- Tesla reporting Wednesday, investors nervous on production revisions
- UniCredit held down by broader Italian bank woes, but shares look cheap
- Toyota oulook likely to be impacted by current yen strengthening
Milan-based banking giant UniCredit reports earnings Wednesday at 1130 GMT.
By Peter Garnry
This week is another big week in terms of earnings releases with 440 companies reporting earnings. With more than 60% of companies in the US and Europe having reported earnings we have a good idea of current trends. Below are our ideas of how to play the key earnings today this week.
Tesla's big question mark (TSLA:xnas)
Investors are nervous ahead of Tesla’s Q2 earnings as recent downward revisions to production figures have made investors question whether Tesla can scale up production as fast as promised. In addition, the recent acquisition of SolarCity will spur a lot of critical questions.
Trading stance: We believe sentiment could change for the worse post the SolarCity acquisition and if Tesla lowers guidance for deliveries this year. We are already short the shares in our equity portfolio. Tesla reports earnings on Wednesday after market close.
Societe Generale and the French bank boost (GLE:xpar)
French banks outperformed its peers in Q1 and we believe the trend could continue in Q2. Societe Generale's earnings release scheduled for Wednesday at 0600 GMT.
Trading stance: We are betting on an upside surprise for Societe Generale given the trend of French outperformance.
UniCredit oversold? (UCG:xmil)
Italy’s largest bank is among the cheapest in Europe and is dragged down by other Italian banks pressured by investors due to elevated non-performing loan exposures. UniCredit reports earnings on Wednesday at 1130 GMT.
Trading stance: Even under adverse scenarios UniCredit shares should at least be trading at €2.50, so we see meaningful upside potential in the shares.
Rio Tinto's China problem (RIO:xlon)
Mining stocks have been one of the best segments lately driven by metals prices as China’s economy is expected to turn. Unfortunately the recent leading indicators for June show that China is slowing down again. This could spill into worse than expected outlook from Rio Tinto.
Trading stance: Given the above, we are negative on the earnings expected to be reported on Wednesday (no time given).
Toyota Motor and the surging yen (7203:xtks)
The recent JPY strength will likely dent Toyota’s outlook and disappoint investors. Revenue is expected to be down 6% year-over-year in Q2 but may disappoint on JPY strength.
Trading stance: Given the above, we are negative on the stock over the earnings release.
Monster Beverage's monster growth (MNST:xnas)
Monster Beverage is one of the most interesting growth stocks in the US consumer segment. We expect Monster to continue delivering high top and bottom line growth rates, something investors are willing to pay a high price for these days.
Trading stance: We expect a strong outlook and are therefore long the stock ahead of the earnings release.
Siemens' strong track record (SIE:xetr)
The turnaround is on track for Germany’s largest industrial conglomerate having positively surprised investors for four straight quarters. The firm has been executing well on the cost side, protecting profits. Siemens is expected to report earnings on Thursday at 0500 GMT.
Trading stance: We expect Siemens' positive trend to continue in Q3 despite a backdrop of weak economic activity.
Today's earnings schedule
Today's session sees Ferrari (RACE:xnys) reporting during the European session while stateside, Pfizer (PFE:xnys) will report at 1045 GMT and Procter & Gamble is scheduled to release its figures at 1100 GMT.
Our views are as follows:
- Ferrari could disappoint on both its Q2 figures and guidance given the demand slowdown seen both globally but even more forecefully in the luxury space. We are short.
- Expectations for Pfizer include strong EPS, and healthcare stocks have been the best performing sector in the Q2 earnings season so far. We are long.
- Procter & Gamble's turnaround is ongoing and revenues are eexpected to be down 11% (y/y). We are short but must note the risk of another EPS beat, as has been the case for the past four quarters.
Lovely car, but Ferrari is perhaps a better reward for investing
successfully than an investment itself. Photo: iStock
— Edited by Michael McKenna
Peter Garnry is head of equity strategy at Saxo Bank