Better-than-expected results from many US companies reporting in recent days are fuelling optimism on Wall Street. Of the 210 S&P 500 companies that have reported fourth-quarter results, 71% have topped profit estimates.
In total, the companies are reporting earnings that are 3.0% above the estimates, which is below the five-year average. In terms of revenues, the percentage of companies reporting actual revenues above estimates (59%) is below the five-year average.
The earnings season is relatively strong, but most of the companies are giving lower guidance for 2019, which seriously affect the sentiment of investors. The main obstacles to the growth of earnings remain the Sino-US trade war and the Fed’s monetary policy. From the events abroad, the S&P 500 companies were most seriously affected by the Chinese economic slowdown and Brexit, as well as financial and economic problems in the Eurozone.
This week was the busiest in the earnings reporting season with the biggest technology and industrial giants reporting their financial statements. The moods were different without a single direction.
Apple report: Sales of iPhone fell by 15%
The US technology giant Apple reported its first decline in revenue and profit for the Christmas quarter for over a decade and warned that the slowdown in the core business with the iPhone and the weakness of Chinese economy will continue to be main obstacles for its growth this year.
Apple’s revenue fell by 4.5% to 84.31 billion USD for the three months ended December 29, while earnings fell slightly to 19.97 billion USD. Apple faces growing reluctance of smartphone owners to upgrade their devices to more expensive models, while in China the competition of high-end devices is oversaturated. The sales of iPhone fell by 15% in the quarter.
In addition to business failures, Apple also seeks to fix the technical problem of FaceTime’s video call system, which allows callers to tap users on iPhone, iPad, and Mac. The bug, which was reported by social media users on Monday, is a serious blow to the company that advertises its commitment to privacy. This is one of the company’s biggest problems to date with the protection of personal data.
According to the latest earnings report, Apple’s biggest challenges are two – falling iPhone business revenue, which accounts for nearly two-thirds of sales, and the inability to boost enough growth in smaller subdivisions, such as services and wearable devices.
Customers are reluctant to pay for the flagship iPhone, which has increased its starting price by more than 50% in recent years to nearly 1,000 USD. The demand for the iPhone XR, the less expensive option released in October, does not meet the expectations of the company, which has forced it to cut production.
The sales of iPhone, which account for two-thirds of total revenue, fell to 51.98 billion USD from 61.1 billion USD a year earlier.
Boeing revenues exceeded 100 billion USD for the first time
The stocks of Boeing rose after the company announced a record sales revenue in 2018, crossing the threshold of 100 billion USD for the first time in its 102-year history. The US aircraft manufacturer also said the best is yet to come.
The company expects sales and earnings to rise this year, judging by fourth-quarter results that outstripped the projections.
Optimistic assumptions show that Boeing still sees improvement when it comes to tackling the problems with its passenger aircraft business. Boeing and its European rival, Airbus, have achieved record sales revenue thanks to the low interest rates and rising middle class, especially in Asia.
This year, Boeing expects its revenue to reach between 109.5 and 111.5 billion USD from 101.1 billion USD in 2018. Operating cash flows will reach 17.5 billion USD or about 2 billion USD more than last year. The expected earnings per share will be between 19.90 USD and 20.10 USD.
Investors are worried about Amazon’s rising costs
Amazon.com gave a cool forecast for its first-quarter earnings and expressed concern about rising costs, the slowdown in retail growth and a bleak outlook for its business in India.
According to the e-commerce giant, the sales revenue will amount to between 56 billion USD and 60 billion USD in the current quarter. By comparison, the analysts’ average estimate was 61 billion USD.
Although sales and earnings in the fourth quarter surpassed analysts’ forecasts, growth in North America has slowed drastically in the key holiday season, and uncertainty ratings in India have shifted stocks to lower levels.
In the fourth quarter, the total loss from international operations increased to 642 million USD, reversing the trend of improving profitability.
Worldwide shipping costs increased 23% in the fourth quarter, outpacing the growth of online sales, and highlighting the tension over Amazon’s free shipping promotions to counter competition from Walmart Inc and Target Corp.