First-quarter earnings season keeps rolling on. Headlining this week's earnings calendar will be entertainment giant Walt Disney (DIS, $110.71), oil name Occidental Petroleum (OXY, $62.97) and buy now, pay later company Affirm Holdings (AFRM, $25.04).
Through April 29, the percentage of S&P 500 companies reporting higher-than-expected earnings per share (80%) is above the five-year average (77%). However, the magnitude of the earnings beats (3.4%) is below the five-year average (8.9%), according to John Butters, senior earnings analyst at FactSet.
At the sector level, Butters says industrials and consumer staples have had the highest percentage of earnings beats at 91% and 89%, respectively. At the low end, real estate and consumer discretionary have the smallest amount of companies reporting earnings above estimates at 63% apiece.
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Can Earnings Give Walt Disney Stock a Boost?
Walt Disney will report its fiscal second-quarter earnings results after the May 11 close.
It has been a rough stretch for the Dow Jones stock, which is off more than 28% for the year-to-date, but another well-received earnings report could give DIS a boost.
In February, shares popped more than 3% after the company reported higher-than-expected earnings, revenue and Disney+ subscriptions.
Disney's streaming service will be in focus this time around too, especially after Netflix (NFLX) stock sold off sharply when its latest earnings report showed the company's first quarterly subscriber loss since 2011. However, unlike NFLX, Walt Disney "can monetize content through a variety of other channels, like merchandise and theme park revenue," says David Trainer, CEO of Nashville-based investment research firm New Constructs.
And in addition to direct-to-consumer subscriber growth across Disney+, Hulu and ESPN+, which will help DIS stock outperform its peers, BofA Global Research analyst Jessica Reif Ehrlich says the company's theme parks are on the upswing.
"Despite achieving near record results in its fiscal first quarter, international visitors still represent a minimal percentage of total attendance, hotel room occupancy remains well below peak levels as all hotels have not been reopened yet, cruise ship capacity remains below pre-pandemic peaks and parks are still operating below peak capacity levels," Reif writes in a note to clients. "These should all be additional tailwinds over the next 18-24 months."
As for Disney's fiscal second quarter, consensus estimates are for earnings per share (EPS) of $1.06, up 34.2% year-over-year (YoY) and revenue of $18.8 billion (+20.1% YoY).
Occidental Petroleum Earnings in Focus After Big Buffett Buy
Occidental Petroleum has been in the limelight in recent weeks following news that Warren Buffett's Berkshire Hathaway (BRK.B) increased its stake in the energy stock.
OXY first became a member of the Berkshire Hathaway equity portfolio in 2019, but the holding company more recently bought 91 million shares amid Buffett's big spending spree.
The integrated oil and gas company will once again be in the spotlight when it unveils its first-quarter earnings results after Tuesday's close.
OXY ended 2021 in a strong position, returning to profitability on an annual basis after two years of losses and recording its highest free cash flow – or the money available after a company has met its financial obligations – ever.
The company no longer resembles the debt-ridden firm of fiscal 2020 following its "record-shattering fiscal 2021," says Raymond James analyst John Freeman (Strong Buy).
"Leverage, which stood at around 4.8x at year-end 2020 – nearly double the Raymond James large-cap average – is estimated to fall below 1x by year-end 2022. The company, who remains completely unhedged in fiscal 2022, stands to generate a whopping $12.3 billion in free cash flow on our estimates of production of around 1.6 millions of barrels of oil equivalent per day (in-line with Street)," Freeman adds.
Underscoring this financial strength, analysts, on average, are expecting OXY to report earnings of $2.03 per share in Q1 versus a per-share loss of 15 cents in the year-ago period. Revenue is projected to jump 47.3% to $8.1 billion.
Affirm Selloff Creates Opportunity, Says Analyst
Affirm Holdings has not been immune to broad-market troubles in 2022, with shares down more than 75% for the year-to-date.
The reaction to the buy now, pay later (BNPL) stock's mid-February earnings report – where AFRM shares slid nearly 21% the day after the results were released – only exacerbated these headwinds.
"AFRM has been pressured since reporting fiscal second-quarter results," says Truist Securities analyst Andrew Jeffrey. This, according to Jeffrey, is due to a general multiple contraction, liquidity concerns and the perception of rising competition.
However, the analyst, who has a Buy rating on AFRM stock, isn't worried. While the recent selloff creates an opportunity, "rising BNPL demand, driven by changing consumer demographics and tastes, creates opportunity for several providers." And secular demand for BNPL "will outpace any cyclical headwinds."
So what's in store for Affirm's fiscal third-quarter earnings report, due out after Thursday's close?
Consensus estimates are for the company to record a per-share loss of 53 cents for the three-month period, an improvement over the $1.06 per-share loss it reported in the year-ago period. Revenue, meanwhile, is expected to climb 73.6% YoY to $344.0 million.
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