Here’s what the Earnings Season is telling us about the market

02:12, 22 November 2019

The latest quarterly corporate earnings reports are coming to a close.


The latest quarterly corporate earnings reports are coming to a close. 

More than 95% of companies in the benchmark S & P 500 have already posted their latest-quarter financial figures, with the vast majority coming in the past month or so.

So now it is the best time to take a closer look at some of these stocks and see what they can tell us about the U.S economy.

Payments Giants: Mastercard vs. PayPal

paypal-mastercard

The payments space is one of the most attractive sectors for stock traders. Lately, all the major players in this industry have benefitted from the switch toward electronic systems, a trend that doesn’t seem to go away too soon. Mastercard and PayPal are, of course, no different.

Both have recently expanded their business with a string of acquisitions and strategic moves: Mastercard ventured into more-direct B2B and peer-to-peer payments, while PayPal bought iZettle (a Swedish software company) and made an investment in Uber and e-commerce company MercadoLibre.

Their Q2 Earnings showed strong results on all key metrics: transaction growth, revenue growth, and operating income growth. But how did the numbers translate to this time around?

Mastercard

Mastercard earnings beat analysts’ expectations, which sent its stock soaring in pre-market trading following the report. Here’s what the company announced:

  • Earnings per share: $2.15 adjusted, vs. $2.01 forecasted
  • Revenue: $4.47 billion, vs. $4.42 forecasted
  • Gross dollar volume: $1.7 trillion, vs. $1.5 trillion in Q3 2018
  • Domestic dollar volume: $494 billion, vs. $442 billion during the previous third quarter

According to TipRanks and based on 18 analysts offering 12-month price targets in the last three months, the average price target for Mastercard stock is $316.13 (13.69% increase from the previous price).

PayPal

PayPal earnings also beat analysts’ expectations, boosting its stock value as much as 9% in the aftermarket. Below you can read what the company reported:

  • Earnings per share: $0.61, vs. $ 0.58 forecasted
  • Revenue: $4.38 billion, vs. $4.35 billion forecasted
  • Total payment volume: $179 billion, vs. $177.4 billion forecasted
  • Total peer-to-peer volume for all PayPal products: $51 billion and represented 28% of Total payment volume

According to TipRanks and based on 21 analysts offering 12-month price targets in the last three months, the average price target for PayPal stock is $127.11 (24.47% increase from the previous price).

The entertainment Sector: Netflix vs. Disney

netflix-disney

Online content-on-demand is the new best thing in the entertainment industry. This fall, both Apple and Disney entered this niche, challenging the long-time king Netflix and spicing up things for traders.

Going back to Disney, we already have an official figure for its streaming service Plus: 10 million subscribers since launching early last Tuesday. Add to that another 28 million subscribers on Hulu, which is owned by Disney. 

On the other side, Netflix has gathered almost 160 million subscribers in 10 years, but growth seems to slow down as spending increases.

Both Disney and Netflix had mixed Q2 earnings reports, so it was interesting to see how things would fare now.

Without any further ado, it’s time to check the numbers:

Netflix

Netflix’ s Q3 report boosted the company’s stock as much as 7.6% in after-hours trading due to earnings and year-over-year revenue significantly exceeding expectations. Here’s how things turned out:

  • Earnings per share: $1.47, vs. $1.05 forecasted
  • Revenue: $5.24 billion, vs. $5.25 forecasted
  • International Subscriber growth: 6.3 million net adds, vs. 6.2 million forecasted
  • U.S Subscriber growth: 500.000 paid net additions, vs. 800.000 forecasted

According to TipRanks and based on 31 analysts offering 12-month price targets in the last three months, the average price target for Netflix stock is $373.69 (31.99% increase from the previous price).

Disney

Disney announced earnings figures that impressed Wall Street due to the company’s aggressive streaming plans. More about their latest financial report below:

  • Earnings per share: $1.07, vs. $0.95 forecasted
  • Revenue: $19.1 billion, vs. $4.42 forecasted
  • Direct-to-consumer revenue: $3.43 billion, vs. $825 million a year ago
  • Media networks revenue rose 22% to $6.51 billion 

According to TipRanks and based on 17 analysts offering 12-month price targets in the last three months, the average price target for Disney stock is $154.29 (3.75% increase from the previous price).

The Retail Battle: Amazon vs. Walmart

walmart-store

Two of the largest retail companies in the U.S, Amazon, and Walmart, have constantly gone toe-to-toe with new offerings and innovations. 

The competition will even get tighter in the future due to the battle between physical sales and online sales between them.

In the physical stores’ department, Walmart plans to open 1,600 stores for grocery delivery and 3,100 stores with grocery pickup by the end of 2019, while Amazon revealed its plan to build 3000 Go Stores by 2021.

In online, Walmart is continuously expanding its variety of products and is looking to sign good partnerships with brands such as Lord & Tylor or Fanatics. Amazon focuses on developing its in-house brands, besides enlarging its offerings.

Overall, it's always been a very close battle between Amazon and Walmart. What about this specific earnings report? Let’s check it out.

Amazon

Amazon’s earnings fell short of expectations, causing its stock to tumble down in after-hours trading. However, in terms of revenue, the company outperformed the forecasted figures. Here’s what the numbers showed:

  • Earnings per share: $4.23, vs. $4.62 forecasted
  • Revenue: $70 billion, vs. $68.8 billion forecasted
  • Amazon Web Services: $9 billion, vs. 9.1 billion forecasted

Additionally, Amazon’s fourth-quarter revenue guidance was estimated at $80 billion to $86.5 billion, below Wall Street’s average estimate of $87.4 billion.

According to TipRanks and based on 35 analysts offering 12-month price targets in the last three months, the average price target for Amazon stock is $2.182 (24.49% increase from the previous price).

Walmart

A strong grocery business supported Walmart’s impressive online sales growth in the third quarter, but revenue didn’t quite match the expectations

  • Earnings per share: $1.16 adjusted, vs. $1.09 forecasted
  • Revenue: $127.99 billion, vs. $128.65 billion forecasted
  • U.S sales: up 3.2%, vs. 3.1% forecasted

Following this report, Walmart now expects EPS for the fiscal year 2020 to go up even higher in comparison to last year.

According to TipRanks and based on 22 analysts offering 12-month price targets in the last three months, the average price target for Walmart stock is $123.24 (1.87% increase from the previous price).

 

Sources: cnbc.com, marketrealist.com, forbes.com, fool.com, finance.yahoo.com, tipranks.com, finviz.com, investors.com, techrunch.com

 

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