Next Week’s Earnings Reports: Potential Bright Spots in a Challenging Market
While the broader market has recently faced headwinds, with the S&P 500 and Nasdaq Composite experiencing their biggest one-day loss in over a year, some companies reporting earnings next week could offer a glimmer of hope. These companies, including Amazon and T-Mobile, are seen by analysts as having the potential for post-earnings stock price boosts, potentially becoming bright spots in an otherwise challenging market.
Key Takeaways:
- Earnings season had a positive start: As of July 19, the blended second-quarter earnings growth rate for the S&P 500 was 9.7%, exceeding expectations and potentially marking the index’s highest year-over-year earnings growth rate since the fourth quarter of 2021.
- Analysts are optimistic about certain companies: Companies with strong earnings estimates, buy ratings from a significant portion of analysts, and substantial upside potential in their price targets are expected to perform well.
- Amazon and T-Mobile are key contenders: Analysts have significantly raised earnings estimates for both Amazon and T-Mobile, with the former seeing an impressive 190% and 397% increase in the past three and six months, respectively.
- Data center plays and other potential winners: Eaton, a power management company now viewed as an AI-tied data center play, is also expected to see positive post-earnings performance. Other companies, including Mastercard, MGM Resorts International and S&P Global, are on the list of potential post-earnings gainers.
Amazon: A Beacon of Growth in E-commerce
Analysts are particularly bullish on Amazon, with their earnings estimates experiencing a dramatic surge. The consensus price target suggests the e-commerce giant could see a 31% upside over the next year, and 82% of analysts covering the stock have buy ratings.
BMO Capital Markets analyst Brian J. Pitz highlights Amazon Web Services (AWS) as a key driver of this optimism, stating, "We raise our 2Q24 AWS growth rates to a Street high of 19%, or $26.3B, following Google Cloud’s growth acceleration — AWS is on a path for durable revenue growth through at least 2025E."
Amazon’s stock has already seen notable gains this year, exceeding 18%. With strong fundamental growth underpinning their expectations, analysts believe the company could deliver another positive surprise in the second quarter.
T-Mobile: A Stable Force in a Competitive Market
T-Mobile, a leading telecommunications provider, is also positioned for potential post-earnings success. While analysts expect the wireless competitive environment to remain stable, they highlight T-Mobile’s strong postpaid phone growth and positive pricing actions as key drivers of expected growth.
Citi analyst Michael Rollins maintains a buy rating on the stock and sees a 20% potential upside from Thursday’s close. He expects "solid" second-quarter results, with year-over-year wireless service revenue growth of 3.8%, exceeding the consensus prediction of 3.6%.
T-Mobile’s shares have already gained 9% this year, and analysts believe the company is well-positioned to maintain its momentum.
Eaton: Riding the AI Wave
Eaton, a power management company, has gained significant traction as an AI-tied data center play. The company’s focus on critical infrastructure and its ability to capitalize on the growing demand for data centers fueled by AI adoption has attracted analysts’ attention.
The consensus price target suggests a potential 18% upside for Eaton’s stock over the next year. Earnings estimates for the company have been revised upwards by 24% and 47% in the past three and six months, demonstrating increasing optimism surrounding its quarterly report.
Other Potential Stars: Mastercard, MGM Resorts International, and S&P Global
Beyond Amazon, T-Mobile, and Eaton, other companies are attracting analyst attention for their potential to deliver impressive post-earnings performance.
Mastercard, a global payments technology company, is well-positioned to capitalize on the growth in digital payments and consumer spending. MGM Resorts International, a leading casino and entertainment company, is benefitting from the recovery in the travel and leisure industry.
S&P Global, a leading provider of financial information and analytics, is expected to benefit from continued demand for its data and insights.
Looking Ahead: A Light at the End of the Tunnel?
While the broader market has faced some challenges recently, the potential for positive earnings reports from key companies like Amazon, T-Mobile, and Eaton offers a glimmer of hope.
These companies have demonstrated strong fundamentals and have attracted considerable analyst interest. If they deliver on expectations, their performance could provide a much-needed boost to investor sentiment and provide a catalyst for renewed market optimism.
The upcoming earnings season will be a key indicator of the health of the economy and the direction of corporate performance. Investors will be closely watching the results, hoping that these bright spots can translate into a more positive outlook for the broader market.
