The market is kicking off a short but active week this morning, with lots of key earnings reports coming out. The reports started this morning with Delta (DAL) reporting positive numbers thanks to lower oil costs, while Morgan Stanley (MS) suffered the same negative fate as its banking friends already did last week.
Will the rest of the companies slated to report pull a Delta or a Morgan Stanley? Here’s a rundown of the notable earnings I’ll have my eye on this week:
Tuesday: Netflix (NFLX)
Netflix is announcing earnings after the market closes tonight, and it should be the most interesting, and subsequently volatile, report of the week. The stock has moved an average of 14% in either direction following earnings releases.
I won’t even attempt to predict which way this earnings report goes, as the company’s shares dropped 25% last quarter despite strong top and bottom line growth. I think there are valid points on either side and if you’re interested, you can check out a pro/con argument on Netflix’s future growth prospects here.
I can however tell you what numbers everyone will be watching for tonight; subscriber growth and margins. Netflix has fallen 24% in the last 6 months, mostly thanks to concerns of slowing subscriber growth. For investors to be happy, CEO Reed Hastings will need to show positive subscriber growth this quarter, plus plans for future growth and international expansion. Netflix projected it would have 57 million Botal members at the end of the fourth quarter, so that will be a key barometer tonight.
Finally, margins are important because investors seem to want reassurance that Netflix will not overspend in order to meet its expansion goals.
One number I’m not concerned about is Netflix’s revised earnings estimates, Although Netflix lowered earnings estimates recently, Netflix always lowballs its own guidance number. According to Estimize, Netflix has averaged an 11 cent beat against its own guidance over the past 2 years.
Wednesday: eBay (EBAY), American Express (AXP)
EBay’s report could be interesting as the company is gearing up to spin off its payments division, PayPal.
Thursday: Starbucks (SBUX), Southwest Airlines Co (LUV), Verizon Communications (VZ)
I’m expecting positive news out of Starbucks on Thursday. Starbucks has shown consistent growth, and over the past 4 quarters earnings have grown between 17% and 25% year over year. Plus, Starbucks has been expanding its menu and food options, which could boost revenues even further.
I also am optimistic about Southwest, if only because lower fuel costs have been boosting airline profits.
Friday: McDonald’s (MCD)
McDonald’s could be feeling some heartburn on Friday. McDonald’s has been showing poor monthly sales figures, with US comparable sales down 4.6% year over year in November. Some are blaming McDonald’s menu, saying that it has gotten so large and complicated that it slows down service. In response, McDonald’s announced a menu and marketing overhaul last month, but any effects of that effort will likely come too late to affect this earnings report.
Phew, that wraps up the preview. I’ll be checking back in tomorrow with an update on how Netflix’s report turns out! In the meantime, shout out any predictions you have in the comments.