Earnings Week Ahead: Q4 Season Kicks Off With Delta Air Lines and Big Banks Like BlackRock, Citigroup, Wells Fargo and JPMorgan

This week will also bring us an inflation report, US-Russia talks, and a lot of Fed talks. The following is a list of earnings slated for release January 10-14, along with a few previews. Investors will carefully monitor the latest news on the rapidly spreading Omicron coronavirus variant to see how it affects earnings in 2022.

Earnings Calendar For The Week Of January 10

Monday (January 10)

TICKER COMPANY EPS FORECAST
AZZ AZZ $0.82
CMC Commercial Metals $1.29
TLRY Tilray $-0.09

 

Tuesday (January 11)

TICKER COMPANY EPS FORECAST
SNX TD Synnex Corp $2.6
ACI Albertsons $0.55

 

Wednesday (January 12)

TICKER COMPANY EPS FORECAST
INFY Infosys $0.17
JEF Jefferies Financial Group $1.4
KBH KB Home $1.77
SJR Shaw Communications $0.3
VOLT Volt Information Sciences $0.07

 

Thursday (January 13)

IN THE SPOTLIGHT: DELTA AIR LINES

Delta Air Lines, one of the major players in the United States aviation industry, is expected to report earnings per share (EPS) of $0.11 in the fourth quarter, more than doubling compared to a huge loss of $-2.53 per share seen in the same period a year ago.

The Airline company, which provides scheduled air transportation for passengers and cargo throughout the United States and across the world, is forecast to report revenue growth of over 130% to around $9.2 billion. It is worth noting that in the last two years, the airline has beaten consensus earnings estimates just four times.

According to ZACKS Research, based on strong passenger demand during the holidays, Delta Air Lines raised its guidance for the fourth quarter of 2021. It hopes to achieve “meaningful” profitability in 2022 despite Omicron-induced woes. In the December quarter, the airline expects to make approximately $200 million in adjusted pre-tax profit, according to an SEC filing.

Compared to the same period last year, Delta expects to recover 74% of its adjusted total revenues (excluding third-party refinery sales) in the fourth quarter. In 2022, DAL expects its capacity to reach approximately 90% of its level in 2019. In 2023 and beyond, it expects to achieve pre-pandemic levels of capacity. With adjusted revenues (ex-refinery) exceeding $50 billion in 2024, the company expects earnings per share to surpass $7, ZACKS analysts noted.

“Mgmt. laid out a plan to meet and exceed pre-pandemic financial benchmarks by 2024 by building a best-in-class premium airline. The plan is sound and targets appear conservative though the near-term trajectory remains outside of mgmt.’s control. We see line of sight to the stock doubling from here,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“Why Overweight? Delta Air Lines (DAL) has some of the strongest customer satisfaction numbers among the other Legacy peers, while also commanding a higher PRASM, making it our preferred Legacy carrier. While DAL cannot escape Legacy overhangs (delayed International/corporate recovery, strained balance sheet), it should rise with the industry tide. The risk-reward looks attractive.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 13

TICKER COMPANY EPS FORECAST
TSM Taiwan Semiconductor Manufacturing $1.14

 

Friday (January 14)

IN THE SPOTLIGHT: BLACKROCK, CITIGROUP, JPMORGAN, WELLS FARGO

BLACKROCK: The world’s largest asset manager is expected to report its fourth-quarter earnings of $10.14 per share, which represents a year-on-year decline of about 0.4% from $10.18 per share seen in the same period a year ago.

The New York-based multinational investment management corporation would post revenue growth of nearly 15% to around $5.15 billion. The company has been able to beat earnings per share (EPS) estimates most of the time in the last two years.

“We believe BlackRock (BLK) is best positioned on the asset mgmt barbell given leading iShares ETF platform, multi-asset & alts combined with technology/Aladdin offerings that should drive ~11% EPS CAGR (2020-23e) via ~6% avg LT organic growth,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“We see further growth ahead for Alts, iShares, international penetration, and the institutional market in the US. Recently acquired Aperio also bolsters solutions offering and organic growth. We expect the premium to widen as BLK takes share in evolving industry and executes on improving organic revenue growth trajectory.”

CITIGROUP: The New York City-based investment bank is expected to report its fourth-quarter earnings of $1.87 per share, which represents a year-on-year decline of about 10% from $2.07 per share seen in the same period a year ago. But the U.S. third-largest banking institution would post revenue growth of nearly 4% to $17.06 billion.

