Apple, Tesla and Facebook ready to report record sales in busiest week of earnings

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
SPX
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.
AAPL
and Facebook Inc.
FB
are among the highlights of next week’s slate, along with Tesla Inc.
TSLA,
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

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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
DJIA
components.

Up in the air

Boeing Co.’s
BA
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.
AAL
and Southwest Airlines Co.
LUV
offer more on Thursday morning.

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Can you hear me now?

Verizon Communications Inc.
VZ
leads off a busy week of telecommunications earnings Tuesday morning, followed by AT&T Inc.
T
Wednesday morning and Comcast Corp.
CMCSA
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.

Full preview: AT&T earnings to kick off a defining year for telecom giant

AT&T and Comcast have more media exposure than Verizon, and those two companies have been trying to contend with the new realities brought on by the pandemic. Both companies have made moves to emphasize streaming more with their film slates given theater closures, and the financial implications of these moves will be worth watching.

Paying up

The evolving situation with the pandemic is reflected perhaps no more clearly than in the results of Visa Inc.
V,
Mastercard Inc.
MA,
and American Express Co.
AXP,
which have a pulse on the global consumer spending landscape. The companies should provide insight on a travel recovery toward the end of the year, as well as the impact of recent lockdowns.

Susquehanna analyst James Friedman wrote recently that his Mastercard revenue projection of $3.97 billion is slightly below the consensus view, though he also asked: “does anyone really care about Q4 2020?” Friedman is upbeat about mobile-payments and online-shopping dynamics that suggest “positive trends ahead” for Mastercard, which reports Thursday morning. Visa follows that afternoon, while American Express kicks of the week with its Tuesday morning report.

The chip saga continues

Advanced Micro Devices Inc.
AMD
is poised to keep benefiting from Intel Corp.’s
INTC
stumbles, which analysts expect to last for some time even as Intel prepares for a new, technology-oriented chief executive to take the helm.

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“We have low confidence that Intel will be able to close that transistor gap quickly, and therefore expect it to continue to lose share for the foreseeable future,” Jefferies analyst Mark Lipacis wrote after Intel’s latest earnings report. AMD will show how that dynamic has played out on its side of the equation when it posts numbers Tuesday afternoon.

Full preview: If Intel gets its act together, can AMD maintain swollen valuation?

Other chip makers reporting in the week ahead include Texas Instruments Inc.
TXN
on Tuesday afternoon; Xilinx Inc.
XLNX,
which is in line to be acquired by AMD, on Wednesday afternoon report, when it will be joined by chip-equipment maker Lam Research Corp.
LRCX
; and Western Digital Corp.
WDC
on Thursday afternoon.

Busy week for the Dow

Among the 13 members of the Dow Jones Industrial Average
DJIA
set to report this week are 3M Co
MMM.
, Johnson & Johnson
JNJ,
American Express, Verizon, and Microsoft Corp.
MSFT,
all of which report Tuesday.

“Near term, we see the company’s COVID-19 vaccine readout as a key upcoming catalyst and believe efficacy in the 80%+ range would suggest a clear role for the product in the market,” J.P. Morgan analyst Chris Schott wrote of Johnson & Johnson.

Cowen & Co. analyst J. Derrick Wood sees tough comparisons for Microsoft especially in its Azure and server businesses, though he expects a more favorable situation going forward.

Full preview: SolarWinds hack may actually be a good thing for Microsoft

Wednesday brings results from Boeing and Apple, while Thursday features McDonald’s Corp.
MCD,
Dow Inc.
DOW,
and Visa. Honeywell International Inc.
HON,
Chevron Corp.
CVX,
and Caterpillar Inc.
CAT
round out the week Friday morning.

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