War in Europe, inflation and pandemic tailwinds are testing companies like never before. Identifying resilience within the uncertainty is key this US earnings season.
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US Earnings Season Report
The latest US earnings season is in full swing, presenting excellent opportunities for Australian investors with an eye for identifying the telling fundamentals of company resilience within the first quarter results.
With some of the biggest publicly traded companies in the world reporting during yet another period of significant turbulence – this time now including war in Europe, continued lockdowns in China and growing inflation concerns internationally – investors will need to be prepared to leverage opportunities and respond to breaking news and company results during pre and post market hours.
Volatility also stepped up a notch recently after Fed Chair confirmed a 50 bps rate hike will arrive in May. The hawkish move by central bank is responding to the US consumer price rising in March by a staggering 8.5 per cent, growth not seen since 1981, and the rising costs most acute at the petrol pump as well as across essential items like basic food supplies. These continued rises are further impacting business running costs, resulting in thinner margins just as companies navigate additional stress from negative consumer sentiment.
“This earning season looks likely to be a big test for all businesses, who are experiencing one of the most difficult and complicated times in decades,” IG Australia’s Hebe Chen told Yahoo Finance.
Converging headwinds of inflation, geopolitical uncertainty and supply chain issues have created a hard-to-predict economic outlook, said Chen. So expect this earnings season to highlight the businesses able to demonstrate resilience in their continuing response to change.
“From my perspective, I think it’s safe to say adapting to change has become the key factor of the past two years, and will remain that way for the year to come,” Chen said.
Outside of geopolitical tensions, the COVID-19 related uncertainty continues more than two years into the pandemic, with large US companies experiencing the tailwinds differently. Some of those that were doing well prior to the pandemic, like Meta/Facebook, have seen their customer growth slowing to a stop. While others that have done well during the pandemic, like Zoom and Netflix, are succumbing to a post-pandemic period and share prices tumbling in recent quarters, as a result of further changes to how people live and work.
“No business is safe from this, as the whole world is entering into a new phase, the competitive landscape across different sectors will face new change as well,” Chen says.
From an investor's point of view, businesses that demonstrate an ability to identify and react to opportunities within the changing environment would be more favorable.
Chen also noted other factors as contributing to pressures facing businesses, including the massive growth enjoyed across the S&P 500 over 2021, which has significantly raised the bar on growth expectations.
Chen says investors would be wise to keep an eye on company fundamentals during this reporting season, particularly earning growths, profitability, and cash flow. Staying well informed and across breaking news is also critical, given continued global volatility.
As such, after hours trading opportunities can be useful for traders – not only for leveraging new stocks, but also for managing risk on existing portfolios.
“The market doesn’t sleep. Especially for most of the US earnings, when companies release their earnings outside of the main session. So if you can access that after hours trading, you can react to breaking news quickly and get ahead of the game.”
Meanwhile, out of hours trading also enables traders to address risk within existing portfolios, by foreseeing upcoming news or reports that are likely to have an impact.
Not all brokers offer access to extended trading hours, so it’s important to check what access you have and be prepared for this season.
“IG Australia offers extended trading hours on 70 “All Sessions” US stocks, including Amazon, Tesla and Facebook.” said Chen.
“We regularly see our clients trading actively in the pre and post markets session, and this can increase the majority of our daily volume on that stock, when it is a popular stock that has experienced a major move” said Chen.
It’s an uptick that shows how traders are preparing for trading seasons and keeping a keen eye on company announcements, breaking news and the reports that drop, knowing just how consequential this current period of volatility is.
More than 70 key US equities can be traded during IG’s extended hours.
All trading involves risk. You may get back less than you originally put in. Consider taking steps to manage your risk and ensure to monitor your positions. Fees and charges may apply. Issued by IG Australia Pty Ltd ABN 93 096 585 410, AFSL 515106.