“While the stock is cheap at 0.6x NTM BVPS, and new CEO is taking strong, proactive strategic action to boost returns closer to peers, we believe these actions will take time to play out,” noted Betsy Graseck, equity analyst at Morgan Stanley.

Citi is exiting 13 consumer businesses in Asia and EMEA, and focusing on higher growth areas of US consumer, Asia WM, International wholesale and consumer payments. These actions could drive ROE higher than the 9% we are modelling for 2023, but we expect the stock will only start to fully reflect this once revenues begins to accelerate. Citi benefits less than peers from higher rates, and we expect some of our more rate sensitive stocks will outperform as the Fed begins to raise rates next year.”

JPMORGAN: The leading global financial services firm with assets over $2 trillion is expected to report its fourth-quarter earnings of $2.94 per share, which represents a year-on-year decline of over 20% from $3.79 per share seen in the same period a year ago. But one of the world’s oldest, largest, and best-known financial institutions would post revenue growth of just over 2% to $29.9 billion.

WELLS FARGO: The fourth-largest U.S. lender is expected to report its fourth-quarter earnings of $1.11 per share, which represents a year-on-year growth of over 70% from $0.64 per share seen in the same period a year ago. The San Francisco, California-based multinational financial services company would post revenue growth of more than 4% to $18.8 billion.

Wells Fargo (WFC) benefit to EPS from rising rates is the highest in the group, with each ~50bps increase in FF driving ~15% increase in EPS; 50bps in long-end rates drives ~7% to EPS WFC is in a strong position to monetize higher rates, as cash stands at 15% of earning assets, 7% points above pre-pandemic levels,” noted Betsy Graseck, equity analyst at Morgan Stanley.

WFC is taking action to restructure its business mix as it works to exit the Fed consent order/asset cap and reduce its expense base. Excess capital at Wells stands at 10% of market cap vs. 5% for median Large Cap Bank, enabling a net buyback yield of 10% in 2022 and a total cash return of 12%. Risks around the timing of asset cap removal and further regulatory action remain.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 14

TICKER COMPANY EPS FORECAST
C Citigroup $1.87
JPM JPMorgan Chase $2.94
BLK BlackRock $10.15
WFC Wells Fargo $1.11

 

Preview: What to Expect From BlackRock’s Q4 Earnings

The world’s largest asset manager BlackRock is expected to report its fourth-quarter earnings of $10.14 per share, which represents a year-on-year decline of about 0.4% from $10.18 per share seen in the same period a year ago.

The New York-based multinational investment management corporation would post revenue growth of nearly 15% to around $5.15 billion. The company has been able to beat earnings per share (EPS) estimates most of the time in the last two years.

BlackRock to report fourth-quarter 2021 earnings on Friday, January 14 2022.

According to ZACKS Research, the company expects fourth-quarter 2021 core G&A expenses to increase sequentially, reflecting seasonal increases in marketing spend, additional costs related to return to office planning, and ongoing technology costs associated with the latent cloud migrations. In the long term, the company expects its annual contract value to grow in the low to mid-teens. The projected tax rate for the fourth quarter of 2021 is 24%.

The better-than-expected number would help the stock recoup recent losses.  BlackRock’s shares rose over 26% so far this year. It closed 0.42% higher at $913.53 on Thursday.

Analyst Comments

“We believe BlackRock (BLK) is best positioned on the asset mgmt barbell given leading iShares ETF platform, multi-asset & alts combined with technology/Aladdin offerings that should drive ~11% EPS CAGR (2020-23e) via ~6% avg LT organic growth,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“We see further growth ahead for Alts, iShares, international penetration, and the institutional market in the US. Recently acquired Aperio also bolsters solutions offering and organic growth. We expect the premium to widen as BLK takes share in evolving industry and executes on improving organic revenue growth trajectory.”

BlackRock Stock Price Forecast

Nine analysts who offered stock ratings for Blackrock in the last three months forecast the average price in 12 months of $998.33 with a high forecast of $1,141.00 and a low forecast of $794.00.

The average price target represents a 9.26% change from the last price of $913.76. Of those nine analysts, eight rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $1,026 with a high of $1,417 under a bull scenario and $465 under the worst-case scenario. The firm gave an “Overweight” rating on the investment manager’s stock.

Several other analysts have also updated their stock outlook. Deutsche Bank raised the target price to $1141 from $1024. Evercore ISI lifted the price objective to $1015 from $950. UBS raised the target price to $1000 from $978.

