With third-quarter corporate earnings season well underway, corporate America appears to be performing better than expected. Despite steep drops in growth for companies involved in energy and raw materials, earnings from S&P 500 companies have slipped by just 2.43 percent.
This isn’t bad considering that most projections expected earnings growth to slow by more than 5 percent on concern over the slowdown in the Chinese economy. The strong U.S. dollar -- which is up about 15 percent since last year against a basket of major world currencies -- has also made U.S. exports more costly and has battered sales made in foreign currencies. Those factors aren’t going away anytime soon.
“With the slowdown in China and with the strong dollar, a lot of companies reset expectations a little lower ahead of the earnings cycle,” said David Schiegoleit, managing director of investments at U.S. Bank Wealth Management. “And one of the things we’ve observed is that earnings forecasts have been a little pessimistic, but forward-looking guidance for the next 12 months is a little too optimistic.”
In other words, while third-quarter earnings season has been better than expected, analysts are lowering their expectations for growth over the next year. The effect of the strong U.S. dollar has yet to work its way through corporate earnings, said Schiegoleit.
This week will see important earnings reports from big U.S. names, like Visa and Walt Disney, as well as widely watched stock market newcomers Etsy and Shake Shack. By Friday, about 87 percent of S&P 500 listed companies will have reported their July-September earnings reports.
Here are some of the forecasts for companies reporting earnings this week. Forecasts are based on economists polled by Thomson Reuters:
Visa Inc. (NYSE:V) will report earnings Monday before markets open in New York. The San Francisco-based payments processing giant is expected to report in its July-September quarter $3.57 billion in revenue, up from $3.23 billion in the same period last year, a 10.5 percent increase. Net income is seen rising from $1.36 billion, or 55 cents per share, to $1.53 billion, or 63 cents per share. Visa’s shares are trading at around $78, up nearly 19 percent since the start of the year.
KBR Inc. (NYSE:KBR) will also post its July-September quarter before markets open on Monday. The Houston-based engineering, construction and logistics company that often wins government military contracts is expected to report lower revenue but higher profit. Revenue is expected to drop nearly 20 percent, from $1.66 billion in the year-ago period to $1.33 billion in the third quarter. Net income, however, is seen increasing from $30.0 million, or 21 cents per share, to $39.8 million, or 28 cents per share. KBR’s links to the energy sector have negatively impacted its business. KBR is trading at around $18 per share and its stock value has increased by nearly 9 percent this year.
Kellogg Company (NYSE:K) will report its July-September earnings on Tuesday before markets open. The Michigan-based maker of breakfast cereals and snacks is expected to post nearly 6 percent less revenue, from $3.64 billion to $3.43, compared with the same period last year. Net income, however, is seen increasing from $224.0 million, or 62 cents per share, to $279.3 million, or 79 cents per share. Kellogg is trading at around $70 per share and the company’s stock price has advanced by nearly 8 percent this year.
Etsy Inc. (NASDAQ:ETSY), the online marketplace of consumer-made crafts, jewelry, stationery and other goods, will release its third earnings report since the company went public earlier this year. The tiny Brooklyn-based company facing off against retail giant Amazon.com in the handmade-goods business is forecast to grow revenue from $47.6 million in the July-September period of 2014 to $66.2 million in the same period this year. Losses are expected to narrow, from $6.3 million to $3.4 million. Etsy’s stock is trading at around $11 per share and it’s lost almost 64 percent of its value since the company’s April 17 IPO.
Tesla Motors Inc. (NASDAQ:TSLA) will report its third-quarter results on Tuesday after markets close. The Silicon Valley luxury electric car maker is expected to grow its adjusted revenue by 35 percent in the July-September quarter, to $1.26 billion, from $932.4 million in the same period last year. Analysts expect Tesla to post a fully reported loss of $95.5 million, greater than the $74.7 million in the year-ago period. Adjusting for certain charges and revenue streams that are not recognized by generally accepted accounting principles, Tesla is forecast to lose $55.5 million compared with a $3.17 million gain in the same period last year. Tesla stock is trading at around $207 per share and it’s lost nearly 7 percent of its value.
Twenty-First Century Fox Inc. (NASDAQ:FOXA) will report earnings on Wednesday before markets open. The New York-based media and entertainment company is expected to report a small drop in revenue, from $6.44 billion in the July-September quarter last year, to $6.42 billion in the same period this year. Net income is expected to fall from $1.04 billion, or 39 cents per share, to $758.8 million, or 38 cents per share. The company’s shares are trading at around $31 and have lost 20 percent of their value this year.
Facebook Inc. (NASDAQ:FB) will post its earnings results on Wednesday after markets close. The Silicon Valley social networking site is forecast to report a 36.6 percent rise in revenue, from $3.20 billion in the third quarter of 2014 to $4.37 billion in this year’s third quarter. Net profit is seen dropping 3.8 percent, to $771.2 million, or 27 cents per share, in the three months ended September.
Whole Foods Market Inc. (NASDAQ:WFM) will post earnings after markets close Thursday. The Austin, Texas-based high-end grocer is expected to report a 6.4 percent rise in revenue, from $3.26 billion in the July-September quarter of last year to $3.47 billion in the same period this year. Net income is seen dropping year over year from $128.0 million to $124.6 million. Earnings per share is expected to remain unchanged between the two quarters, at 35 cents.
Shake Shack Inc (NYSE:SHAK) will report its first July-September quarterly results on Thursday after markets close. The small New York-based fast-casual burger and frozen custard company went public in February. The revenue forecast for the chain is $47.46 million, a slight quarter-to-quarter drop from $48.45 million in the three months ended June. Net income is expected to jump from quarter to quarter, from $1.12 million, or 8 cents per share, to $2.68 million, or 10 cents per share. Shake Shack stock is trading at around $46 and it’s lost nearly 1 percent of its value since its February IPO.
Walt Disney Co. (NYSE:DIS) will report earnings Thursday after markets close. The Burbank, California, media and entertainment giant is expected to grow its revenue from $12.39 billion in its July-September quarter of last year to $13.55 billion in the same quarter this year. Net income is forecast to rise from $1.50 billion, or 86 cents per share, to $1.95 billion, or $1.14 per share. Disney’s stock is trading at around $114 and its price has risen by nearly 21 percent this year.