The heaviest part of the fourth-quarter earnings storm hits this week, with 106 companies set to report results. But the results of just five – all part of the gang of tech giants known as the Magnificent Seven – will play a huge role in pushing collective corporate profit growth into positive territory for the period.
The explosion of numbers will begin Tuesday, with results from two of these seven, Microsoft Corp. MSFT,
and Google’s parent company, Alphabet Inc. GOOGL,
GOOG,
We continue Thursday with three more: online retail giant Amazon.com Inc. AMZN,
Meta Platforms Inc., parent company of Facebook, META,
and Apple Inc. AAPL,
Among the remaining two, electric vehicle maker Tesla Inc. TSLA,
reported last week – with results and forecasts that disappointed investors – while chipmaker Nvidia Corp. NVDA,
will report next month.
Six of the Magnificent Seven are expected to be the top six drivers of earnings per share growth for S&P 500 companies overall for the fourth quarter, according to a FactSet report released Friday. These six are Nvidia, Amazon, Meta, Alphabet, Apple and Microsoft, the company said.
Taken together, the FactSet report says, these six are expected to post a jump in fourth-quarter earnings of 53.7%. If we exclude them, the equation for everyone else gets much worse.
“Excluding these six companies, the decline in blended earnings (which combines actual and estimated results) for the remaining 494 companies in the S&P 500 would be -10.5% for the fourth quarter of 2023,” John Butters, senior analyst, said in the report of FactSet earnings.
Results from the big five tech companies this week will get investors hooked on demand for artificial intelligence, the potential of which launched their stocks higher last year. Markets will also take a fresh look at demand for digital advertising, cloud services and e-commerce, amid lingering concerns about regulations, tighter technology budgets and still-high prices. For Apple, there are signs of declining iPhone demand in China amid growing competition.
For the seven companies in total – and their shares – there are more questions.
Some analysts have suggested that solid gains could occur elsewhere in the S&P 500 index if the Federal Reserve cuts interest rates and thus eases pressure on smaller companies grappling with more debt. Others have questioned how much higher the Mag Seven can remain, after an average gain of 111% last year.
“Mag Seven stocks were really the perfect antidote to what we saw in 2023, when there was a lot of economic uncertainty, but also rising rates,” said Chris Marangi, co-CIO of value at Gabelli Funds, in an interview at the beginning of this article. month. “And where interest rates were rising, they were safe havens.”
He added: “While there are some variations in the Mag Seven, overall, they are more popular today than they were a year ago.”
This week in earnings
Other companies reporting this week include United Parcel Service Inc. UPS,
as rival FedEx continues to face weak shipping demand. Video game developer Electronic Arts Inc. EA,
also reports, following layoffs elsewhere in the industry. The results are also awaited by drugmaker Pfizer Inc. PFE,
coffee chain Starbucks Corp. SBUX,
and appliance manufacturer Whirlpool Corp. WHR,
they are also due. Mastercard Inc. MA,
also reports, after concerns about U.S. shopping trends this month sank rival Visa Inc. V,
Calls to put on the diary
Boeing: David Calhoun, chief executive of jet maker Boeing Co., said this month that the company must own up to its mistakes, after the Alaska Airlines mid-air blowout that grounded dozens of 737 Max 9 jets. The CEO of Alaska Airlines expressed anger. The FAA did the same. United Airlines Holdings Inc. UAL,
he backed out of some of his long-term plans with Boeing. More questions about Boeing’s safety protocols and corporate culture — and, perhaps, some answers — may emerge when Boeing reports results and holds its conference call on Wednesday.
JetBlue: Elsewhere in airline drama, JetBlue Airways Corp. JBLU,
will report results Tuesday as it grapples with a possible solo flying future after a federal judge blocked its merger deal with Spirit Airlines Inc. SAVE,
While the carriers said they appealed that ruling, JetBlue said Friday that the deal may have to end as of Jan. 28, an assessment disputed by Spirit. Expect more commentary from executives as JetBlue looks for ways to revive growth and Spirit tries to repair its finances.
The numbers to keep an eye on
General Motors Sales and Forecast: Car manufacturer General Motors Co. GM,
it will report quarterly results on Tuesday. According to Barron’s, Wolfe Research recently upgraded the stock, citing potential gains from lower interest rates, which would make it easier to take out auto loans. But the company reports slowing growth in EV sales.