Technical analysis also suggests it is good to buy as 100-Day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

Check out FX Empire’s earnings calendar

US Congressman Says Crypto Represents the Rich and not the Poor

House of Representatives member Brad Sherman has said that crypto is for the powerful in the society, a group that includes the likes of Elon Musk, Goldman Sachs, BlackRock, Mark Zuckerberg, and others. He made this statement during the House Committee on Financial Services hearing on digital assets.

Crypto Industry Represents the Power in the Society

In his scathing remarks about crypto, he claimed that while many believe that the cryptocurrency industry is an attack on the powers in society, crypto represents these powers instead.

They believe that somehow this is new and hip, and an attack on the powers of society. The fact is that the advocates of crypto represent the powers in our society. The powers of our society on Wall Street and in Washington have spent millions, and are trying to make billions and trillions.

The congressman further stated that crypto remains the number one threat to itself, citing examples of how it’s possible for Ether to displace Bitcoin as the number one cryptocurrency. He mentioned that this isn’t possible with fiat currencies.

In the last one year, the crypto industry has grown in leaps and bounds as it enjoyed a new wave of adoption among institutional and retail investors. The market cap of the entire industry has touched as high as $3 trillion and two digital coins, BTC and ETH, are amongst the top 15 assets by market cap in the world.

Blockchain Technologies are Secured — FTX

The hearing on digital assets saw several crypto CEOs entertain questions from congress members. FTX CEO Sam Bankman-Fried was one of the most notable names at the hearing. 

Bankman-Fried spoke about the potential impacts of supercomputers on blockchain tech. According to him, supercomputers could create faster and more efficient cryptographic algorithms. He also mentioned that all major blockchains are very secure when Rep. Ritchie Torres (D-NY) asked a question related to this matter. 

US Crypto Industry Needs Regulatory Clarity

Brian Brooks, the former Acting Comptroller of the Office of the Currency, called for more clarity in crypto regulations. According to him, other countries, including the UAE and Germany, have clear-cut regulations for digital assets, but the US is still far behind.

He, therefore, urged US regulators to figure this out very fast so as to prevent crypto firms from leaving the United States for more friendly jurisdictions. 

There were also questions about volatility risks, especially from whales in the crypto market. Brian Brooks of BitFury stated that although the actions of one whale could have serious impacts on the price, what the US market needs are more liquidity and price discovery instead of less.

BlackRock Shares Rise Nearly 4% as Earnings and Revenue Tops Views; Target Price $966

BlackRock shares rose about 4% on Wednesday after the world’s largest asset manager reported better-than-expected earnings and revenue in the third quarter, primarily driven by strong demand for its actively managed and sustainable funds as well as high performance fees.

The New York-based multinational investment management corporation reported quarterly earnings of $10.95 per share, beating the Wall Street consensus estimates of 9.70 per share. The asset manager also posted revenues of $5.05 billion for the quarter ended September 2021. That was above the market expectations of $5.0 billion.

The company said a 16% increase in revenue year-over-year reflects strong organic growth and a 13% growth in technology services revenue, despite lower performance fees. There were long-term net inflows of $98 billion led by ETFs and active strategies, with total net inflows of $75 billion due to outflows from low-fee cash management and advisory assets under management (AUM).

By the end of the September quarter, BlackRock’s assets under management totalled $9.46 trillion, up from $7.81 trillion a year ago, but flat compared to the previous quarter. That was disappointing as most analysts predicted assets would exceed $10 trillion.

BlackRock shares rose about 4% to $867.81 on Wednesday. The stock rose over 20% so far this year.

Analyst Comments

“Having taken a deeper look at our long-term projections for wide-moat-rated BlackRock following the company’s release of third-quarter earnings, we’ve raised our fair value estimate to $910 per share from $880. Most of the improvement came from adjustments to our longer-term forecasts for the company’s multi-asset and alternatives segments–two areas management has targeted for higher levels of growth over the next five to 10 years,” noted Greggory Warren, Sector Strategist at Morningstar.

“While we had lifted our projections for both segments in June following BlackRock’s investor day presentations, we felt that our forecasts were a bit too conservative (especially considering the more recent rates of organic growth we’ve seen from both segments).”

BlackRock Stock Price Forecast

Eight analysts who offered stock ratings for BlackRock in the last three months forecast the average price in 12 months of $966.63 with a high forecast of $1,039.00 and a low forecast of $803.00.

The average price target represents an 11.39% change from the last price of $867.81. From those eight analysts, seven rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $1,026 with a high of $1,417 under a bull scenario and $465 under the worst-case scenario. The firm gave an “Overweight” rating on the investment manager’s stock.

