Business

Can a company determine if U.S. corporate profits rise to record levels next year


As Wall Street looks to 2023, earnings growth for the companies that make up the S&P 500 index may depend on just one of them: Amazon.com Inc.

Amazon
AMZN,
-1.39%
,
The online retail giant, whose shares have fallen 46% year-to-date on concerns about weaker e-commerce demand, is expected to be the biggest contributor to gains in the sector. The index’s discretionary consumer goods, as reported by FactSet. By contrast, that sector is expected to be the biggest earnings gainer in the index as a whole, according to FactSet.

“At a corporate level, Amazon.com is expected to be the biggest contributor to industry earnings growth this year, accounting for nearly half of the industry’s expected earnings growth,” FactSet senior earnings analyst John Butters wrote in a report. on Friday.

As this column reported last week, Wall Street analysts expect profits to hit records this year and next, despite recession fears and inflationary pressures on consumers. Of the 11 sectors tracked by FactSet, the S&P 500’s Consumption Consumption sector is expected to see the biggest year-over-year earnings growth next year – 35.8%. Without Amazon, earnings growth for that sector would drop to 18.6%.

But for Amazon to do the heavy lifting, it will have to find a way to entice consumers who are already more reluctant to click to buy online. And it will have to find a way to squeeze a bigger profit from its cloud services division as spending on technology takes a turn for the worse.

See more: Amazon CEO says there will be more layoffs in 2023

Analysts expect Amazon to average a gain of $1.86 per share in 2023, as opposed to a projected loss of 10 cents a share currently projected. ​in 2022 after three-quarters of reported profits. That loss is largely due to share value plummeted in electric vehicle maker Rivian Automotive Inc.
RIVN,
-4.51%
.

But Amazon also forecast Q4 earnings and revenue fall short of Wall Street expectations, as rising prices raise concerns that holiday shoppers will be more cautious, craving bargains. And since September 30, Amazon has been the biggest source of income for companies that serve consumers, FactSet reports.

However, even as economists remain concerned about a recession next year, analysts expect overall index earnings to grow 5.5% in 2023, the Facts report set. But that’s below the 10-year average, and analysts expect most of that growth to happen in the second half of the year. They also expect the S&P 500
SPX,
-0.73%

Overall value will increase 13% next year, the report said.

Earnings this week

According to FactSet, as earnings reporting volume fell to a trickle this month, only six S&P 500 companies are expected to report quarterly results next week. But those results should provide further insight into the outdoor entertainment and tech industries, both of which are dealing with the consequences of a pandemic-related surge in demand in 2020 and 2021. .

Software giant Oracle Corp.
ORCL,
-0.26%

earnings on Monday and Adobe Inc.
ADBE,
-0.58%

reported reports on Thursday, as Wall Street tries to address software demand amid cuts in tech spending and tech industry layoffs.

For more: Cloud software is a ‘battle for a knife in the mud’ and Wall Street is going bad with a winning sector

Also this week, grill maker Weber Inc.
WEBR,
-0.31%

and RV maker REV Group Inc.
REPUBLISH,
-1.13%

reported Wednesday, while RV maker Winnebago Industries Inc.
world,
+0.22%

reported on Friday. Taken together, the results will provide more context about people’s enthusiasm for road trips and outdoor excursions, which have become more popular in the wake of the pandemic.

Elsewhere, homebuilder Lennar Corp.
WOOL,
-1.04%

releases its earnings on Wednesday, as rising mortgage rates, higher home prices and limited supply weigh on the housing market. Manufacturing service provider Jabil Inc.
JBL,
-0.39%

fifth report. Darden Restaurant Inc.,
DRI,
-0.83%
,
owner of Olive Garden, reported the results on Friday, as restaurants try to gauge how much customers will pay to dine while also navigating their own higher costs.

Calls to include in your calendar

Adobe, Oracle: In October, Adobe
ADBE,
-0.58%

say it will stick with its fourth-quarter outlook. The move has made the company – known for design platforms like Photoshop, Illustrator and InDesign – an outlier in the tech industry, where layoffs and sales are weak. become more popular.

“Over the course of the last month, we have received more insight into the impact of the macro environment on many software companies and it is clear that growth is under pressure and will continue to be under pressure in the coming months. going forward,” Stifel analysts said in a note late last month.

Adobe has not been exempt from those problems. The company recently cut about 100 jobs, mostly in sales, Bloomberg reported this month. And its $20 billion bid for Figma, a platform that allows users to collaborate on design projects, was reported. face deeper regulatory scrutiny. Analysts have also come up with concerned about the overpriced price of the acquisition.

Wells Fargo analyst Michael Turrin said: “While the product/strategy fit is clearly fine-tuned, it’s the price level that is likely to lend credence to the downside. At least for now.” wrote in septemberfollowed a series of other analysts downgraded.

prophesy
ORCL,
-0.26%

Will also report in context worry about dwindling sales and job cuts. But analysts say the company, which develops cloud software and owns a Java programming language background, could benefit from the Cerner division and the ability to land larger deals. Case in point, Oracle is one of the big tech companies that will share $9 billion contract to provide Pentagon cloud servicesThe Department of Defense said on Wednesday.

Numbers to see

The outdoor migration of COVID-19: Outdoor activities, from golf to cooking to camping, boomed in the early days of the pandemic, after many felt bored and stuck at home. But as the final restrictions of COVID-19 are gone and inflation is more austere, Wall Street will get more insights from Winnebago.
world,
+0.22%

— also produces fire trucks and ambulances — and Weber
WEBR,
-0.31%

position of demand as indoor activity reemerges as competition for profit.

Rival RV maker Thor Industries
CARDS,
+4.20%

on Wednesday reported a drop in quarterly sales – albeit from record levels in the same period last year. Chief Executive Officer Bob Martin, in the company’s earnings release, said the entertainment media industry has been hit by worries about the economy, adding that “the retail environment is deteriorating. affected by inflation and monetary policy causing interest rates to be higher”. However, the company’s full-year revenue forecast slightly better than analysts expected.

RV retail sales in North America fell 23% year-on-year in October and are down 22% year-to-date, Raymond James analyst Joseph Altobello said in a research note Wednesday. .

Meanwhile, the demand for baked goods is showing signs of decline. Last month, Weber’s rival Traeger Inc.
CHEF,
-6.49%

revealed that retailers’ The ongoing inventory clearing will be a drag on full-year sales. After actively stockpiling goods to avoid a repeat of last year’s supply shortages, retailers this year often have too many items on hand as inflation makes customers reluctant to buy.

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