Earnings playbook: How to trade a big week of results including Netflix and Goldman Sachs

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The third-quarter earnings season kicks into full gear this coming week, with 63 S & P 500 companies slated to report. Netflix, Goldman Sachs and Bank of America are among the names set to give results. Investors will be looking for clues on whether Netflix has been able to ease a recent trend of subscriber losses. Wall Street will also want to see how Goldman Sachs and Bank of America are faring in an environment of rising rates and increasing chances of a U.S. recession — especially compared to rivals JPMorgan Chase, Morgan Stanley and Citigroup, which reported last week. So far, more than 30 S & P 500 names have reported third-quarter earnings thus far, with 67% of those posting better-than-expected results. Take a look at CNBC Pro’s breakdown of what’s expected from this week’s biggest reports. Monday Bank of America is set to report earnings before the bell, with management slated to hold a conference call at 8:30 a.m. ET. Last quarter: BAC posted better-than-expected revenue for the quarter, boosted by higher interest rates . This quarter: Bank of America’s earnings are expected to have fallen by nearly 10% year over year, according to Refinitiv. What CNBC banking reporter Hugh Son is watching: “Bank of America has always been seen as a big beneficiary to rising interest rates, so now should be the time for CEO Brian Moynihan to shine. That’s because rival bank JPMorgan Chase posted a 34% surge in net interest income in the quarter to $17.6 billion; Bank of America is one of the only firms out there with similar scale in deposits and lending as JPMorgan.” What history shows: Bank of America has posted better-than-expected earnings in eight of the last 10 quarters, according to FactSet. However, Bespoke Investment Group data shows the bank’s stock averages a 0.97% loss on earnings days. Tuesday Johnson & Johnson is set to report earnings in the premarket, followed by a call at 8:30 a.m. ET. Last quarter: JNJ said sales of its cancer drug helped it weather a strong dollar in the second quarter . This quarter: The pharmaceutical giant’s revenue are expected to come in flat year over year, Refinitiv data shows. What CNBC is watching: “J & J shares have outperformed the broader market this year, losing just 3.8% while the S & P 500 is down more than 20%. However, some analysts think that pressures from a strong dollar and a tough macroeconomic environment could weigh on some of its key businesses. ‘We would not be surprised given the macro backdrop noted above to see JNJ nominally lower 2022 guidance, mostly based on continued F/X headwinds and inflationary pressure,’ Bank of America analyst Geoff Meacham, who has a neutral rating on the stock, said in a note Friday.” What history shows: FactSet data shows Johnson & Johnson has beaten earnings expectations every quarter since 2011. The stock also averages a 0.3% gain on earnings days, according to Bespoke. Goldman Sachs is set to report earnings before the market open. Corporate management is slated to hold a call at 9:30 a.m. ET. Last quarter: GS easily beat analyst expectations thanks to strong bond trading results . This quarter: Analysts see Goldman’s earnings falling by nearly 50% in the third quarter, according to Refinitiv. What CNBC banking reporter Hugh Son is watching: “Goldman Sachs has been doing well in its traditional strengths of Wall Street trading and advisory, but that hasn’t mattered lately, as its stock has traded at a relatively low multiple all year. I’m curious what CEO David Solomon can do (or say) to change things up. Will he announce new management? A way to cut losses in his consumer banking venture? Stay tuned.” What history shows: Goldman’s earnings per share have beaten expectations in nine of the last 10 quarters, according to FactSet. However, Bespoke data shows the stock is typically flat on the earnings days. Netflix is set to report earnings after the bell, followed by a conference call between management and analysts at 6 p.m. ET. Last quarter: NFLX reported a smaller-than-expected subscriber loss for the second quarter . This quarter: The streaming giant’s earnings per share are expected to have fallen by at least 30% from the year, earlier period, Refinitiv data shows. What CNBC is watching: “Investors will be looking for clues on whether the streaming giant can reverse course after losing subscribers in back-to-back quarters. Citi analyst Jason Bazinet also noted that ‘the prevailing sentiment on Netflix’s equity remains muted’ due to three issues: ‘1) several unknows including the potential incremental demand from lower consumer prices, 2) the degree of success (via net adds) may not be known until 2H23 and 3) with prevailing market conditions, most investors are keen to preserve capital rather than take on incremental risk. We remain bullish on Netflix and see investor’s current trepidation as a precursor to better performance in 2023.'” What history shows: Netflix earnings have been a toss-up the last 10 quarters, with the company missing expectations in five of those periods, FactSet data shows. United Airlines is set to report earnings after the close. Management is expected to hold a conference call a day later. Last quarter: UAL posted a profit for the second quarter as travel demand surged . This quarter: United is expected to report year-over-year revenue growth of more than 60%, according to Refinitiv. What CNBC airlines reporter Leslie Josephs is watching: “United is likely to share Delta’s upbeat tone about the continued recovery in travel demand, despite high inflation. Also on the radar: does United have the planes and staff to meet demand? Be on the look out for any comments on business travel bookings and the outlook on getting key labor deals done.” What history shows: United Airlines has a solid history of beating earnings expectations, posting better-than-expected profits 67% of the time, according to Bespoke. But United’s earnings per share have come in below expectation in six of the last 10 quarters, FactSet data shows. Wednesday Procter & Gamble is set to report earnings