Several other analysts have also updated their stock outlook. Evercore ISI lowered the target price to $950 from $956. JPMorgan cut the price objective to $1,015 from $1,052. Deutsche Bank slashed the target price to $1039 from $1117. Jefferies lowered the price target to $978 from $1075.

“Following BlackRock’s (BLK) 3Q21 results, our 4Q21 EPS declines by $0.10 (modestly higher G&A) and our 2022 EPS estimate remains unchanged. Organic base fee growth remains diversified and well above the long-term target (+9% vs ~5% target). Although investment spend is on the rise, it is fueling industry-leading organic growth through expansion of the company’s geographic footprint and investment capabilities,” noted Daniel T. Fannon, equity analyst at Jefferies.

Check out FX Empire’s earnings calendar

S&P 500 Rises With Growth Stocks; JPMorgan a Drag

The S&P 500 briefly added to gains following the release of minutes from the September Federal Reserve policy meeting.

U.S. central bankers signaled they could start reducing crisis-era support for the economy in mid-November, though they remained divided over how much of a threat high inflation poses and how soon they may need to raise interest rates, the minutes showed.

Earlier, a Labor Department report showed consumer prices increased solidly in September, further strengthening the case for a Fed interest-rate hike.

Shares of JPMorgan Chase & Co fell and were among the biggest drags on the Dow and S&P 500 even though its third-quarter earnings beat expectations, helped by global dealmaking boom and release of more loan loss reserves.

The day’s corporate results kicked off third-quarter earnings for S&P 500 companies.

“My hope is that as we work out way through earnings season that the forward-looking guidance will be good enough that we’ll close the year higher. But right now the market is in a show-me phase,” said Jim Awad, senior managing director at Clearstead Advisors LLC in New York.

Mega-caps growth names including Amazon.com Inc, Google-parent Alphabet and Microsoft Corp all rose.

According to preliminary data, the S&P 500 gained 14.20 points, or 0.33%, to end at 4,364.85 points, while the Nasdaq Composite gained 105.71 points, or 0.73%, to 14,571.64. The Dow Jones Industrial Average rose 4.35 points, or 0.01%, to 34,382.69.

BlackRock Inc also gained after the world’s largest money manager beat quarterly profit estimates as an improving economy helped boost its assets under management, driving up fee income.

Bank of America, Citigroup, Wells Fargo and Morgan Stanley will report results on Thursday, while Goldman Sachs is due to report on Friday.

Analysts expect corporate America to report strong profit growth in the third quarter but worries have been mounting over how supply chain problems, labor shortages and higher energy prices might affect businesses emerging from the pandemic.

Among other stocks, Apple Inc dipped after a report said the iPhone marker was planning to cut production of its iPhone 13.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Devik Jain and Bansari Mayur Kamdar in Bengaluru; Editing by Arun Koyyur and David Gregorio)

SP500 Is On The Edge – What’s Next?

It’s likely that legislation to fund President Biden’s $4 trillion worth of infrastructure and other spending plans will be moving through Congress around the same time. Those bills are expected to include tax increases for businesses and on capital gains. All of that combined could set markets up for a rocky December but for now, investors are turning attention back to economic data and upcoming earnings.

What to watch next week?

Turning to next week, Q3 earnings “unofficially” kick off Wednesday with earnings from big Wall Street banks, including Bank of America, Goldman Sacks, JP Morgan Chase, and Wells Fargo. Other earnings worth noting next week include Fastenal on Tuesday; BlackRock, Delta, and The Progressive Corp. on Wednesday; Alcoa, Citigroup, Dominos Pizza, Morgan Stanley, United Health Group, U.S. Bancorp, and Walgreens on Thursday; and J.B. Hunt, PNC Financial, and Prologis on Friday.

In economic data next week, it’s a packed calendar that will cover all the economic bases from jobs to inflation. Highlights include the Job Openings and Labor Turnover Survey on Tuesday; the Consumer Price Index on Wednesday; the Producer Price Index on Thursday; and Retail Sales, Empire State Manufacturing, Import/Export Prices; Business Inventories, and the preliminary read on October Consumer Sentiment.

Technical analysis

ES ##-## (Daily) 2021_10_10 (6_59_58 PM)

As we expected SP500 bounced back up last week. The market is reaching a critical point – MA50 retest. There is strong accumulation in this market, while the price holds under daily MA50. In these mixed conditions, its better to stay on the sidelines till the market finds a new direction.

