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02 Feb, Thursday
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Bull Trader USA

Earnings playbook: How to trade the back half of the reporting season, including a major chip name

The back half of the earnings season gets underway this week, with key companies across different sectors set to report. AMD, Clorox and Starbucks are among the roughly 150 S & P 500 components that will announce results. For the most part, the season has been better than expected. FactSet data shows that slightly more than 70% of the S & P 500 that have reported earnings have beaten earnings expectations. Among those are industrial giants Caterpillar and Honeywell . To be sure, there have been some big disappointments, such as Meta Platforms and Alphabet . Check out some of the key companies slated to post results this week, and what investors can expect out of each report. Tuesday Advanced Micro Devices is set to report earnings after the bell, followed by a conference call at 5 p.m. ET. Last quarter: AMD reported earnings and revenue that beat expectations, but the stock fell after the chipmaker issued a disappointing forecast . This quarter: Earnings per share are expected to fall more than 6% even though revenue is projected to post double-digit gains, according to Refinitiv. What CNBC is watching: Falling demand for personal computers and supply chain issues are weighing on the chipmaker’s results. Earlier this month, AMD slashed its revenue forecast by 16%. Investors will be focused in on the company’s outlook. They will want to know if there are any signs that the PC market is nearing a bottom. Some analysts viewed slowing data center revenue at rival Intel as a sign that AMD may be gaining market share here. Investors will be looking to hear more on that on the call. What history shows: AMD averages a 1.5% share gain on earnings days despite the company beating bottom-line estimates about 77% of the time, Bespoke Investment Group data shows. However, FactSet data shows that AMD has beaten expectations in 10 of the last 11 quarters. Clorox is set to report earnings after the close. Management is scheduled to hold a call at 5 p.m. ET. Last quarter: CLX posted slightly disappointing revenue and forecast a decline in fiscal year revenue. This quarter: The maker of household cleaning products is expected to post steep declines in both earnings and revenue. Analysts estimates are calling for a more than 38% drop in earnings per share, while revenue may sink more than 6%, according to Refinitiv estimates. What CNBC is watching: Investors will likely want to know if the company is seeing consumers trade down to less expensive products as inflation continues to chip away at household budgets, particularly among lower-income consumers. They also likely will want to hear more about whether there is any fallout from a recent recall of its Pine-Sol cleaning products. Management has been trying to squeeze out costs and raise prices to offset higher raw material prices. What history shows: Clorox earnings have beaten expectations 76% of the time, per Bespoke. However, the stock typically struggles on earnings days, losing an average of 0.27%. Wednesday Yum Brands is set to report earnings before the bell, with management holding a call at 8:15 a.m. ET. Last quarter: YUM reported stronger sales for its Taco Bell business, but said that lockdowns in China hurt KFC sales . This quarter: Yum is expected to see a small increase in revenue year over year, but EPS will likely be nearly 6% lower than it was last year, according to a Refinitiv analyst survey. What CNBC restaurants reporter Amelia Lucas is watching: Other restaurant companies have seen traffic shrink as consumers worldwide reckon with inflation. Like its rivals, Yum and its franchisees have raised menu prices to mitigate higher costs, resulting in lower-income consumers spending less at KFC, Pizza Hut and Taco Bell last quarter. Investors will be watching to see if the trend accelerates. Lockdowns in China will also likely hurt Yum’s results this quarter. What history shows: Yum has missed earnings expectations in the last three quarters, according to FactSet. However, the company’s stock has risen in two of those earnings days. EBay is set to report earnings after the bell, followed by a call at 5 p.m. ET. Last quarter: EBAY shares dropped after the online goods seller issued light earnings guidance . This quarter: Despite an expected drop of more than 7% in revenue, eBay could see profits rise by about 3%, according to analysts surveyed by Refinitiv. What CNBC tech reporter Annie Palmer is watching: EBay CEO Jamie Iannone has been investing heavily in high-spending users, called enthusiast buyers, and so-called focus categories like jewlery, sneakers and collectibles. That helped the company deliver better-than-expected earnings last quarter, despite a slowdown in consumer spending amid the slowing economy. Analysts will be listening to what the company has to say about macro pressures going forward, along with any guidance for the holiday quarter. What history shows: EBay has topped earnings per share expectations in the last 16 quarter, per FactSet. However, Bespoke data shows the stock averages a 0.14% decline on earnings days. Thursday Moderna is set to report earnings in the premarket. Management is slated to hold a call at 8 a.m. ET. Last quarter: MRNA ‘s earnings beat expectations, but the company wrote off $500 million in expiring Covid shots . This quarter: The biotech company is expected to post a more than 57% decline in profits on a 29% drop in revenue, according to Refinitiv. Demand for its Covid-19 vaccine has waned, as some consumers have been slow to roll up their sleeves for booster shots. What CNBC is watching: Investors are eager for more color on demand and pricing for Covid booster shots. It will be interesting to see what management expects in the months ahead should Covid cases surge in the winter. Moderna has said that it could charge as much as $100 a dose for shots once payment shifts to private insurers. Amid pandemic fatigue, investor interest has shifted to the company’s pipeline and shareholders will want updates on its progress. What history shows: Moderna’s earnings per share have beaten expectations in seven of the last 10 quarters, according to FactSet. Starbucks is set to report earnings after the bell, with corporate leadership set to hold a conference call with analyst at 5 p.m. Last quarter: SBUX reported better-than-expected earnings, thanks in part to strong U.S. demand for cold drinks . This quarter: Despite a projected 2% increase in revenue, analysts expect Starbucks profits to fall nearly 28%, according to Refinitiv. What CNBC restaurants reporter Amelia Lucas is watching: Last quarter, interim CEO Howard Schultz told investors that inflation wasn’t hurting demand for Starbucks coffee. Wall Street wants to know if that’s changed, especially as many other restaurant chains report declining traffic. Investors also want more details on the progress of its reinvention strategy, which it unveiled last month. Although Schultz still leads the company, incoming CEO Laxman Narasimhan could make an appearance on the quarterly conference call. What history shows: Starbucks has beaten earnings expectations just 54% of the time, according to Bespoke. However, the stock averages a gain of 0.6% on earnings days. PayPal is set to report earnings after the close. A conference call is slated for 5:30 p.m. ET. Last quarter: PYPL reported better-than-expected results. Elliott Management also disclosed a $2 billion holding in the company. This quarter: Analysts anticipate a 10% increase in revenue, but earning per share are expected to fall nearly 14%, according to Refinitiv estimates. What CNBC is watching: Investors will want to hear more about Venmo’s partnership with Amazon . The payment option will be up and running on the e-commerce site ahead of the busy holiday season, and many see the development as a huge win for PayPal. Analysts will want to know if the deal will serve as a catalyst for wider adoption of Venmo as a payment option for other retail sites. What history shows: PayPal typically does well on earnings days, with the stock averaging a gain of 1.1% on those days, Bespoke data shows. The company has also beaten bottom-line estimates in seven of the last 10 quarters, per FactSet.

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