With the coronavirus-related uncertainty and confusion around the second stimulus deal continuing to pressure markets, some of the largest U.S. companies will begin reporting third-quarter 2020 earnings in the week ahead.
Several mega cap companies are scheduled to release their latest reports, at a time when investors need a solid signal that corporate America is coming out of a recession and the underlying demand remains strong.
In this environment, corporate earnings are a crucial indicator, providing justification for the ongoing rally, but also furnishing future guidance with which investors can determine whether their expectations are in line with company prospects going forward.
In a week packed with major announcements, we're focusing on these three stocks:
1. Netflix
The streaming entertainment giant Netflix (NASDAQ:NFLX) will report Q3 earnings on Tuesday, Oct. 20 after the market close. Analysts are projecting $2.12 a share profit on sales of $6.37 billion.
Shares of Netflix have outperformed during the COVID-19 pandemic as the content-rich video-streaming service has proven to be a perfect “stay-at-home” stock.
As of Friday's close at $530.79, Netflix's shares had gained about 68% so far this year, compared with about 8% gains in the S&P 500 index. This unanticipated resilience comes after Netflix’s dismal performance in 2019 when the stock lagged far behind in the surge that pushed so many other mega-cap tech stocks to new highs.
This coming week’s earnings report will be crucial to sustaining this year's rally. The Los Gatos, CA-based company has to show it’s cementing its position as the dominant streaming service during the coronavirus pandemic, while its competitors struggle.
2. Lockheed Martin
Lockheed Martin (NYSE:LMT) is scheduled to report its Q3 earnings on Oct. 20 before the market open. Analysts, on average, forecast $6.09 earnings per share on sales of $16.1 billion.
The U.S. defense sector has continued to operate through the coronavirus-driven lockdowns, shielding Lockheed Martin from any significant financial impact. The lack of business interruption and increased government spending puts Lockheed in a good position to weather the current economic downturn.
Despite some production bumps in Texas and Florida, Lockheed Martin said in July it doesn’t expect the pandemic to have a material impact on its finances this year, and raised its 2020 sales and profit guidance.
Also, the world’s largest defense contractor has an impressive portfolio of products and services, including its F-35 fighter jets which are providing the largest source of profit. LMT shares rose about 9% during the past quarter, closing on Friday at $386.50.
3. Intel
Chipmaker Intel (NASDAQ:INTC) will also come under sharp scrutiny in the week ahead, when it reports its latest quarterly earnings on Thursday, Oct. 22, after the close. The semiconductor giant is projected to report $1.1 a share profit on revenue of $18.22 billion, according to analyst consensus
Intel, the largest chipmaker in the U.S. by revenue, was benefiting from robust demand for chips used in data centers before the coronavirus pandemic hit. But those gains were contained as Intel struggled to ramp up production of chips that use its latest 14-nanometer process node. Results last year showed that revenue climbed 2% though net income was flat.
Intel shares, which closed at $54.16 on Friday, have underperformed when compared to other chip producers in the current market rebound. The stock is up almost 20% from its mid-March low of $42.86 as it faces challenges to introduce new and powerful chips and competitors grab market share.