If accumulation remains and the price starts building the base above daily MA50, the market will attempt to renew an uptrend. On the other hand, if futures lose accumulation and price gets rejected at MA50, SP500 might continue to drift to the downside. The cycles forecast bottom in October. But we need a price action confirmation.

Earnings Week Ahead: Most Big U.S. Banks, Delta Air Lines, UnitedHealth and Domino’s in Focus

Earnings Calendar For The Week Of October 11

Monday (October 11)

No major earnings are scheduled for release.

Tuesday (October 12)

Ticker Company EPS Forecast
TRYG Tryg KRW1.71
FAST Fastenal $0.42
PNFP Pinnacle Financial Partners $1.55

Wednesday (October 13)

IN THE SPOTLIGHT: BLACKROCK, DELTA AIR LINES

BLACKROCK: The world’s largest asset manager is expected to report its third-quarter earnings of $9.70 per share on Wednesday, which represents year-on-year growth of over 5% from $9.22 per share seen in the same period a year ago.

The New York-based multinational investment management corporation would post revenue growth of over 13% to around $5.0 billion. In the last four consecutive quarters, on average, the investment manager has delivered an earnings surprise of over 9%.

“We believe BlackRock (BLK) is best positioned on the asset mgmt barbell given leading iShares ETF platform, multi-asset & alts combined with technology/Aladdin offerings that should drive ~13% EPS CAGR (2020-23e) via ~6% avg LT organic growth,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“We see further growth ahead for Alts, iShares, international penetration, and the institutional market in the US. Recently acquired Aperio also bolsters solutions offering and organic growth. We expect the premium to widen as BLK takes share in evolving industry and executes on improving organic revenue growth trajectory.”

DELTA AIR LINES: The earnings per share (EPS) is expected to swing back to positive territory for the first time in seven quarters on Wednesday, more than doubling to $0.16 per share compared to a huge loss of -$3.30 per share seen in the same period a year ago.

The Airline company, which provides scheduled air transportation for passengers and cargo throughout the United States and across the world, is forecast to report revenue growth of over 170% in the third quarter to around $8.4 billion. It is worth noting that in the last two years, the airline has beaten consensus earnings estimates just three times.

“Airlines will report 3Q21 results later this month, beginning Oct 13 with Delta Air Lines’ release. We believe 3Q21 started strong, sagged in the middle and then finished strong as people started planning holiday trips,” noted Helane Becker, equity analyst at Cowen.

“We believe 4Q21 guidance will reflect a strong peak, likely >2019 levels while off-peak is likely to lag 2019 levels. Stocks to own include United Airlines (UAL), Alaska Air Group (ALK), Allegiant Travel (ALGT) & Southwest Airlines (LUV).”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 13

Ticker Company EPS Forecast
JPM JPMorgan Chase $3.00
BLK BlackRock $9.60
INFY Infosys $0.17
WIT Wipro $0.07
FRC First Republic Bank $1.84
DAL Delta Air Lines $0.16

Thursday (October 14)

IN THE SPOTLIGHT: UNITEDHEALTH, DOMINO’S PIZZA

UNITEDHEALTH: Minnesota-based health insurer is expected to report its third-quarter earnings of $4.41 per share, which represents year-over-year growth of over 25% from $3.51 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 11%. The largest insurance company by Net Premiums would post revenue growth of about 10% to around $72.0 billion.

UnitedHealth Group is the number one Medicare Advantage player with ~28% market share, the number two Medicare PDP player with ~20% market share, and the number two commercial player with ~15% market share,” noted Ricky Goldwasser, equity analyst at Morgan Stanley.

United’s model is enhanced via vertical integration with its OptumRx PBM platform, which is one of the three largest PBMs in the country. With a large lead in the breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well-positioned for any potential changes in the US healthcare system. A strong balance sheet and continued solid cash generation give flexibility for continued M&A.”

DOMINO’S: The world’s largest pizza company is expected to report its third-quarter earnings of $3.11 per share, which represents year-over-year growth of about 25% from $2.49 per share seen in the same quarter a year ago.

