Investing Action Plan: Amazon, Alphabet, Facebook, Ford Earnings

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The Nasdaq Composite stemmed a four-week sell-off, the S&P 500 held its decline to three weeks. Both stock market indexes rebounded from lows early in the week, launching a rally attempt and cuing investors to watch for a potential follow-through day. This is the Investing Action Plan for investors building watchlists and preparing for that possible follow through, and for one of the biggest weeks of the fourth-quarter reporting season.

If you’re new to IBD, you may want to look over its stock trading system and CAN SLIM basics. Recognizing chart patterns is one key to the investment guidelines. IBD offers a broad range of growth stock lists, such as Leaderboard. Investors also can create watchlists, find companies nearing a buy point, or develop custom screens at IBD MarketSmith.

Stocks To Watch: Using Relative Strength To Build A Watchlist

With the market in a correction and the major indexes whipsawing, not many stocks are holding up. It’s a good time to focus on relative strength lines. Ocean shipping firm Matson (MATX), natural gas play Targa Resources (TRGP), grain processor Bunge (BG), investment bank Raymond James Financial (RJF) and medical products giant AbbVie (ABBV) all have relative strength lines at new highs. Matson and Targa are around buy points, while Bunge and Raymond James are rebounding from brief tumbles. AbbVie has held support at the 50-day line ahead of its fourth-quarter report next week. Bunge reports on Feb. 9, while Targa and Matson report later in the month.

China Welcomes The Year Of The Tiger

Global supply chains are bracing as China launches its Lunar New Year celebration next week, with the Shanghai Stock Exchange set to shut down for the entire week. The exchange in Hong Kong closes Tuesday through Thursday. All major business, factories included, go dark for the weeklong holiday. Many companies are discouraging workers from returning home for the holiday, attempting to prevent labor shortages after the holiday. China’s Ministry of Transportation expects those in the country to take 1.18 billion trips during the holiday, in what is widely considered the world’s largest annual migration. The country has already reduced manufacturing schedules in order to clear the skies ahead of Beijing’s Winter Olympics, due to start Friday, Feb. 4. Covid lockdowns, attempting to limit the coronavirus ahead of the Beijing Games, were exacerbating normal holiday delays and price spikes in shipping and airfreight.

Stock Market Earnings: A Deeper Look At The Oilpatch

Exxon Mobil (XOM) and Enterprise Products Partners (EPD) will report Q4 results before the market opens Tuesday. Analysts see Exxon’s earnings soaring to $1.94 per share from 3 cents in the year-ago quarter. Revenue is expected to nearly double. Marathon Petroleum (MPC) is expected to swing to a profit when it reports early Wednesday. MPLX (MPLX) and Suncor (SU) will also report Wednesday. Royal Dutch Shell (RDSA) is on tap for Thursday. Analysts see the European major posting EPS of $1.36, up from 10 cents in the year-ago quarter with revenue up 52%.

January Payrolls Report

Next Friday’s jobs report may flash the weakest payroll gain since December 2020’s outright decline amid that pre-vaccine spike in Covid cases. That’s the take-away from the rise in weekly jobless claims from a half-century low 188,000 in early December to a three-month-high 290,000 in mid-January. Yet the Federal Reserve will look through any short-lived softness tied to the omicron surge, which is already receding. Fed chief Jerome Powell said Wednesday that he thinks the labor market has met the central bank’s maximum employment mandate, with the jobless rate at 3.9% in December. Powell also cited “very large wage increases” amid the potential risk factors for high inflation becoming entrenched.

The stock market’s reaction may have at least as much to do with wage gains and labor force dynamics as payroll headlines. One point of interest will be whether the omicron surge has had any negative impact on labor force participation, giving those close to retirement a reason to stay home, for example.

Earnings: Alphabet Taps The Brakes

Google-parent Alphabet (GOOGL) reports Q4 earnings late Feb. 1. Analysts estimate GAAP earnings of $27.64 per share, up 24% from a year earlier, with gross revenue jumping 27% to $72.2 billion. Net revenue, minus traffic acquisition costs, is projected at $59.39 billion. Analysts project YouTube advertising revenue of $8.8 billion and cloud computing revenue of $5.44 billion.

Earnings: Amazon Poised For A Slide

Amazon reports quarterly results late Thursday, with stock market analysts expected to focus on supply-chain issues that have hit a wide swath of businesses. Also, industrywide shortages in shipping containers, truck drivers, and readily available ports likely impacted delivery times and caused strained performance. Estimates look for earnings of $3.72 a share, a 74% plunge from the year-ago quarter. They look for revenue to climb 10% to $137.8 billion, its slowest growth in more than seven quarters.

Earnings: Will Meta Break its Earnings Streak?

Facebook-owner Meta Platforms (FB) reports fourth-quarter results late Wednesday, with analysts expected to focus on how much Apple continues to impact advertising after it changed privacy controls last year. Facebook and Instagram were adversely hit by the iOS changes, but a recent survey of advertisers by Cowen suggest Meta is regaining lost ground. The consensus estimate for adjusted earnings is $3.85 a share, vs. $3.88 a year earlier, according to FactSet. That would mark its first earnings decline in more than two years. Forecasts put revenue at $33.3 billion, up 19%.

Earnings: Big Pharma Season Opens

Drugmakers Merck (MRK), Eli Lilly (LLY) and Bristol Myers Squibb (BMY) are on deck to report fourth-quarter earnings next week. Early Thursday, analysts expect Merck to report adjusted profit of $1.52 per share on $13.14 billion in sales, growing a respective 21% and 5%. Also, before Thursday’s open, Lilly is likely to report an 11% earnings dive to $2.45 per share. Sales are expected to increase roughly 3% to $7.69 billion. Early Friday, analysts call for Bristol earnings of $1.80 per share on $12.09 billion in sales. Earnings would pop 23% and sales would advance north of 9%.

In Brief:

Late Tuesday, General Motors (GM) should see a 40% EPS decline to $1.16 on a 5% sales drop to $35.752 billion. Late Thursday, Ford Motor (F) is likely to post a 32% EPS increase to 45 cents on a 15% sales rebound to $41.23 billion.
Chipmakers Advanced Micro Devices (AMD) and Qualcomm (QCOM) will report December-quarter results on Tuesday and Wednesday, respectively. AMD investors will be looking for evidence of market share gains in PC and data centers processors. Qualcomm investors will key on the company’s diversification efforts beyond smartphone chips.
Streaming music service Spotify (SPOT) will announce its fourth-quarter results on Wednesday. Analysts expect Spotify to add 8 million new subscribers in the period and end 2021 with 180 million subscribers worldwide.
Video game publisher Activision Blizzard (ATVI) will report results for the fourth quarter on Thursday. Its holiday-quarter financials likely will be overshadowed by the company’s pending acquisition by Microsoft (MSFT).