Earnings Calendar: Feb 20 – 24

Earnings season in the US will take a brief break for the bank holiday on Monday, but things will swiftly pick up when markets reopen with results due out from retail kingpin Walmart, DIY outlet Home Depot, chipmaker Nvidia, electric vehicle maker Lucid Group, vaccine maker Moderna and cryptocurrency trading platform Coinbase.

In the UK, banks will remain under the spotlight when Lloyds and HSBC round off what has been a mixed bag of results from the sector so far. Miners will also be in play with BHP, Rio Tinto, Anglo American and Antofagasta pencilled-in. There are also earnings due out from hotelier IHG, advertising giant WPP, defense firm BAE, power generator Drax, engine maker Rolls Royce and airline IAG.

Elsewhere, we will also have results out from Chinese firms Alibaba and Baidu, Spanish renewable energy giant Iberdrola, automaker Stellantis, Italian oil producer Eni, German telecom firm Deutsche Telekom and chemicals company BASF, as well as Australian retailer Woolworths.

Walmart (WMT)

Walmart, as the world’s largest retailer and the biggest employer in the US, is always closely watched by the markets as a bellwether for the health of wider economy. US comparable sales are forecast to rise 4.9% in the fourth quarter, marking the slowest growth over the key holiday shopping season in three years. However, a beat could be on the cards considering Walmart has greater exposure to food and drink, which is swallowing up more of consumer’s cash in the inflationary environment. Plus, its store network will have attracted shoppers keen to return to stores following years of shopping online. Its cheaper private label goods are also proving popular. Recent US retail sales also came in stronger than anticipated, and food and furniture were among those to be in particular demand. The bottom-line remains under pressure from rising expenses, including the cost of its 2.3 million-strong workforce, and because margins have wavered because shoppers continue to buy more food and essentials, which offer lower margins than more lucrative discretionary items. Walmart is forecast to report a 4.5% year-on-year rise in revenue in the fourth quarter to $159.7 billion and report a 1.2% decline in adjusted EPS to $1.51.

Home Depot (HD)

We will see Home Depot suffer a slowdown in the fourth quarter. Its ability to keep lifting prices is waning after two years of price increases and, while its greater exposure to professional clients is helping lift demand for bigger-ticket items this too is expected to slow this year. Home Depot could disappoint markets. It has said it is aiming to deliver 3% comparable sales growth over the full year, but analysts think it will fall short in the fourth quarter (with a 0.3% rise pencilled-in) and will therefore post slower growth of 2.6%.  Revenue is expected to rise just 0.6% in the fourth quarter to $35.9 billion and a 1.7% rise in EPS to $3.27. The guidance for the new financial year will be influential, with Wall Street anticipating Home Depot can target comparable sales growth of 2%.

Nvidia (NVDA)

Brokers have become bullish on Nvidia as markets get excited about the prospects of artificial intelligence, with several having highlighted that the chipmaker will be a major beneficiary as its products help provide the huge amount of computing power needed for the new technology. However, while long-term prospects look strong, we may see some pullback in early 2023 as oversupply issues are ironed out. With this in mind, Nvidia is expected to report a sharp 21% fall in revenue to $6.0 billion and a 38% drop in adjusted EPS to $0.81. Softer demand from the gaming market and from original equipment manufacturers will drag down results, countered by continued strength in automotive and data centres – although the latter is also suffering from a severe slowdown this quarter. Some hope AI can provide a new cushion to soften the blow from the broader downturn, but there are questions about how quickly any benefits will feed through to Nvidia. The outlook for the second half still looks rosier than the first.

Coinbase (COIN)

It will be another rough quarter for Coinbase as the crypto winter could push user numbers and trading volumes to their lowest level in two years. Coinbase is trying to grow its subscription business to diversify income and in search of new, more reliable revenue streams. It is also being more disciplined with costs and this will limit adjusted Ebitda losses to below $500 million in 2022. Consensus points toward a small loss in 2023, making breakeven at the adjusted Ebitda level a possibility. The recovery in cryptocurrency markets in early 2023 provides some hope and has allowed Coinbase shares to surge. That will put pressure on the outlook. You can find out more in our Coinbase Q4 Earnings Preview.