The company has beaten consensus earnings per share (EPS) estimates only twice in the last four quarters. The largest pizza chain in the world would post revenue growth of about 7% to around $1.03 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 14

Ticker Company EPS Forecast
UNH UnitedHealth $4.41
BAC Bank Of America $0.71
WFC Wells Fargo $1.00
MS Morgan Stanley $1.69
C Citigroup $1.74
USB US Bancorp $1.15
WBA Walgreens Boots Alliance $1.02
AA Alcoa $1.75
DCT DCT Industrial Trust $0.02
TSM Taiwan Semiconductor Mfg $1.04
DPZ Dominos Pizza $3.11
CMC Commercial Metals $1.19

Friday (October 15)

IN THE SPOTLIGHT: GOLDMAN SACHS

The New York-based leading global investment bank is expected to report its third-quarter earnings of $10.11 per share, which represents year-over-year growth of over 4% from $9.68 per share seen in the same quarter a year ago.

It is worth noting that in the last two years, the world’s leading investment manager has surpassed market consensus expectations for profit and revenue most of the time. The world’s leading investment manager would post revenue growth of over 4% to around $11.25 billion.

“Reason to Buy: Organic growth, solid capital position and steady capital deployment activities continue to enhance Goldman’s prospects. Business diversification offers long-term earnings stability,” noted analysts at ZACKS Research.

“Reason to Sell: Geopolitical concerns and volatile client-activity levels may hinder the top-line growth of Goldman. Further, legal hassles and higher dependence on overseas revenues remain other headwinds.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 15

Ticker Company EPS Forecast
GS Goldman Sachs $10.11
PNC PNC $3.38
TFC Truist Financial Corp $1.09
HON Honeywell International $2.01
GE General Electric $0.51
PLD ProLogis $0.47
VFC VF $1.16
JBHT J B Hunt Transport Services $1.79
GNTX Gentex $0.42
MAN ManpowerGroup $1.91
SXT Sensient Technologies $0.80
ABCB Ameris Bancorp $1.17
ACKAY Arcelik ADR $0.68
BMI Badger Meter $0.50

 

Preview: What to Expect From BlackRock’s Earnings on Wednesday

The world’s largest asset manager BlackRock is expected to report its third-quarter earnings of $9.70 per share on Wednesday, which represents year-on-year growth of over 5% from $9.22 per share seen in the same period a year ago.

The New York-based multinational investment management corporation would post revenue growth of over 13% to around $5.0 billion. In the last four consecutive quarters, on average, the investment manager has delivered an earnings surprise of over 9%.

In the near future, the company expects discretionary money market fee waivers to remain at current levels. In 2021, the adjusted operating margin is anticipated to be similar to that of 2020. It expects low to mid-teens growth in annual contract value over the long term, according to ZACKS Research.

The better-than-expected number would help the stock recoup recent losses.  BlackRock’s shares rose over 16% so far this year. The stock rose about 1% to $848.68 in pre-market trading on Friday.

Analyst Comments

“We believe BlackRock (BLK) is best positioned on the asset mgmt barbell given leading iShares ETF platform, multi-asset & alts combined with technology/Aladdin offerings that should drive ~13% EPS CAGR (2020-23e) via ~6% avg LT organic growth,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“We see further growth ahead for Alts, iShares, international penetration, and the institutional market in the US. Recently acquired Aperio also bolsters solutions offering and organic growth. We expect the premium to widen as BLK takes share in evolving industry and executes on improving organic revenue growth trajectory.”

Blackrock Stock Price Forecast

Nine analysts who offered stock ratings for Blackrock in the last three months forecast the average price in 12 months of $1,007.11 with a high forecast of $1,117.00 and a low forecast of $803.00.

The average price target represents a 19.56% change from the last price of $842.35. From those nine analysts, eight rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $1,021 with a high of $1,428 under a bull scenario and $472 under the worst-case scenario. The firm gave an “Overweight” rating on the investment manager’s stock.

Several other analysts have also updated their stock outlook. JP Morgan raised the target price to $1,052 from $1,029. Evercore ISI lifted the target price to $998 from $970. Jefferies upped the target price to $1075 from $1001.

Check out FX Empire’s earnings calendar

PBOC Promises to Protect Consumers as China Evergrande Teeters

Once the epitome of an era of helter-skelter borrowing and building in China, Evergrande has now become the poster child of a crackdown on developers’ debts that has left investors large and small sweating their exposure.

In a letter to investors seen by Reuters, the Shenzhen Financial Regulatory Bureau said “relevant departments of the Shenzhen government have gathered public opinions about Evergrande Wealth and are launching a thorough investigation into related issues of the company.”

It is also urging China Evergrande and Evergrande Wealth to work to repay investors, the letter said, which was sent following investor demands for an inquiry.

The People’s Bank of China (PBOC) made no mention of Evergrande in a statement posted to its website, which contained just a line on housing along with promises to make its monetary policy flexible, targeted and appropriate.

