Earnings reports this week will reveal just how much a strengthening dollar affected the revenue and profit of U.S. energy, technology, auto and media companies at the end of last year. It will also signal whether analyst expectations that big U.S. corporations boosted fourth-quarter earnings an average of 5 percent over year-earlier levels will be realized.
One concern stems from the fact that a stronger dollar lessens the value of overseas revenue and slows earnings growth.
"The percent of revenues coming to S&P 500 firms from exports is in the region of 45 percent. That's got to be a major concern for the Federal Reserve," said David Louton, professor of finance at Bryant University. "Although we're not really an export economy anymore, anything that puts a damper on exports is bad news for the U.S. consumer and the economy as a whole. So the Fed is backed into a corner now."
Analysts polled by Thomson Reuters expect, on average, earnings growth of 5 percent.
The Federal Reserve vowed last week to remain “patient” before raising interest rates, which are currently at historic lows. Most economists interpreted the Fed's most recent statement as meaning there won't be interest rate hikes before mid-2015.
Ahead on this week's earnings calendar, London-based company BP will report Tuesday following a series of mixed reports from the energy sector after oil prices have lost more than half of their value in the last seven months, dropping more than 40 percent since June. Earnings from the energy sector are expected to tumble 25 percent in the fourth quarter, according to Reuters data, a much larger decline than the previous expected drop of 19.8 percent forecast at the beginning of the year.
Wednesday, auto giant General Motors Company will turn in results after Ford Motor Company's earnings beat forecasts last week, while revenue came in light. Analysts will be watching if the holiday season helped boost GM's auto sales in the fourth quarter.
Meanwhile, social networking giant Twitter Inc. and professional networking site LinkedIn Corp. will post earnings Thursday following mixed results from Google Inc. and Facebook Inc. last week. Information technology has moved into the third spot for highest sector growth for the fourth quarter, according to research from Estimize, which expects the IT sector’s net income to grow 12.3 percent and sales to increase 7 percent.
Here’s a deeper look at the energy, technology, auto and media companies reporting this week.
Ahead of the opening bell Tuesday, British oil and gas conglomerate BP plc (NYSE:BP) will post earnings results after Exxon Mobil Corporation, Chevron Corporation, ConocoPhillips and other oil giants recorded profit declines last quarter. The energy sector is projected to be the biggest laggard in the S&P 500 this earnings season, as the drop in crude oil prices has forced many energy companies to announce budget cuts to compensate for falling prices.
Wall Street expects BP to report fiscal fourth-quarter net income of $1.88 billion, or earnings per share of 13 cents, on revenue of $66.93 billion, compared with a profit of $2.81 billion, or earnings per share of 6 cents, on revenue of $93.72 billion a year ago.
In the last six months, shares of BP have lost 9.67 percent to $439.22.
Walt Disney Co.
When the U.S. financial markets close Tuesday, Walt Disney Co. (NYSE:DIS) is slated to post its latest quarterly results after the company met Wall Street expectations on earnings last quarter, while costs of the company's media networks segment weighed on results.
The company, which owns the ESPN and ABC television networks, said revenue from its cable and broadcasting sectors rose to $5.22 billion, up 5 percent from a year ago but below the $5.25 billion analysts had expected.
Analysts expect Walt Disney Co. to report fiscal first-quarter net income of $1.83 billion, or earnings per share of $1.08, on revenue of $12.87 billion, compared with a profit of $1.85 billion, or earnings per share of $1.03, on revenue of $12.31 billion a year ago.
In the last three months, shares of Walt Disney Co. have gained 0.24 percent to $92.55.
General Motors Company
Ahead of the opening bell Wednesday, auto giant General Motors Company (NYSE:GM) will turn in results after the company’s earnings beat estimates in the third quarter, driven by strong sales growth in its North American segment. Meanwhile, revenues were flat and fell short of expectations. GM’s North American sales volumes and profit rose sharply last quarter, helping offset weakness in Latin American and European markets.
Ahead of the company's report, Wall Street will analyze last month's motor vehicle sales from GM, Chrysler, Ford and others scheduled for release on Tuesday. Economists expect total U.S. motor sales edged down to 16.5 million in January from 16.8 million in December.
Previous data showed Black Friday deals pushed November car sales in the U.S. to the highest level in more than a decade, making the Thanksgiving holiday weekend one of the highest discount periods of the year for auto companies. General Motors Co. posted its best U.S. November sales since 2007, as total sales jumped 6 percent during the same period a year ago. The company delivered 225,818 vehicles in November, and GM estimates the seasonally adjusted annual selling rate (SAAR) for light vehicles in November was 17.1 million, the company’s highest November SAAR since 2003.
General Motors Co. is expected to post fiscal fourth-quarter net income of $1.42 billion, or earnings per share of 80 cents, on revenue of $40.12 billion, according to analysts polled by Thomson Reuters. That compares with a profit of $1.15 billion, or earnings per share of 57 cents, on revenue of $40.49 billion during the same period a year ago.
In the last three months, shares of General Motors have gained 5 percent to $33.
Social networking giant Twitter Inc. (NYSE:TWTR) will post quarterly results following the closing bell Thursday after disappointing investors in October when the company lowered its earnings outlook for the fourth quarter. The tech firm's fourth-quarter guidance is in the range of $440 million to $450 million. Analyst estimates for that quarter averaged $448 million.
Analysts will be eyeing the company’s overall user growth and mobile advertising growth, which accounted for 85 percent of the company’s total advertising revenue. The company announced it had grown by 13 million monthly active users (MAUs) to 284 million last quarter, a 23 percent year-over-year increase. Average mobile monthly active users represented around 80 percent of total MAUs.
Twitter is forecast to issue fiscal fourth-quarter net income of $41.96 million, or earnings per share of 6 cents, on revenue of $453.34 million, compared with a profit of $9.77 million, or a loss of $1.41, on revenue of $242.68 million a year ago.
In the last three months, shares of Twitter have dropped 7.41 percent to $38.56, and in the last 12 months shares have tumbled $42.94 percent to $43.50.
Analysts will focus on mobile user growth when professional networking site LinkedIn Corp. (NYSE:LNKD) reports its latest earnings Thursday, as well as the company’s multi-app portfolio strategy as mobile now accounts for 47 percent of total traffic to LinkedIn, according to the company’s third-quarter earnings report.
LinkedIn Corp. is expected to report fiscal fourth-quarter net income of $67.13 million, or an earnings per share loss of 8 cents, on revenue of $616.93 million, compared with a profit of $48.24 million, or earnings per share of 3 cents, on revenue of $447.22 million a year earlier.
Shares of LinkedIn Corp. have lost 4.86 percent of their value to $223.90 in the last three months and have gained 2.95 percent to $196.53 in the last year.