Top US stocks to watch: Apple, Microsoft and Alphabet

Investors are digesting a flurry of results from the likes of Tesla, 3M, UPS, GE, Raytheon and Archer-Daniels-Midland and preparing for another flood of earnings after markets close later today from Apple, Microsoft, Alphabet, Starbucks and Advanced Micro Devices.

USA (1)

Apple

Apple will headline the US corporate calendar today when it releases third quarter results after the markets close, with analysts expecting strong growth in both hardware and services.

Analysts are expecting Apple’s third-quarter revenue to rise 22.7% year-on-year to $73.23 billion from $59.68 billion, while diluted EPS is expected to jump over 53% to $1.01 from $0.65. Expectations are high considering Apple has surprised the market by beating Wall Street’s forecasts for at least eight consecutive quarters.

In terms of hardware, the 5G-enabled iPhone 12 is expected to continue to drive topline growth in the quarter. Estimates from Bloomberg suggest iPhone shipments will rise 26% year-on-year. Services, regarded as the key to Apple’s long-term future, will also be under the spotlight. With services revenue having grown 26% in the second quarter, analysts are expecting that level of year-on-year increase to be maintained in the third.

Microsoft

Microsoft will release second quarter results after the markets close today, with analysts forecasting strong growth across the board as IT budgets recover from the pandemic.

Traders and economists are expecting Microsoft’s adjusted second quarter EPS to come in at $1.90. Revenue is expected to come in at $44.1 billion. As always with Microsoft, the fast-growing cloud computing platform, Azure, will be a major focus for traders. The company has recently expanded its cloud availability to many new regions outside the United States, including China, Indonesia, and Malaysia.

Meanwhile, after a rocky rollout, Microsoft’s workspace communication tool Teams has hit its stride amidst the broader pandemic-driven shift to remote work and online working. With tight integrations with other widely-used productivity tools like Powerpoint and SharePoint, traders are anticipating ongoing strong adoption of Teams this quarter.

Alphabet

Alphabet will also be releasing second quarter results later today, with its leading position in search and video expected to see the tech giant benefit from the increased demand for online advertising.

Analysts are estimating quarterly revenue will jump to $56.16 billion from $38.29 billion the year before. That would represent an acceleration in growth to 42% from 34% in the first quarter as it comes up against weaker comparatives. Net income is expected to leap to $13.06 billion from $6.95 billion and EPS is anticipated to surge to $19.33 from just $10.13.

YouTube ad sales are forecast to jump over 65% and some analysts think it could beat this target while its cloud computing business could see revenue jump as much as 50%.

Advanced Micro Devices

Advanced Micro Devices will publish second quarter earnings later today, with markets expecting the semiconductor company to build on the momentum built in the first quarter of 2021 when revenue and earnings soared.

AMD has said it is expecting $3.6 billion in revenue in the quarter, around 86% year-on-year growth driven by all segments, particularly by data centres and gaming. The consensus shows analysts are expecting AMD to just beat that target with revenue of $3.62 billion from $1.93 billion the year before.

Net income is estimated to increase to $576.8 million from $157.0 million, while EPS is anticipated rising to $0.47 from $0.13. Sales of AMD’s computer and graphics chips are set to be bolstered by strong demand for PCs and cloud-computing. Watch for any changes to guidance, with AMD currently targeting 50% annual revenue growth after raising it from a previous goal of 37%.

Starbucks

Coffee giant Starbucks will release third quarter results once the closing bell has rung today, with growth figures set to impress as it comes up against weak comparatives from the year before.

Markets expect Starbucks to report quarterly revenue of $7.3 billion compared to the $4.2 billion booked the year before, when sales were subdued due to lockdowns. Analysts expect the company to report GAAP EPS of $0.77, turning from the $0.58 loss booked the year before. Bloomberg estimates same-store sales could rise 74.1% in the Americas and by 70.8% worldwide, with the addition of new beverages and plant-based options set to provide a boost.

Separate news broke earlier today that Starbucks plans to exit its South Korean joint venture by selling its stake to existing partners E-Mart and GIC, Singapore’s sovereign wealth fund.

Tesla

Tesla celebrated yesterday when it revealed it posted over $1 billion in quarterly net profits for the first time ever during the second quarter following a record number of car deliveries.

Record output in the quarter led to revenue of $11.95 billion, up from just $6.03 billion the year before. An operating margin of 11% led to GAAP net income of $1.1 billion compared to just $104 million the year before. More importantly, while the profit was boosted £354 million of regulatory credits, Tesla demonstrated it can deliver sustainable earnings from selling cars.