But at a delicate moment for the world’s most indebted developer, which missed a bond interest payment last week and has another due this week, its pledge to “safeguard the legitimate rights of housing consumers” hinted at the sort of response markets had begun to hope for.

With liabilities of $305 billion, Evergrande has sparked concerns its problems could spread through China’s financial system and reverberate around the world – a worry that has eased as damage has so far been concentrated in the property sector.

The PBOC’s broad-ranging statement was issued after the third quarter meeting of its Monetary Policy Committee. Its housing line echoed comments from Evergrande’s leadership that point to containment efforts and prioritizing small investors in properties ahead of foreign holders of Evergrande debts.

“We expect that any impact to the banking system will be manageable and that the government will instead focus on the social fallout of unfinished housing units,” said Sheldon Chan, who manages T. Rowe Price’s Asia credit bond strategy.

Suppliers exposed to Evergrande payables and domestic bondholders would also take priority over dollar bond holders, he said.

Evergrande dollar bonds have been trading accordingly, and remained on Monday at distressed levels around 30 cents on the dollar.

Research firm Morningstar listed BlackRock, UBS, Ashmore Group and BlueBay Asset managers as bondholders with exposure to Evergrande in a Friday report which said funds at HSBC and TCW had closed positions.

Ashmore, BlackRock, BlueBay, HSBC, TCW and UBS declined to comment.

Evergrande’s stock rose 8%, though at HK$2.55 it isn’t far above last week’s decade-low of HK$2.06 and stock borrowing costs have surged as short sellers pile in.

Shares of Evergrande’s electric car unit fell heavily after it warned of an uncertain future.

Work on a soccer stadium Evergrande is building in Guangzhou is proceeding as normal, the company said on Monday.

The focus now turns to whether a coupon payment of $47.5 million due on Wednesday is made, and then to whether China can contain the economic damage if Evergrande collapses.

Its struggles so far to pay suppliers and sell assets have already begun to dent confidence among homebuyers and force sector-wide price cuts, signaling that consolidation – at the very least – looms for the real estate industry.

“Evergrande’s potential credit event, in our view, is part of a ‘survival of the fittest’ test in China’s property sector,” Deutsche Bank strategist Linan Liu said in a note to clients.

“Allowing orderly exits by weaker players in the property sector, while painful, is necessary to improve overall leverage conditions in the sector and bring about a soft landing.”

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Ryan Woo in Beijing, Anne Marie Roantree in Hong Kong and Tom Westbrook in Singapore Writing by Tom Westbrook Editing by Stephen Coates, Mark Potter and Nick Zieminski)

China Evergrande’s Rising Default Risks Shift Focus to Possible Beijing Rescue

Analysts played down the threat of Evergrande’s troubles becoming the country’s “Lehman moment,” though concerns about the spillover risks of a messy collapse of what was once China’s top-selling property developer have roiled markets.

In an effort to revive battered confidence in the firm, Evergrande Chairman Hui Ka Yuan said in a letter to staff the company is confident it will “walk out of its darkest moment” and deliver property projects as pledged.

In the letter, coinciding with China’s mid-autumn festival, the chairman of the debt-laden property developer, also said Evergrande will fulfil responsibilities to property buyers, investors, partners and financial institutions.

“I firmly believe that with your concerted effort and hard work, Evergrande will walk out of its darkest moment, resume full-scale constructions as soon as possible,” said Hui, without elaborating how the company could achieve these objectives.

Investors in Evergrande, however, remained on edge.

Its shares fell as much as 7%, having tumbled 10% in the previous day, on fears its $305 billion in debt could trigger widespread losses in China’s financial system in the event of a collapse. The stock ended down 0.4%.

Other property stocks such as Sunac, China’s No. 4 developer, and state-backed Greentown China on Tuesday recouped some of their hefty losses in the previous session. The Hong Kong property sector index rose nearly 3%.

“We are uncertain of how far and how strong the ripple effect would be on the housing market and the developer industry,” analysts at Deutsche Bank said in a recent note. “We think investors should remain on the sideline until there is more clarity.”

Fund giant BlackRock and investment banks HSBC and UBS have been among the largest buyers of Evergrande’s debt, Morningstar data showed.

BlackRock added 31.3 million notes of Evergrande’s debt between January and August 2021, while HSBC increased its position by 40% through July, according to Morningstar. UBS increased its position by 25% through May, the latest date available in the fund tracker’s database showed.

The Chinese government has been largely quiet on the crisis at Evergrande in recent weeks.

