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Earnings look ahead – BP, Facebook, Apple

A look at companies reporting this week.

Source: Bloomberg

BP (Q3 earnings 31 October)

As oil prices rally, the future looks much more encouraging for BP. Having kept its dividend in place, despite fears to the contrary, the firm is expected to report a good set of numbers. It continues to focus on natural gas and oil in regions where it already has operations. At 18 times forward earnings, the stock is not cheap, relative to its five-year average of 13, but the brighter outlook for crude prices will help support both the outlook and the dividend. Having cut costs aggressively in the tough times, the firm looks like a leaner operation, with the potential for the big five oil firms to bring in $50 billion in earnings in 2017, the highest level since 2014. Three years ago oil was at $110, so with Brent now at $60 the turnaround in profit is a testament to how well these firms have done in recent years.

The shares are now testing the £5.00 area, the high from autumn last year. Above here the December 2016 to January 2017 peak at £5.21 comes into play. Significant support this year has been found at 440p, while the summer highs of 480p could provide some support in the event of a move lower.

Facebook (Q3 earnings 1 November)

Facebook is expected to report earnings of $1.29 per share and $9.88 billion in revenue, having reported $1.09 in earnings for the same period a year earlier. The results come as executives from Facebook, plus representatives from Google and Twitter, testify in relation to the US government probe into possible Russian hacking in the 2016 election. This may well feature as topic during the earnings call. Nonetheless, the video ads on the platform and its Instagram offering underscore the firm’s dominance. For example, in the last quarter, Facebook added more than 200 million daily active users, more than the entire total of Snapchat. Further diversification should help boost the bottom line.

There is still no end in sight for the Facebook uptrend; steady pullbacks continue to find buyers, with the expectation that the July record high (intraday) of $179.19 will be surpassed in due course. Recent dips to $168.89 and then $161.58 should provide some support, with the continuation of higher highs and higher lows confirming the uptrend. 

Apple (Q4 earnings 2 November)

Apple is expected to report $1.87 in earnings per share (EPS), up 12% year over year (YOY), with earnings of $50 billion flat over the year. While the recent product launch failed to produce much in the way of fireworks, recent comments suggest demand is picking up. As ever, watch for iPhone sales numbers, which will be the real driver here. Apple has beaten profit forecasts in each of the previous five quarters, and higher than expected sales in four out of the last five. It seems difficult to think that Apple customers can continue to provide the demand seen in recent years, but there seems no end in sight to the demand levels.

A fresh all-time high in the stock confirms the bullish trend here. Higher highs and higher lows continue to power the stock higher, with a fall below $150 needed to reverse the short-term uptrend. Any pullback that holds above this level certainly fits into the ‘buying opportunity’ box. 

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