Earnings This Week: US banks, UnitedHealth and Delta Air Lines

Earnings calendar: July 10 – 14

Earnings season is here! As usual, it will begin with results out from major US banks with JPMorgan, Wells Fargo and Citigroup, which are all due to report at the end of the week, alongside financial giant BlackRock and health insurer UnitedHealth. We also have beverage behemoth Pepsi and Delta Air Lines scheduled in on Thursday.

Taiwanese semiconductor firm TSMC will report monthly sales for June ahead of results out next week.

The UK calendar is quiet, headlined by full year results out from fashion house Burberry.

Monday July 10	Friday July 14
TSMC June sales	JPMorgan Q2
Tuesday July 11	Citigroup Q2
N/A	Wells Fargo Q2
Wednesday July 12	BlackRock Q2
DNB Bank H1	State Street Q2
AEON Q1	UnitedHealth Q2
Thursday July 13	Burberry Q1
Pepsi Q2
Delta Air Lines Q2
ConAgra Foods Q4
Fastenal Q2
Aker BP H1

 

 

 

UnitedHealth stock: Q2 earnings preview

UnitedHealth and other health insurers have significantly underperformed the wider market this year, with the stock down 9.5% despite expectations that it can deliver record earnings in 2023. That is because markets are worried about the outlook. CFO John Franklin Rex sparked a selloff in the sector last month when he warned that older people are getting more medical procedures that were delayed during the Covid-19 pandemic, sparking fears that more claims will be made and hurt profitability. UnitedHealth raised its outlook back in April, when it said it is aiming for annual adjusted EPS of $24.50 to $25.00, with analysts currently leaning toward the upper-end of that range and believing it will rise almost 12% from last year. The key question is whether this rise in surgeries will impact that guidance and lead to profitability being eroded this year and next. Wall Street forecasts UnitedHealth’s revenue will rise 13% in the second quarter to $90.95 billion and are looking for adjusted EPS to rise 8.4% to $6.04. We may also hear more about its deal to buy Amedisys as part of its push into the home healthcare market, although there is still a risk of a rival bidder coming in.

 

Pepsi stock: Q2 earnings preview

Pepsi’s array of beverages and snacks as well as its geographical reach around the world has allowed it to flex pricing power in the inflationary environment. It has continued to raise raising prices and this has only recently started to impact volumes, alongside softer consumer spending. That has also allowed it to keep margins largely steady. Wall Street forecasts Pepsi will deliver 7.2% year-on-year revenue growth to $21.7 billion in the second quarter and are looking for organic revenue growth of 9.8%. Topline growth will be led by North and South America, supplemented by Europe. That will counter softer conditions in Asia and Africa. Core EPS is expected to be up 5.3% from last year at $1.96 – but it is worth noting that Pepsi has beaten expectations for 17 consecutive quarters! Pepsi raised its full year outlook back in April and is now targeting annual organic revenue growth of 8% and for core EPS to rise 9%. Analysts back its sales target but only see 7.6% growth in earnings at present.

 

Delta Air Lines stock: Q2 earnings preview

This is a crucial year for Delta Air Lines considering markets not only believe this will be the first year earnings will return back above pre-pandemic levels but that they will hit an all-time record high. The fact Delta Air Lines raised its annual outlook when it held its investor day in late June, saying it would hit the top-end of forecasts for operating margins (10% to 12%) and earnings per share ($5 to $6) while bumping up its free cashflow target to $3 billion from $2 billion, reinforces those hopes. Wall Street forecasts the airline will report 17% year-on-year growth in revenue in the second quarter to $14.4 billion – which would be a quarterly record! Adjusted EPS is also forecast to hit a new high and jump 65% to $2.37. Higher fares and lower fuel costs will help deliver the impressive growth, although rising wages across the industry will counter this. The rosy landscape has sent Delta Air Lines stock flying over the past month, taking year-to-date gains to 45%. It has outperformed its US rivals and climbed to a 27-month high before pulling back this week, with the RSI in deep overbought territory. Delta Air Lines may struggle to keep up the momentum this week without a positive surprise, and that is less likely given it has already raised its outlook. All seems well now that the airline industry is posting record figures after recovering from the pandemic and Delta Air Lines has said it expects profits and cashflow to improve further in 2024, suggesting it should remain on the right trajectory for some time. However, there are risks ahead as inflation and rising rates continue to eat away at consumer’s finances while simultaneously raising the risks of a recession. Delta Air Lines has said it is confident given high-income travellers generate around 75% of all spending on air travel and because travel is a high priority for wealthier households.

 

Burberry share price: Q1 earnings preview

This week’s update will focus exclusively on how sales have performed in the first quarter and the outlook for the remainder of the year. Analysts forecast it will report retail revenue of £588.2 million and same-store sales growth of 18.3%. Asia remains key for growth and much of its progress will be determined by how demand fares as the Chinese economy rebounds, with its recovery having been much slower than hoped so far. Asia Pacific same store sales are forecast to be up 34.5% in the first quarter, with sales in mainland China estimated to be up 60%! EMEIA (dominated by Europe, the US and the Middle East) is also powering ahead with sales forecast to be up over 20%, while the Americas remains under pressure and is expected to see a 9.2% decline. Burberry’s goal is to deliver high-single digit CAGR growth in revenue versus what it delivered in 2020 and deliver an adjusted operating margin of ‘around 20%’ over the full year. Markets believe it can achieve its sales target and forecast a full year margin of 19.6%. The stock needs a catalysts considering it has been stuck in decline since late April, down 2% since the start of 2023 and recently hit fresh 2023-lows. A sales beat or an upgraded outlook would therefore be welcome. The addition of new chief creative officer Daniel Lee in February could add momentum this year. With all this in mind, Burberry is currently unloved by the markets and trades at a sizeable 30% discount compared to its peers with a forward price-to-earnings ratio of 16.2x.