Industrials in Focus Ahead of Peak Earnings Season
Published: October 24, 2024.
Q3 S&P 500® EPS growth expected to come in at 3.4%, the fifth consecutive quarter of growth, yet the weakest quarter in over a year.
Industrials in focus: Boeing, Honeywell, Southwest, UPS.
Peak weeks for Q3 season run from October 28 - November 15
After reaching all-time highs on Friday, the S&P 500 and DJIA took a bit of a breather to start the week as investor’s waited for the next round of corporate earnings results to come in.
Before-the-bell on Tuesday General Motors surpassed Wall Street expectations and raised full-year guidance, causing investors to take the stock about 10% higher after the report.1 More good news came in from Philip Morris which also saw a nearly 9% uptick in their stock after they beat Q3 expectations and raised EPS guidance.2 On the flipside, Verizon3 and Lockheed Martin4 released what could be seen as disappointing results, which led to a downturn in both of those stocks.
Yesterday, markets continued to retreat in the face of rising yields. The 10-year Treasury yield climbed to 4.2%, its highest level since July, and the Dow dropped 400 points, to its lowest level since early September. Earnings results from Tesla and IBM took center stage after the bell, and results were mixed. The first of the Magnificent 7 names to report, Tesla, came in better-than-expected on the bottom-line, but slightly missed top-line estimates.5 Those numbers were good enough for investors who took the stock 10% higher after the report. Similarly, IBM reported results that surpassed Wall Street estimates on EPS, but not on revenues, investors were not so forgiving of the tech giant.6 Shares of IBM were down 5% after the report.
With nearly 20% of the S&P 500 reported thus far, the YoY growth rate stands at 3.4%, the fifth consecutive quarter of growth, yet the lowest growth rate in over a year.7 Despite better-than-expected reports from banks, the blended growth rate fell as a result of analysts lowering EPS estimates significantly for companies that have yet to report.8 Three sectors in particular have seen the most drastic cuts, Industrials, Energy and Health Care.9
On Deck for the Remainder of the Week
While we haven’t yet hit peak earnings season yet, 1,536 global companies are scheduled to have reported Q3 results by the end of the week. The biggest focus of the week has been on the Industrials names coming out as they are one of only two sectors (Energy) expected to report negative growth on both the top and bottom-line.10 One of the biggest drags on the blended growth rate has been Boeing, which preannounced weak expectations on October 11.11 When Boeing reported earlier today, results showed they lost more than $6B in Q3, the biggest decline since the COVID-19 pandemic hit in 2020 and halted most aircraft travel.12
This morning a batch of Industrials reports hit the tape when Honeywell (HON), Southwest Airlines (LUV) and UPS (UPS) all released results for Q3. Results were mixed with UPS13 and LUV14 beating on both the top and bottom-line, but HON15 slightly missing on revenues. Only UPS saw a boost to shares after their report.
Source: Wall Street Horizon
Q3 Earnings Wave
This earnings season, the peak weeks will fall between October 28 - November 15, with each week expected to see over 2,000 reports. Currently, November 7 is predicted to be the most active day with 1,422 companies anticipated to report. Thus far, 69% of companies have confirmed their earnings date (out of our universe of 11,000+ global names), so this is subject to change. The remaining dates are estimated based on historical reporting data.
Source: Wall Street Horizon
1 GM Releases 2024 Third-Quarter Results and Updates Full-Year Guidance, October 22, 2024, https://investor.gm.com/news-releases/news-release-details/gm-releases-2024-third-quarter-results-and-updates-full-year
2 Philip Morris International Reports 2024 Third-Quarter & First Nine-Months Results, October 22, 2024, https://www.pmi.com/investor-relations/press-releases-and-events/press-releases-overview/press-release-details/?newsId=28126
3 Verizon delivers strong third quarter results with customer growth in mobility, October 22, 2024, https://www.verizon.com/about/news/verizon-delivers-strong-third-quarter-results-customer-growth-mobility-extending-industry
4 Lockheed Martin Reports Third Quarter 2024 Financial Results, October 22, 2024 https://news.lockheedmartin.com/2024-10-22-Lockheed-Martin-Reports-Third-Quarter-2024-Financial-Results
5 Tesla Releases Third Quarter 2024 Financial Results, October 23, 2024, https://ir.tesla.com/press-release/tesla-releases-third-quarter-2024-financial-results
6 IBM RELEASES THIRD-QUARTER RESULTS, October 23, 2024, https://www.ibm.com/downloads/documents/us-en/10a9980468afdf4c
7 Earnings Insight, FactSet, John Butters, October 18, 2024, https://advantage.factset.com
8 Earnings Insight, FactSet, John Butters, October 18, 2024, https://advantage.factset.com/
9 Earnings Insight, FactSet, John Butters, October 18, 2024, https://advantage.factset.com
10 Earnings Insight, FactSet, John Butters, October 18, 2024, https://advantage.factset.com
11 Boeing Reports Preliminary Third Quarter Results, October 11, 2024, https://investors.boeing.com/investors/news/press-release-details/2024/Boeing-Reports-Preliminary-Third-Quarter-Results/
12 Boeing Reports Third Quarter Results, October 23, 2024, https://investors.boeing.com/investors/news/press-release-details/2024/Boeing-Reports-Third-Quarter-Results/default.aspx
13 UPS Releases 3Q 2024 Earnings, October 24, 2024, https://investors.ups.com/news-events/press-releases/detail/2131/ups-releases-3q-2024-earnings
14 Southwest Airlines Reports Third Quarter 2024 Results, October 24, 2024, https://www.southwestairlinesinvestorrelations.com/news-and-events/news-releases/2024/10-24-2024-114544165
15 Honeywell Reports Third Quarter Results; Updates 2024 Guidance, October 24, 2024 https://honeywell.gcs-web.com/news-releases/news-release-details/honeywell-reports-third-quarter-results-updates-2024-guidance
