US earnings season is at full throttle

Hang Seng

Hong Kong's Hang Seng lost ground overnight after the People's Bank of China kept loan prime rates steady at its January fixing. The one-year LPR remains at 3.45% and the five-year rate at 4.2%. It came as no surprise after the People's Bank of China (PBOC) kept its medium-term facility rate steady the previous week. Since the start of the year, the Chinese yuan has been weakening against the dollar, giving the PBOC little room to manoeuvre. A rate cut at this stage would further depreciate the Yuan.

The Bank of Canada

This week, three major central banks are due to decide on their monetary policy. On Tuesday, the Bank of Japan will also publish its quarterly outlook report. It will be followed by the Bank of Canada decision on Wednesday and the European Central Bank (ECB) decision on Thursday.

Macroeconomic indicators

Also, a few macroeconomic indicators will give the markets and central bankers food for thought this week. On Wednesday, manufacturing and services PM Flash will be released around the world. Apart from service activity in Japan, the UK, and the US, every reading is expected to remain below 50 in January. Then on Thursday, Germany's business climate and a preliminary reading of the US Q4 gross domestic product (GDP) growth rate. And on Friday, the US core personal consumption expenditures (PCE) price index.

US earnings season

The US earnings season will resume at lunchtime with a report from United Airlines. The Street anticipates earnings of $1.70 per share for the October–December quarter, to be compared with $2.46 recorded in the same quarter a year ago. Revenue is expected to rise to $13.54 billion from $12.40 billion in Q4 2022. Expected earnings per share (EPS) are also substantially lower than the $3.65 posted three months ago. In October, United Airlines warned that Q4 would suffer from higher costs as it forecast its average fuel bill to increase by 11% in Q4. During the past three months, the stock has recovered a bit, but it bears no comparison with the drop from the July 2022 high.

After a relatively quiet week, the pace of US earnings publication will really accelerate tomorrow when the markets expect reports from Netflix, J8, GE, P8G, and Verizon. On Wednesday: IBM, Tesla, and AT&T, followed on Thursday by Intel, Visa, and American Airlines.

Netflix

Netflix is scheduled to report earnings on Tuesday after the close of US markets. The street expects earnings of $2.20 per share on revenue of $8.71 billion. Netflix had previously said it anticipated the continuation of robust user growth momentum. According to its own forecast, Q4 revenue is projected to increase by 11% year-over-year. The net addition of paid memberships is projected to be close to the previous quarter, potentially with another 8–9 million new subscribers.

Tesla

As for Tesla, analysts anticipate earnings of 72 cents per share. Revenue is seen at $25.52 billion. Once again, one key metric for investors is margin. Throughout the year, Tesla has been cutting its vehicle prices, focusing, as Elon Musk pledged about 12 months ago, on sales rather than margins. Automotive gross margins topped Q1 at 30%. They were down 16.3% in Q3. Investors want to know where the bottom is.

American Airlines

Big day for the Airlines sector On Thursday, the main company releasing the quarterly report was American Airlines Earnings are expected at 11 cents per share. Revenue should come in at just over $13 billion. Strong demand, both domestic and international, is likely to have played in American Airlines' favour. But the market will be looking at the total value per available seat mile. For Q4, it is expected to be down between 5.5% and 7.5%year-onyear (YoY).