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Earnings Calendar: Jan 16 – 20

We are now in the early stages of earnings season after a string of US banks reported on Friday. Goldman Sachs and Morgan Stanley will follow on Tuesday. The main event this week will be results out from streaming giant Netflix, accompanied by earnings from United Airlines.

In the UK, fashion stocks headline the calendar with updates out from Burberry and Boohoo.

Netflix (NFLX)

This week will be a big test for Netflix as it tries to convince markets it is back on the right track after suffering a torrid 2022, when it lost subscribers for the first time ever, lost its crown to Disney and saw its share price more than halve. It has launched a new ad-supported tier and is cracking down on password sharing, which has received a warm reception from the markets that hope this can reinvigorate growth and drive revenue. However, this will take time before making an impact and Netflix must convince investors its service is still in demand in the meantime. Netflix added 2.4 million subscribers in the third quarter and has said this will accelerate to 4.5 million in the fourth – but not everyone is convinced it can deliver that. Netflix will no longer be providing guidance for subscriber numbers going forward as it shifts focus to revenue and other metrics as it introduces new pricing plans. Wall Street forecasts that Netflix will report a 1.6% year-on-year rise in revenue to $7.83 billion while its headline measure of operating income is expected to plunge 43% to $362.4 million. Both forecasts are ahead of Netflix’s guidance.

Goldman Sachs (GS) and Morgan Stanley (MS)

Goldman Sachs and Morgan Stanley will follow their banking peers with results this week, with both forecast to report sharper drops in earnings compared to most of their rivals this season.

Goldman Sachs is forecast to report a 15% drop in revenue in the fourth quarter to $10.7 billion thanks to its investment banking arm, which has seen fees plummet as appetite for new listings, M&A and new financing has waned amid the uncertain economic outlook. That, plus weaker profits from asset management, is expected to see EPS fall 48% to $5.59. The bottom-line will also be hurt by an 88% jump in loan loss provisions to $645.8 million.

Wall Street forecasts Morgan Stanley’s revenue will be down 14% from last year in the fourth quarter, driven by the slump seen in investment banking over the past year, while diluted EPS is expected to fall 38% to $1.27. Loan loss provisions are not expected to make a major impact like it has on its rivals, but earnings from investment management and institutional securities are still under pressure. Fixed-income trading is set to be a bright spot this quarter alongside a recovery in its wealth management business.

United Airlines (UAL)

United Airlines will follow in the wake of results out from rival Delta Air Lines, which has lost ground after its earnings outlook disappointed the markets as rising labor costs take their toll. Although demand for air travel continues to recover and higher prices have pushed revenue back above pre-pandemic levels, the industry is grappling with surging costs as they try and keep out of the red. Recent operational problems, including the major outage that recently grounded thousands of US flights, have only added to their woes. United Airlines is forecast to report a 49% year-on-year rise in revenue to $12.3 billion in the fourth quarter and adjusted EPS of $2.12 compared to the $1.60 loss seen last year. United Airlines has the opportunity to shine by posting a rosier outlook than its rival this week, although markets are fearful that Delta’s weaker outlook could be a warning of what is to come.

 
P&G (PG)

The outlook for P&G could improve even if this week’s results, when it is expected to report its first year-on-year drop in sales since 2017 and the second consecutive quarter of lower earnings, could be rough. Analysts forecast P&G will report a 1.2% drop in revenue to $20.7 billion in the second quarter of its financial year and a 4.1% fall in EPS to $1.59. While beauty is expected to remain strong with a further acceleration in organic growth to 5%, demand for grooming, healthcare, home care, and its array of other products is slowing down. Lower volumes are being countered by rising prices. China’s emergence from Covid-19 provides an opportunity for its prospects to improve and earnings are forecast to return to growth over the coming quarters. P&G is currently anticipating a 1% to 3% fall in annual revenue (with organic growth of 3% to 5%) and a 4% increase in EPS.

Burberry (BURBY)

Burberry has enjoyed a solid year so far despite the tough macroeconomic conditions, having reported double-digit sales growth, improved margins and a rise in profits during the first half of the financial year. Retail revenue is forecast to grow over 30% from last year to £942 million in the third quarter, driven by improved full price sales thanks to the reduced need to discount its goods and the boost seen during the busy holiday shopping season. China will have remained a drag in the period, but investors will hope its reopening can turn this into a tailwind in 2023.

Boohoo

Boohoo has said it is committed to sorting out operational issues as quickly as possible by improving sourcing and inventory management while cutting costs but has warned that revenue will remain under pressure as consumers pullback on spending. With that in mind, investors would be pleased if the analyst forecast from Refinitiv for Boohoo to report sales of £516 million in the third quarter, up from £506.2 million the year before, is accurate. Its current ambition is to keep adjusted Ebitda margins of 3% to 5% over the full year as it continues to grapple with rising costs and waning demand. Its rival ASOS recently impressed shareholders by demonstrating it was making early progress with its turnaround plan, including a reduction in costs, and pointing toward a much better second half to the financial year. The near term will remain challenging but both stocks have risen since the start of 2023 on hopes they can emerge as recovery plays later this year. That raises the pressure on Boohoo to deliver, especially as its share price has also underperformed its rival in the initial weeks of the new year.

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