- Recent economic data suggests that the domestic economy may be entering a recession
- Robust employment numbers, declining inflation trends, and hopes that gains will hold in there are areas the bulls are pointing to
- Some companies, however, issued cautious profit outlooks
What is the status of the consumer? Struggling between ever-high inflation and a pandemic-related decline in excess savings?
Thrive in an abundant labor market that features improving real wages and the lowest unemployment rate since 1969? There seems to be data to go either way at this point, as recession fears ease. Both the December report and the reading suggested that an economic outcome of gold curls might not be that far off. Of course, the x factor is Chair Powell and the rest of the Federal Reserve.
There are also other signs of hope. Lower commodity prices, benign credit spreads, and a tick down in interest rates are helping to ease financial conditions. The upside is that the scenario works to the detriment of the Fed’s mission to squash inflation sooner rather than later. We will know much more in the coming weeks as major US and global corporations report results Q4.
But some clues have already been left by the big companies issuing preliminary earnings and sales numbers – some good, some quite cautious. Let’s dig into a few key pre-announcements [sourced by Wall Street Horizon] and what they could mean for stocks as we embark on an uncertain 2023.
Soft Landing? How about a bullish takeoff in Airlines stocks?
One of the main reporters of preliminary earnings for 2022 was a company of the transport industry in the industrial sector. Delta Airlines (NYSE: ) held an investor day in mid-December, and at the event, the management team expressed optimism about its free cash flow generation outlook for 2023 and 2024 Consumers, while constrained by some metrics, still want to travel while business travelers return to the sky for corporate meetings.
As a result, the cost per available seat mile for DAL has decreased on a year-over-year basis, according to the investor day conference. As a result, on December 14, Delta raised its Q4 2022 EPS guidance from $1.00 – $1.25 to $1.35 – $1.40. File this in the “bullish on 2023” category. The shares have taken flight since the beginning of this year. The stock rose from $32 a few weeks ago to around $40 in mid-January.
On Friday, January 13, Delta reported better-than-expected top- and bottom-line numbers, but shares traded lower initially due to reduced Q1 2023 EPS guidance. However, the CEO said that $ $5 to $6 in earnings per share could be in the works this year due to solid revenue growth and costs that are under control.
In the future, Delta’s management team is scheduled to speak at the Airfinance Journal Dublin 2023 conference on January 17 and 18, so be on the lookout for potential stock volatility.
- Delta Airlines Regroups After Bullish and Guiding Preliminary Earnings
Additionally, American Airlines (NASDAQ: ) took flight last week after raising its Q4 revenue and profit forecasts along with raising its margin expectations. Keep an eye on AAL later this month when it reports on January 26.
Harsh retail reality?
Bears always have plenty of arrows in their collective quivers. One is a heavy outlook from prominent retailer Macy’s (NYSE: ). The $6.2 billion consumer discretionary department store company updated Wall Street on its expectations for fourth-quarter sales and profit results. Revenue is now seen in the range of $8.16B – $8.40B versus a street forecast of $8.3B. EPS is expected to be in the range of $1.47 – $1.67 compared to the consensus of $1.61.
This preliminary figure implies a considerable decrease in annual revenue during the most important period in the calendar for a retailer. We won’t know the final results until Tuesday, March 7, when BMO is expected to release both same-store sales and full Q4 results. Macy’s preliminary earnings announcement goes into the “not so hot” bag.
- Macy’s: Shares Struggle in December, but Bounce Back in the New Year
A 2022 winner
Finally, we head home to another cyclical company with less exposure to the end consumer. Nucor (NYSE: ) is a steel and steel products manufacturer with sales in the United States, Canada and Mexico. The Materials sector company with a market cap of $40 billion has been a big winner for investors in the last year. While the stock is down about 15% from 12 months ago, this Charlotte-based steel industry stock is up nearly 40%.
Wall Street Horizon data tracker shows a preliminary earnings event confirmed on December 15th. Amidst the macro uncertainty and the continued gloomy view of the CEOs of the global economy, the steelmaker told the street that he still expects positive numbers for the year 2022. to the total from 2021. The shares of NUE faltered in the weeks following the news, but then rose to 8-month lows in mid-January. The actual Q4 reporting date is January 26th, so don’t let this one get lost in the shuffle during that busy week of earnings releases.
- Nucor Steel hits new rebound highs, outperforming the S&P 500
The Bottom Line
First half recession or golden curls? It seems that investors are slowly gravitating to one side. Of course, we’ll probably end up somewhere in between. With a large number of companies issuing preliminary sales and profit prospects, the corporate world is trying to signal certain messages to investors. It is clear that some parts of the economy will remain in a boom while others will encounter much harder compounds from the unusual timing of the stimulus of the end of 2021 and super-low interest rates. So far, traders are generally looking beyond the bad news.
Stay tuned for our earnings season coverage on Wall Street Horizon. You can stay ahead of the catalysts of market volatility with our industry-leading corporate event data that helps traders identify key dates so they can effectively manage risk.