Revenue came in ahead of the $11.30 billion expected by analysts whilst EPS of $1.45 was also much better than the $0.98 forecast.

3M

3M said it expects to deliver better earnings growth in 2021 than previously thought as it reported solid growth in the second quarter.

The company, which makes everything from N95 face masks to Scotch-Brite homecare products, said sales grew 24.7% year-on-year to $8.9 billion and posted EPS of $2.59 compared to $2.25 the year before.

3M said it now expects to report 7% to 10% sales growth over the full year, improved from its previous 5% to 8% target. EPS should be in the range of $9.70 to $10.10 compared to its original goal of $9.20 to $9.70. It also said free cashflow conversion will be 90% to 100% rather than 95% to 105%.

UPS

United Parcel Service beat expectations in the second quarter as it reported record results as demand for shipping remains high thanks to the shift to online shopping.

Revenue in the quarter rose 14.5% year-on-year to $23.4 billion. Adjusted EPS of $3.06 jumped almost 44% from the year before and came in ahead of the $2.82 expected by analysts.

US revenue increased 10.2%, driven by an uplift in prices, while international revenue jumped 30% thanks to an expansion in Europe.

General Electric

General Electric raised its free cashflow forecast for the full year after delivering solid growth at the top and bottom lines during the second quarter.

Revenue in the quarter rose 9% to $18.3 billion and adjusted EPS of $0.05 turned from a $0.14 loss the year before. The company said it is now expecting industrial free cashflow of between $3.5 billion to $5.0 billion in 2021 rather than its previous goal of $2.5 billion to $4.5 billion. It left its other targets unchanged. That upgrade came as GE posted $388 million in quarterly cashflow when analysts had forecast an $287 million outflow.

‘Orders and revenue returned to growth, our operating margins expanded across all segments, and we generated positive Industrial free cash flow. Momentum is building across our businesses, driven by Healthcare and services overall, with Aviation showing early signs of recovery,’ said chairman and CEO Lawrence Culp.

Raytheon

Raytheon raised its earnings expectations after results surpassed expectations in the second quarter and also upped its synergy target from the merger with UTC.

Sales rose to $15.9 billion in the second quarter from $14.1 billion the year before. Net income of $1.04 billion improved from the $3.84 billion loss posted the year before, with adjusted EPS rising to $1.03 from $0.39.

Raytheon said it is now targeting annual sales of between $64.4 billion to $65.4 billion and adjusted EPS of $3.85 to $4.00. Previously, it was aiming for sales of $63.9 billion to $65.4 billion and EPS of $3.50 to $3.70. It also said free cashflow will now be $4.5 billion to $5.0 billion from around $4.5 billion beforehand, and that its synergy target from its merger with UTC has been raised to $1.5 billion from $1.3 billion.

Archer-Daniels-Midland

Archer-Daniels-Midland delivered record earnings in the second quarter and said it expects the momentum to continue into the second half, ‘leading to a very strong full-year outlook’.

Second quarter revenue of $22.92 billion was over 40% higher than the year before and ahead of the $18.64 billion forecast by analysts. It flagged record results for its Nutrition business and raised expectations for the division over the full year.

Adjusted EPS jumped to $1.33 from $0.85 the year before with reported EPS improving to $1.26 from $0.84. Adjusted operating profit jumped to $1.16 billion from $804 million as all three divisions – Agricultural Services and Oilseeds, Carbohydrate Solution and Nutrition - all contributing significant growth.

Amazon

Amazon has denied reports that it is looking to start accepting cryptocurrencies by the end of the year after speculation was sparked by the company advertising a new job listing within the crypto space.

‘Notwithstanding our interest in the space, the speculation that has ensued around our specific plans for cryptocurrencies is not true’, a spokesperson said, according to Bloomberg. ‘We remain focused on exploring what this could look like for customers shopping on Amazon’.

The company published an ad for a digital currency and blockchain product lead last week.

Weber

Barbeque firm Weber has said it is looking to raise up to $797 million and earn a valuation of over $8 billion through an initial public offering by selling around 46.9 million shares at between $15 to $17 each.

Weber is looking to capitalise on strong demand for outdoor cooking, with revenue jumping 62% in the six months to the end of March to $963.3 million from $596.4 million the year before. That saw net income soar to $73.8 million from $23.6 million. It will list on the NYSE under the ticker ‘WEBR’.

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