Co. /zigman2/quotes/205226835/composite GM +6.25% follows the next morning.