Good, bad and ugly: Earnings this week


It’s the first big week of first-quarter earnings. Here are some big takeaways so far.

Netflix (NFLX) is the flashiest name overall, spiking to new all time highs after adding 7.4 million subscribers in the first quarter. That’s like signing up the entire Dallas-Fort Worth metropolitan area as new customers.

Things haven’t gone as well for semiconductors. Lam Research (LRCX), whose machinery is used to make chips, beat estimates but spooked investors with talk of slower shipments in the second half. Then on Thursday, Taiwan Semiconductor (TSM) gave weak revenue guidance.

Remember that in this world, it’s all about cycles. Investors care more about guidance and forward-looking indicators. Are we at the beginning, middle or end of a longer-term business wave? Monthly data from the Semiconductor Industry Association has run at a record pace since last summer thanks to a strong global economy and spreading use of chips in everything from smartphones to sports cars.

However, industry watchers were a little gun shy this earnings season amid some potential warning signs. On March 23, for instance, Citi downgraded memory-chip maker Micron Technology (MU) on pricing concerns. UBS followed with an even more pessimistic note on April 5. There have also been rumblings that weaker iPhone demand will hurt semiconductors, according to Goldman Sachs and Morgan Stanley two months ago.

Industrials have proven a happier place to be. Aircraft maker Textron (TXT) is leading the charge in terms of price performance — up 12 percent on the week — amid strong demand for corporate jets. Tool maker Snap-on (SNA) had its biggest gain in over a year today after beating on the top and bottom lines. Industrial supplier Grainger (GWW) also rallied on strong results after adapting its business to the competitive threat from (AMZN) and citing better demand across its customer base. Don’t forget there’s been evidence of this in economic reports for several months: Factory jobs have been on the rise and the Institute for Supply Management’s index has been near long-term highs.

Railroad CSX (CSX) is another member of the industrial sector that beat estimates. It’s been a viewed as turnaround story for a while, and is also benefiting from the strongest industry backdrop (based on weekly traffic) since since 2015.

Banks have reported decent earnings but investors haven’t really cared. American Express (AXP) has been the strongest financial, up 10 percent. The credit-card issuer beat on its top and bottom lines after sweetening rewards to win more customers.

The second-biggest gainer in the S&P 500 this week was Intuitive Surgical (ISRG), which reported yet another blowout quarter. The worst performer was Philip Morris (PM), down 16 percent after revenue missed and cigarette volumes continued to shrink. Procter & Gamble (PG), another major consumer-staples name, also fell to a new 52-week low amid tepid sales and signs that management being forced to cut prices.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.