before the bell, followed by a conference call with management at 8:30 a.m. ET. Last quarter: PG was able to offset rising commodity costs with higher prices, but the company also warned of more challenges ahead . This quarter: Procter’s earnings are expected to have fallen slightly on a year-over-year basis, Refinitiv data shows. What CNBC is watching: “Procter & Gamble shares have struggled in 2022, losing 23.5% in that time, in part due to the unwinding of some Covid trends. Because of these struggles, investors will be looking for clues on how the company plans to turn around its fortunes. ‘PG was a key beneficiary during Covid, owing to its superior supply chain management, which allowed the company to gain meaningful market share across several of its key categories,” Goldman Sachs analyst Jason English said in a note, downgrading the stock to neutral from buy . ‘However, as competitors manufacturing capabilities recover, we are beginning to see a reversal in market share trajectory across several of these categories.'” What history shows: Since July 2015, Procter & Gamble has posted weaker-than-expected earnings per share just once, according to FactSet. IBM is set to report earnings after the close. The company’s management is expected to hold a call at 5 p.m. ET. Last quarter: IBM posted better-than-expected earnings for the second quarter, but lowered its full-year cash forecast . This quarter: IBM’s earnings and revenue are expected to have fallen by at least 20% in the previous quarter, according to Refinitiv. What CNBC tech reporter Jordan Novet is watching: “IBM has withstood downward pressure from inflation and higher interest rates than much of the U.S. stock market, thanks to its defensive position and quarterly dividend. Investors are eager to see how the company is faring in the current economy given indications from other business-oriented technology companies that some deals are slipping. Demand for consulting projects and the pre-tax margins for consulting are of interest to analysts, given that IBM said in July that the competitive labor market was impacting results. A robust second quarter for mainframe revenue might also lead to a less impressive outcome in the third quarter.” What history shows: IBM has an earnings beat rate of 83% and has posted better-than-expected profits in eight of the last 10 quarters, Bespoke and FactSet data show. However, the stock on earnings days averages a loss of 0.67%. Tesla is set to report earnings after the market close, followed by a conference call with management at 5:30 p.m. ET. Last quarter: TSLA reported revenue growth of 42 %, but added that its automotive margins declined . This quarter: Refinitiv data shows analysts expect the electric car maker to report strong earnings and revenue growth from the year-earlier period. What CNBC is watching: “Investors will be looking to see if Tesla has been able to benefit from the signing of the Inflation Reduction Act this past summer, which includes several incentives and rebates for customers purchasing an electric vehicle. ‘There are two main IRA provisions that benefit TSLA. One, there are production tax credits for US produced EV batteries. … Two, we see the $3,750 retail buyer EV credit related to battery components as viable,’ wrote Wells Fargo analyst Colin Langan, who has an equal weight rating on Tesla. Investors will also be looking for clues on the deliveries front, after third-quarter deliveries fell short of expectations .” What history shows: Tesla shares typically do well after earnings, averaging a 1.46% gain on earnings days, according to Bespoke. The company also has a beat rate of 67% and has posted better-than-expected earnings in eight of the last nine quarters. Thursday American Airlines is set to report earnings before the bell, with management slated to hold a conference call at 8:30 a.m. ET. Last quarter: AAL posted in-line earnings and revenue and forecast a profit for the third quarter . This quarter: The airline’s top line is expected to have grown by nearly 50% in the third quarter on a year-over-year basis. What CNBC airlines reporter Leslie Josephs is watching: “Holidays are in focus for the country’s largest carrier and whether it, and rivals, has the staffing — and backup — to deliver reliably. A key issue is how the carrier is handling a rise in costs and whether consumers are still willing to pay higher fares. Look out for updates on labor talks and corporate travel demand.” What history shows: American Airlines has beaten earnings expectations 89% of the time over its history, according to Bespoke. More recently, the company’s earnings per share have topped analyst expectations in seven of the last 10 quarters, FactSet data shows. Snap is set to report earnings after the bell, followed by a conference all at 5:30 p.m. ET. Last quarter: SNAP reported disappointing quarterly figures, sending the stock tumbling . This quarter: Analysts polled by Refinitiv see a small earnings per share loss for the social media company and mid-single digit revenue growth from the year-earlier period. What CNBC social media reporter Jonathan Vanian is watching: “Like many social media companies, Snap has had a rough couple of months. The Snapchat parent continues to be hammered by factors out of its control, including a reduction on online advertising spend by businesses due to a weak economy and the continued impact of Apple’s 2021 iOS update that made it difficult for companies to track users across the Internet. Snap conducted a major restructuring in late August as a way to deal with its challenges, but it’s currently unclear how much of an impact it will have on the company, which analysts are expecting to report $1.13 billion in sales for the third quarter. As a result of the restructuring, Snap said it would lay off 20% of its over 6,000-person workforce and cut several projects including Snap Originals premium shows and its Pixy drone.” What history shows: Snap has missed analyst earnings expectations in five of the last 10 quarters, including the first two quarter of 2022, according to FactSet. –CNBC’s Michael Bloom contributed reporting.

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