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Q4 Earnings Season Preview and Analyst Reports for Facebook, Chevron & Others

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Sheraz Mian
·7 min read
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Tuesday, January 5, 2021

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily provides a preview of the Q4 earnings season that will take the spotlight with the earnings release from JPMorgan (JPM) and other banks on January 15th. As always, we have also featured new research reports on 16 major stocks, including Facebook (FB), Berkshire Hathaway (BRK.B) and Chevron (CVX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

2020 Q4 Expectations

The consensus expectation is for Q4 earnings for the S&P 500 index to be down -10.5% from the same period last year on +0.1% higher revenues. This would follow the -7% decline in Q3 and the -32.2% drop in earnings in Q2.

The growth trend is expected to rebound in the current period, with 2021 Q1 earnings for the index currently expected to be up +12.6%. The overall earnings picture started improving in July as the pandemic-driven lockdowns started easing.

As a result, estimates have steadily improved since that time period, a trend that we expect will gain momentum as companies report Q4 results in the coming days and share their outlook for 2021 Q1 and beyond.

The expectation is for full year 2021 earnings to increase by +22.5% after the -16.6% decline in 2020. 

Facebook shares have outperformed the S&P 500 over the past year (+27.4% vs. +16%) on the back of steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger and Facebook Watch is a major growth driver.

However, Facebook expects user-base growth to be flat or slightly down in the United States and Canada in the fourth quarter of 2020, sequentially. The company expects ad-revenue growth on a year-over-year basis to be better than the third quarter’s growth rate, driven by continued strong advertiser demand during the holiday season.

Strong demand for Oculus 2 is expected to boost other revenues. However, changes made by Apple and Google in their mobile operating systems and browser platforms have limited Facebook’s ability to track user-activity trend, which is a headwind. 

(You can read the full research report on Facebook here >>>)

Shares of Berkshire Hathaway have gained +25.3% in the last six months against the Zacks Insurance - Property and Casualty industry’s gain of +18.4%. The Zacks analyst believes that continued insurance business growth fuels increase in float, drive earnings and generates maximum return on equity. The non-insurance businesses are delivering improved results with increased revenues over the past few years. A sturdy capital level provides further impetus.

The company is one of the largest property and casualty insurance companies measured by premium volume. Berkshire's inorganic growth story remains impressive with strategic acquisitions. A strong cash position supports earnings-accretive bolt-on buyouts and indicates the company's financial flexibility.

A sturdy capital level provides further impetus. However, exposure to catastrophe loss induces earnings volatility and also affects the property and casualty underwriting results of the company. Huge capital expenditure remains a headwind for the company.

(You can read the full research report on Berkshire Hathaway here >>>)

Chevron shares have gained +19.7% over the past three months against the Zacks Integrated Oil industry’s rise of +26.2%. The Zacks analyst believes that Chevron is not immune to commodity price crash, forcing it to cut capital spending and suspend buybacks. The company’s high oil price sensitivity is a concern too.

While the company has struggled with depressed demand stemming from the coronavirus pandemic, it has reiterated its commitment to its dividend on a number of occasions. Chevron’s Noble Energy takeover has expanded its footprint in the DJ Basin and the Permian Basin along with the addition of cash-generating offshore assets in Israel.

However, the supermajor’s reserve replacement ratio of 44% is indicative of its inability to add reserves to replace the amount of oil and gas produced.

(You can read the full research report on Chevron here >>>)

Other noteworthy reports we are featuring today include Boeing (BA), Equinix (EQIX) and Southern Copper (SCCO).

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

Sheraz Mian

Director of Research                                                                                                                   

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>

Today's Must Read

Expanding User Base, Instagram Strength Aid Facebook (FB)

Solid Insurance Business Aids Berkshire (BRK.B), Cat Loss Ails

Chevron (CVX) Boosts Permian Position with Noble Buy

Featured Reports

Strategic Mergers Aid Boeing (BA), Low 737 Deliveries Hurt

Per the Zacks analyst, strategic mergers made by Boeing boosts growth. However, low 737 deliveries as a result of the worldwide grounding of 737 Max jets raises concerns.

Expansion Strategy Boosts Equinix (EQIX) Amid Stiff Competition

Per the Zacks analyst, Equinix's expansion of its interconnection service provides it with a competitive edge in the data-center space.

Cost Cuts Aid Southern Copper (SCCO), Lower Production Ail

The Zacks analyst likes Southern Copper's focus on cost reduction, industry-leading copper reserves, and expansion actions.

Investments Aids Northrop (NOC), High Operating Expenses Hurt

Per the Zacks analyst, Northrop Grumman's regular investments in growth projects bolster its future prospects. However, it continues to incur higher operating expenses that raise concerns.

Debt Reductions, Randgold Acquisition Aid Barrick (GOLD)

While Barrick faces a headwind from higher costs, it will benefit from actions to de-leverage its balance sheet and synergies from the Randgold acquisition, per the Zacks analyst.

Verisk (VRSK) Gains From Franco Signor Buyout, Debt Woes Ail

Per the Zacks analyst, the acquisition of Franco Signor is a part of Verisk's growth strategy and strengthens its foothold in the Medicare space.

Loan Growth Aid First Republic (FRC), Increasing Costs a Woe

Per Zacks analyst, First Republic benefits from a rise in loan balances driven by increased loan origination volumes. Yet, escalating expenses due to investment in digital initiatives remains a woe.

New Upgrades

Sysco (SYY) to Gain From Focus on Transformation Initiatives

Per the Zacks analyst, Sysco is set to gain from its transformation initiatives, including becoming digitally oriented. Notably, it is making investments to enhance Sysco Shop digital order platform.

Strategic Buyouts and Collaborations Aid Synchrony (SYF)

Per the Zacks analyst, its strategic buyouts like Loop Commerce and PayPal Credit financing program and tie-ups with Google, eBay, Qurate Retail Group, and Amazon has led to significant growth.

CoreLogic (CLGX) Rides on Operational, Financial Growth

The Zacks analyst believes that strength in property-tax processing, insurance & spatial, and international and consistent solid housing market fundamentals aid growth and profitability for CoreLogic.

New Downgrades

Incyte's (INCY) Dependence on Jakafi For Growth Concerning

Incyte's efforts to expand its lead drug Jakafi's label are positive, its dependence on only one drug for growth is a concern. Competition from recently approved therapies will impact sales.

Weak Foodservice Business a Woe For Flowers Foods (FLO)

Per the Zacks analyst, Flowers Foods' foodservice business is hurt by social-distancing trends amid COVID-19. Foodservice and other non-retail sales fell 14.7% in the fiscal third-quarter.

Pandemic-Led Business Challenges, Forex Woes Ail NEOGEN (NEOG)

The Zacks analyst is worried about the continued adverse impacts on some of NEOGEN's important end markets due to the pandemic. Unfavorable currency movements are an added headwind.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Southern Copper Corporation (SCCO) : Free Stock Analysis Report
Facebook, Inc. (FB) : Free Stock Analysis Report
Equinix, Inc. (EQIX) : Free Stock Analysis Report
Chevron Corporation (CVX) : Free Stock Analysis Report
Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
The Boeing Company (BA) : Free Stock Analysis Report
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