Wall Street Brunch: Tech Earnings Overload

Summary:

• Five major tech companies – Apple, Microsoft, Amazon, Alphabet, and Meta – are set to report earnings.
• Economic indicators such as Q3 GDP and October jobs report are crucial, with forecasts suggesting steady growth and a potential labor market cooling.
• Delta Air Lines sues CrowdStrike over a July outage, alleging negligence and breach of contract, seeking over $500 million in damages.

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Five of the biggest tech companies will report earnings. (0:17) Q3 GDP and the October jobs report are due. (2:39) Delta sues Crowdstrike. (3:57)

Five of the biggest tech companies report earnings in a week that will also see big numbers on jobs and economic growth.

Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Alphabet (GOOG) (GOOGL) and Meta Platforms (META) are all scheduled to issue numbers.

Apple is expected to earn $1.55 per share on $94.26 billion in revenue.

TD Cowen analyst Krish Sankar says sentiment on Apple is “markedly negative” going into the quarterly results, amid concerns about year-over-year comparisons, China and regulatory risks to its Services business. And while some of those concerns remain, any upbeat commentary from Apple’s management team would be considered a positive.

“Overall, we expect AAPL to report in-line Sep Q results and guide in line to below consensus for the Dec Q,” Sankar said. He has a Buy rating and $250 price target on the stock.

Amazon reports on Halloween, with analysts looking for revenue of $157.34 billion and EPS of $1.34. Its gross margin is expected to come in at 50.1%. Growth at Amazon Web Services, its margins, capital expenditures and retail margins in the US will be key. Bank of America Securities earlier this week said it expects a “mixed” Q3, with “retail in line and AWS beat.”

And Microsoft will give investors a lot to digest during its earnings call next week, which will likely highlight Azure cloud growth, advances in generative artificial intelligence and new investor metrics.

The forecast is for EPS of $3.10 on revenue of $64.56 billion.

Bernstein Societe Generale analyst Mark Moerdler says: “This quarter the focus could be more on understanding the numbers than the numbers themselves. Management has re-segmented the business, moving products and services around, which is going to make it more difficult for investors to easily understand the results. Fundamentally nothing has changed other than the reporting — Cloud and especially Azure is a big driver of growth and if Gen AI is successful anywhere Microsoft is the most likely candidate.”

Also on the earnings calendar, Ford Motor (F) and Waste Management (WM) report on Monday.

Joining Alphabet on Tuesday are Advanced Micro Devices (AMD), McDonald’s (MCD), Pfizer (PFE) and Mondelez (MDLZ).

Eli Lilly (LLY), Caterpillar (CAT), Amgen (AMGN) and Starbucks (SBUX) weigh in on Wednesday along with Meta and Microsoft.

On Thursday, Apple and Amazon share the stage with Mastercard (MA), Merck (MRK), Uber Technologies (UBER) and Comcast (CMCSA).

Exxon Mobil (XOM), Chevron (CVX) and Charter Communications (CHTR) reports results on Friday.

The economic calendar is also busy, with the first look at Q3 GDP and the last jobs report before the election.

Economists expect the advance measure of Q3 GDP to come in at an annual rate of 3%, the same as Q2.

Wells Fargo economists are a little more bullish, calling for growth of 3.2%.

“Consumers are poised to drive growth again in the quarter, and we forecast 3.6% annualized growth in PCE,” they said.

“The outlook for GDP is sturdy, as the consumer continues to support the fundamentals of economic growth and lower interest rates unshackle investment. Our forecast calls for a gradual moderation in growth as labor market cooling fosters less-robust income growth in the next few quarters, but consumer strength remains an upside risk to growth down the road.”

For October jobs, expectations are for a much weaker print than September, with nonfarm payrolls rising by 111,000.

Weekly initial jobless claims have shown resilience, but Pantheon Macro isn’t encouraged, noting that continuing claims “rose to a three-year high, and were about 70K higher than during the September payroll survey week, the biggest increase since April 2022.”

There are no Fed speakers as the FOMC enters its blackout period ahead of the rate meeting right after Election Day. The markets are pricing in a near-certainty of a quarter-point cut and a 75% chance of the same reduction in December.

In the news this weekend, Delta Air Lines (DAL) has sued CrowdStrike (CRWD) in Georgia state court over an outage in July that brought down the carrier’s computer systems and forced the cancellation of some 7,000 flights.

In the lawsuit filed in Fulton County Superior Court, Delta accused the security software vendor of negligence and breach of contract. The airline said the security software vendor is liable for more than $500 million in out-of-pocket costs in addition to an unspecified amount for lost profits, costs that include legal fees, and “reputational harm and future revenue loss.

“While we aimed to reach a business resolution that puts customers first, Delta has chosen a different path,” a CrowdStrike spokesperson told Seeking Alpha. “Delta’s claims are based on disproven misinformation, demonstrate a lack of understanding of how modern cybersecurity works, and reflect a desperate attempt to shift blame for its slow recovery away from its failure to modernize its antiquated IT infrastructure.”

And Taiwan Semiconductor Manufacturing (TSM) will soon see its “most severe” challenges to its growth now that the US is limiting the flows of advanced chips to China.

According to Bloomberg, founder Morris Chang said and an event: “TSMC is now truly a turf all major powers want to secure. Free trade of semiconductors, particularly the most advanced semiconductors, has died. In such an environment, our challenge lies in how to continue to drive growth.”

For income investors, Blackstone (BX) goes ex-dividend on Monday, with a payout date of November 4. Alcoa (AA) goes ex-dividend on Tuesday, paying out on November 15.

Morgan Stanley (MS) goes ex-divided on Thursday. It pays out on November 15. Costco (COST) goes ex-dividend on Friday, with a payout date of November 15.

Companies forecast to raise their quarterly payouts include Visa (V) to $0.60 from $0.52, D.R. Horton (DHI) to $0.325 from $0.30, Rockwell Automation (ROK) to $1.32 from $1.25, Marathon Petroleum (MPC) to $0.55 from $0.52, and Exxon Mobil (XOM) to $0.97 from $0.95.

And in the Wall Street Research Corner, BofA Securities drew up a list of stocks with the highest weight in ESG funds relative to the S&P 500 (SP500).

Over the past two years, socially responsible investing and environmental, social, and governance strategies were dominated by new mandates, such as the U.S. Inflation Reduction Act, the E.U. Green Deal and Japanese Green Transformation Plan.

Now, BofA analysts argue that there is a greater focus on “climate transition.”

Among the most overweight ESG names are Pentair (PNR), First Solar (FSLR), Charter Communications (CHTR), Paramount Global (PARA), Sysco (SYY), DR Horton (DHI) and Ecolab (ECL).

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