Alibaba (BABA)

It is a big week for Chinese stocks with a number of tech firms set to report, and atop the agenda is Alibaba. It can sometimes be forgotten that Alibaba is an ecommerce giant first and everything else second. This provides all the profits and demand here remains under pressure, but the reopening of the economy provides scope for an improved outlook. Investors will be keen to hear how the Chinese consumer is faring since the country abandoned its fight against Covid-19. Cloud computing will remain a bright spot for topline growth, but this too is suffering from a slowdown like its Western rivals. Losses from its international arm and its local services division should narrow as it heightens its attention on costs and efficiency. Revenue is forecast to rise by a tepid 1.4% to RMB245,874 million and adjusted EPS is expected to fall 5.2% to RMB16. Markets believe Alibaba can eek out revenue and earnings growth over the full year to the end of March 2023, and confirmation would be welcomed by the markets.

HSBC

HSBC will see its topline benefit from higher interest rates, but earnings dragged lower by provisions in 2022. It is forecast to book some $3.1 billion worth of provisions put aside for potentially bad loans as banks remain uncertain about the economic outlook. That will make a substantial dent considering it released reserves and boosted profits by over $900 million in 2021. Commentary on the outlook for 2023 will be key here considering markets believe provisions will soar another 35% to $4.3 billion in 2023. China’s reopening may allow some reversals to be made here, but markets believe the cost of risk will be higher than what HSBC has guided for now. On a brighter note, HSBC has impressed the markets with its cost control efforts this year. In fact, operating expenses should be over 3.5% lower in 2022 at $33.4 billion compared to the year before. Investors will hope HSBC can find more savings after identifying more wiggle room in the last quarter. Currently, markets believe expenses can fall another 5.8% in 2023, suggesting expectations are high. You can read more in our HSBC 2022 Earnings Preview.

Lloyds (LYG)

Lloyds will round-off the earnings season for UK banks when it reports next week. We have seen the other major UK-focused bank NatWest fall today as a strong performance in 2022 was overshadowed by a weaker outlook for 2023, which has dragged down the Lloyds share price and made investors nervous. Revenue will have grown in 2022 thanks to higher interest rates and, despite being dragged down around £1.4 billion of provisions, pretax profit is expected to rise 1.8% to £7.0 billion. Lloyds upgraded its net interest margin in the last quarter and the guidance for 2023 will be key, with markets hoping it can hit 3.1%. Provisions will continue to rise to around £2.0 billion this year, but Lloyds is proving effective with expense control considering its cost-to-income ratio sits below its rivals. The shape of the housing market will hang over the business considering it is one of the largest mortgage providers in the UK.

Rio Tinto (RIO)

We know that shipments of iron ore, its key commodity, were flat in 2022. Production of most other metals including copper and bauxite increased, countered by a drop in aluminium output. Still, prices have eased from the heights we saw in 2021 and this is expected to result in net operating cashflow falling to $20.1 billion from $25.3 billion. That has resulted in lower amounts of cash being returned to investors, although they are still receiving more cash than usual. The annual dividend is expected to be 526 cents, down from 793 cents the year before (this excludes special payouts), according to consensus numbers from Reuters. This will be the first update since Rio Tinto completed its acquisition of Turqouise Hill Resources for $3.1 billion, which has bolstered its ownership over the key Oyu Tolgoi mine in Mongolia.

Rolls Royce (RYCEY)

It could be a big week for Rolls Royce. CEO Tufan Erginbilic informed employees last month that the company must change the way it works because its current performance is ‘unsustainable’, according to the Financial Times. ‘Every investment we make, we destroy value,’ he told staff, adding that ‘we underperform every key competitor out there’. The boss described the company as a ‘burning platform’ and launched a transformation program, which could lead to more job cuts. All of this could be outlined when it reports results. Annual underlying revenue is expected to be up around 7% in 2022 and analysts are looking for underlying operating profit, its headline measure, of £489.1 million, up 18% from the year before. While that will be welcome, the key metric will be free cashflow with markets hoping it can squeeze out £96 million worth of cash in 2022 before staging a bigger recovery in 2023.

BAE Systems (BAESY)

Markets believe defense giant BAE Systems will beat its own targets when it releases annual earnings. Analysts forecast revenue will rise 7.9% in 2022 to £22.98 billion, well ahead of the 2% to 4% guidance, and that underlying earnings per share will rise over 12% to 54p from 47.8p the year before, also ahead of the 4% to 6% growth provided in its outlook. The stronger dollar will help deliver that beat, but it shouldn’t take away from the fact that demand for defence remains strong. BAE launched a new £1.5 billion buyback in the first half. This is a three-year program with around two-thirds of it set to be returned by the end of 2023, but we could see this pulled forward if cashflow remains healthy.

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