Wall Street Better on Earnings as Vaccine Makers, Fintech Reports Approach
With a recession season passing halfway, results from financial technology and vaccine makers will come amid questions about consumer spending and demand for Covid-19 drugs.
As the fear of inflation and recession calcifies, anything good in the results can be better than normal for the shares.
“To date, the market rewards positive earnings surprises more than average and punishes negative earnings surprises less than average,” John Butters, FactSet’s senior earnings analyst, said in a report Friday on the earnings season so far.
Butters reported that companies that have beaten earnings estimates “have seen an average price increase of +2.3% two days before the earnings release through two days after the earnings release,” more than double the five-year average showing an average gain of 0.9% .
As for companies whose results fell short, they have experienced an average share price decline of 2% over that time frame, somewhat more generous than the typical five-year average of a 2.2% decline.
Overall, the results still fall short. Seventy-one percent of the S&P 500 SPX,
companies have earned more than Wall Street expected during the past quarter, Butters said. That’s below the five-year average of 77%, and these companies beat earnings estimates by 2.2%, well below the five-year average of 8.7%, according to FactSet.
This week in earnings
52 percent of S&P 500 companies have reported earnings for the third quarter, according to FactSet. For the week ahead, 167 S&P 500 companies will report quarterly earnings, including a component of the Dow Jones Industrial Average DJIA,
— the pharmaceutical manufacturer Amgen Inc. AMGN,
The two most prominent producers of covid-19 vaccines, Pfizer Inc. PFE,
and Moderna Inc. MRNA,
report on Tuesday and Thursday respectively. From the fintech field, payment processing and technology provider Global Payments Inc. GPN,
reports earnings on Monday, while PayPal Holdings Inc. PYPL,
and Block Inc. SQ,
— formerly known as Square — report Thursday; two prominent names in the trading app industry, Robinhood Markets Inc. HOOD,
and Coinbase Global Inc. COIN,
report on Wednesday and Thursday respectively.
Casino Operators MGM Resorts International MGM,
and Penn Entertainment Inc., PENN,
report as well, giving a look at the demand for corporate events and whether anyone still wants to gamble away money as every penny becomes less valuable. Ride-hailing platform Uber Technologies Inc. UBER,
and food delivery giant DoorDash Inc. DASH,
also report.
The calls you will enter in your calendar
PayPal, blocking and demand for digital consumption: PayPal and block report by credit card companies Visa Inc., V,
Mastercard Inc. MA,
and American Express Co. AXP,
all said consumption remained stable. But the shares of both Block and PayPal, which are strongly linked to online shopping and purchases at smaller businesses, have fallen steadily throughout this year following the pandemic’s digital spending boom. And the latter, which has been considered a safer bet in the payments world, has cut its financial forecasts and tried to rein in costs.
“Consumption has slowed as consumers feel the effects of higher inflation, particularly in food, rent and gas,” BofA analysts said in a discretionary spending note on Wednesday.
“According to aggregated BAC credit and debit card data, overall card spending decreased in September across product categories and spending on leisure services was flat, which may signal tailwinds for the reopening of discretionary services are easing,” they continued.
Wall Street will be looking for PayPal’s results to beat increasingly conservative expectations, and any context around trends for the year ahead. RBC analysts, in a research note this month, said PayPal’s efforts to narrow its focus on digital wallets, as well as its Braintree and payments platforms, “set the stage for potential upside to FY23 expectations that have been held back by macro uncertainty.” Amazon.com Inc. AMZN,
this month also allowed some users to start paying with PayPal’s Venmo mobile wallet.
But PayPal this month has also faced backlash over what it said was a mispublished policy change that indicated users could be fined up to $2,500 for spreading misinformation. Some analysts. but downplayed the economic consequences.
For Square, Wall Street will be looking to see if more people use and spend money through the Cash App mobile wallet. Some analysts were also looking for a clearer view of the way forward.
“We appreciate that the macro background continues to see elevated cross-flows, making forecasts more challenging,” BofA analysts said in a research note on Friday. “However, SQ remains the only payments company we cover that has yet to reintroduce any form of top line guidance since the start of the pandemic.”
The Robinhood and Coinbase results will provide a look at retail and crypto trading as the Fed tries to tame inflation, a move that has battered crypto prices. Robinhood CEO Vlad Tenev said in August that the company would cut 23% of its full-time workforce, citing inflation and “a broad crypto market crash” that “further reduced client trading activity and assets under custody.”
The numbers to see
Vaccine requirements at Pfizer and Moderna
When Pfizer PFE,
and Moderna MRNA,
report, analysts will keep an eye on the state of covid-19 vaccine and treatment sales, and what executives expect for the full year, as they prepare for a private market for covid drugs and as more people shrug off the pandemic.
Pfizer executives said on a call last week that they intended to charge between $110 and $130 for a single-dose vial of the vaccine for US adults when public purchases end. But they said they believe anyone with health insurance should not have to pay anything out of pocket.
Shares in Pfizer jumped on the news, and analysts said prices were higher than expected. Ashish Jha, the White House’s COVID-19 response coordinator, said in August that he hoped for fuller commercialization of vaccines, treatments and tests next year, according to CNN.
The US government, which pays Pfizer and BioNTech $30.50 per vaccine dose, this month renewed its COVID-19 public health emergency declaration to last through early January. Pfizer said in July it expects full-year revenue from Comirnaty, the COVID vaccine it produced with BioNTech SE BNTX,
of around 32 billion dollars. For Paxlovid, its COVID treatment pill, Pfizer expects full-year sales of around $22 billion.
The drug manufacturer Gilead Sciences Inc., GILD,
when it reported quarterly results on Thursday, it said sales of the COVID drug remdesivir fell 52% to $925 million during the quarter, “primarily driven by a lower number of COVID-19-related hospitalizations compared to the third quarter of 2021.”
