Josh Brown and Shawn Russo from Resortswells Management discuss the challenges of the current earnings season, particularly for those who follow market trends. It’s a tricky time, as both positive and negative earnings surprises can cause shifts that disrupt existing trends. They usually avoid naming stocks just ahead of earnings reports, but this week they’re making an exception, highlighting setups for several companies. Among the stocks being tracked, Fastenal has already reported, while Kinder Morgan, Abbott Labs, and Cintas show signs of losing momentum, which may lead to downward trends. On the other hand, BlackRock, Interactive Brokers, and Netflix present promising setups worth exploring.
As of mid-July, the S&P 500’s earnings per share (EPS) estimates have dipped by about 4.2%. This trend isn’t unusual, given that analysts routinely adjust their expectations each quarter. Historical data indicates a consistent decline, with recent quarters reflecting even lower estimates. Most sectors have seen reductions in EPS except for the communications sector, with energy and discretionary sectors seeing the largest drops. There’s some fatigue around these adjustments, leading one analyst to propose a potentially better earnings season than many expect, despite various risks facing the market.
Earnings reports are crucial for individual investors, often impacting stock behavior. While many companies have beaten revenue expectations, their outlooks can sometimes be disappointing, which isn’t always anticipated by the market. BlackRock, set to report soon, is expected to post revenues of $5.47 billion—a 4.3% increase year-over-year—with an EPS of $10.80. The stock has performed well lately, supported by strong ETF inflows, and its recent highs may indicate good prospects. If you’re considering buying in, it might be wise to wait for the report and then look for buying opportunities, especially if the stock remains above $1,000.
Interactive Brokers anticipates revenues of $1.38 billion, reflecting an 11.8% year-on-year growth, and aims for an EPS of $0.46. Their stock chart shows a classic cup-and-handle pattern, signaling strength, even with a high RSI suggesting overbuying conditions. The recent surge in new account openings, particularly in the last few quarters, boosts confidence in their growth trajectory. If their earnings report is solid, there’s potential for the stock to climb beyond current resistance levels.
Netflix is also gearing up for its report, with expectations for revenues of $11 billion—up 45.2% from last year—alongside an EPS of $7.08. The stock has seen a remarkable rally, but current trends indicate it may have peaked recently. Having held shares from lower levels, there’s a plan to stick around, though those without investments might be better off waiting to see the market’s reaction post-report. A potential dip following earnings could open up favorable entry points.
It’s worth noting that the insights here reflect personal opinions and do not constitute financial or investment advice. Investing always carries risks, and individuals should consult with their financial advisors before making significant decisions.
