In the coming week I expect a big earnings test for regional banks and a feW clues about consumer goods, airlines, and autos.
Last week ended with great earnings reports from Big Banks JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C). Big Bank earnings continue this week with Bank of America (BAC) and Goldman Sachs (GS) reporting on Tuesday. But the important news for the financial sector will come from the dozens of earnings reports from regional banks.
On Friday a very negative report from regional PNC Financial Services Group (PNC) suggested that regional banks might report a tough quarter and warn of worsening conditions in the fourth quarter. PNC said net interest income fell 3% in the third quarter from the second quarter and told analysts and investors to expect a 1% to 2% decline in net interest income in the fourth quarter from third quarter levels. The bank also announced that it would layoff 4% of its workforce.
This week watch for earnings from regionals such as Zions Bancorporation (ZION) and Fifth Third Bancorp (FITB) on Thursday and Comerica (CMA) on Friday to see if the sector lives down to analyst fears. Fifth Third, for example, is expected to report 82 cents for the quarter versus 93 cents for the third quarter of 2002. At Zions, the forecast is for earnings to fall to $1.10 a share from $1.40 in 2002. Comerica’s report is expected to be especially negative with earnings going to $1.70 a share from $2.60 in 2022.
Of course, expectations this negative always set up the possibility of a positive earnings surprise.
The rest of the week is largely quiet as investors wait for earnings from technology companies to begin next week. But Netflix (NFLX) is scheduled to report on Wednesday ($3.47 versus $3.10 in the third quarter of 2022.) So too is Tesla (TSLA). There analysts expect a signifiant drop in earnings to 64 cents a share from 95 cents in 2022.
We get two reports from consumer companies with Johnson & Johnson (JNJ) reporting on Tuesday and Procter & Gamble (PG) on Wednesday. The report from P&G is expected to show that consumer spending held up in the third quarter. Analysts are looking for the company to report $1.71 a share versus $1.57 in 2022.
One interest outlier to me is the report from auto supplier Autoliv (ALV) on Friday. The maker of auto safety equipment is expected to report earnings of $1.73 a share versus $1.23 in 2022. Too soon to say whether this report reflects anything going on across the auto supply sector or is company specific. (I’d vote on company specific at this point.)