Eyes on Apple after Netflix kicks off heady season

The earnings-report cycle was off to a strong start this week, when Netflix set an exceptionally high bar, blowing so far beyond subscriber estimates that the video service entered the exalted club of companies valued at more than $100bn (€817bn).

The earnings-report cycle was off to a strong start this week, when Netflix set an exceptionally high bar, blowing so far beyond subscriber estimates that the video service entered the exalted club of companies valued at more than $100bn (€817bn).

Netflix joins the array of US, European, and Asian companies whose earnings are getting a lift from quickened global economic growth.

As always, investors will be watching Apple, the world’s most valuable company, when it reports late next week, for signs of how demand is faring for the iPhone X. The results are likely to affect Asian suppliers.

This week, South Korea’s LG Display reported that operating profit missed the lowest analyst estimate.

The news came about a week after Taiwan Semiconductor Manufacturing forecast revenue that fell short of expectations, as waning smartphone sales in China, and a strong local currency, outweighed booming demand from cryptocurrency miners.

Samsung Electronics, a supplier and rival to Apple, reported lower-than-projected profit this month, as it lost momentum in memory chips.

And not every CEO will have as pleasant news to deliver as Netflix’s, amid speculation that, later today, John Flannery will have to cut General Electric’s 2018 profit outlook. The issues to watch this earnings season include the lower US corporate tax rate.

However, Macquarie Research estimates most US airlines will see an average 20% increase in earnings per share. The benefits will affect Southwest Airlines, which reports tomorrow, and has already announced bonuses of $1,000 (€817) for its workers. US retail giant, Wal-Mart, is getting a roughly $2bn tax benefit. It reports next month.

Faster global growth should help companies that sell goods and services worldwide. This week, the IMF increased its world economic growth outlook. And with that growth comes more digging, paving and loading, and analysts have raised 2018 forecasts for Caterpillar. It reports tomorrow.

But heady times don’t prevent foreign-exchange headwinds for big companies.

The euro gained against every major currency in 2017 and strengthened further in January, so expect more profit warnings from European companies, like the one last week from Remy Cointreau. Luxury conglomerate, LVMH, which reports tomorrow, and German software maker, SAP, which reports next week, are among others that may be hurt by the euro.

The question is how big of a hit, and whether it’s already reflected in stock prices.