“There must be negotiations behind the scenes about a systemic recapitalization (of Evergrande) by state proxies,” said Andrew Collier, managing director of Hong Kong-based Orient Capital Research.

“If one piece of Evergrande’s debt is allowed to default, it would trigger questions about all of their remaining debt from investors and the government doesn’t want a wider crisis like that,” he said.

World stocks stabilised somewhat on Tuesday and oil prices recovered from the previous day’s heavy selling, as investors grew more confident that contagion from the distress of Evergrande would be limited.

Hedge fund managers contacted by Reuters said they were not yet concerned about any contagion risk into other equities markets.

“From our perspective, we … do not see any potential fundamental long-term effects on our portfolio companies,” said one London-based hedge fund professional. However, “there could likely be a lot of volatility around this one in the short term.”

A default by Evergrande has been widely anticipated by some corners of the market.

“I would characterize Evergrande as a telegraphed and controlled detonation,” said Samy Muaddi, the portfolio manager of the $5.1 billion T. Rowe Price Emerging Markets Bond fund, who does not have a position in the company. “If an investor was still investing in Evergrande they were investing against Chinese policy makers, which is a good way to lose.”

However, the spillover concerns at least in the property sector remained. S&P Global Ratings downgraded Sinic Holdings to ‘CCC+’ on Tuesday, citing the Chinese developer’s failure “to communicate a clear repayment plan”.

Hong Kong-listed shares of small-sized Chinese developer Sinic plunged 87% on Monday, wiping $1.5 billion off its market value before trading was suspended.

A major test for Evergrande comes this week, with the firm due to pay $83.5 million in interest relating to its March 2022 bond on Thursday. It has another $47.5 million payment due on Sept. 29 for March 2024 notes.

Both bonds would default if Evergrande fails to settle the interest within 30 days of the scheduled payment dates.

“I think (Evergrande’s) equity will be wiped out, the debt looks like it is in trouble and the Chinese government is going to break up this company,” said Andrew Left, founder of Citron Research and one of the world’s best known short-sellers.

“But I don’t think that this is going to be the straw that breaks the global economy’s back,” said Left, who in June 2012 published a report that said Evergrande was insolvent and had defrauded investors.

Evergrande missed interest payments due Monday to at least two of its largest bank creditors, Bloomberg reported on Tuesday, citing people familiar with the matter.

SPILLOVER RISKS

The Chinese government will help Evergrande at least get some capital, but it may have to sell some stakes to a third party, such as a state-owned enterprise, Dutch bank ING said in a research note.

“The spin-off of non-core businesses, for example, those that are not residential real estate type businesses, will probably be done first,” wrote Iris Pang, ING’s Chief Economist, Greater China.

“After that could come sales of stakes that are at the core of Evergrande’s business,” Pang said.

Citi analysts in a research note said that regulators may “buy time to digest” Evergrande’s non-performing loan problem by guiding banks not to withdraw credit and extend the interest payment deadline.

Still, Citi said that while Evergrande’s default crunch was a potential systemic risk to China’s financial system, it was not shaping up as “China’s Lehman moment.”

At the same time, the U.S. market is in a better position to absorb a potential global shock from a major company default compared with the years prior to the 2007-2009 financial crisis, Securities and Exchange Commission (SEC) chair Gary Gensler said on Tuesday.

In any default scenario, Evergrande, teetering between a messy meltdown, a managed collapse or the less likely prospect of a bailout by Beijing, will need to restructure the bonds, but analysts expect a low recovery ratio for investors.

S&P Global Ratings said in a report on Monday it does not expect Beijing to provide any direct support to Evergrande.

“We believe Beijing would only be compelled to step in if there is a far-reaching contagion causing multiple major developers to fail and posing systemic risks to the economy,” the rating agency said.

“Evergrande failing alone would unlikely result in such a scenario,” S&P said.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Svea Herbst-Bayliss, Clare Jim, Tom Westbrook, Alun John, Anshuman Daga, and David Randall; Writing by Megan Davies and Sumeet Chatterjee; Editing by Stephen Coates, Shri Navaratnam and Nick Zieminski)

Wall Street Group to Revive Talks With China to Find Common Ground – Bloomberg News

Barrick Gold Corp Chairman John Thornton, who is also a veteran of Goldman Sachs Group Inc, is in Beijing meeting with high-ranking Chinese officials, Bloomberg said, citing two people with knowledge of the matter.

According to Bloomberg, Thornton is one of the chairs of the influential group dubbed China-U.S. Financial Roundtable that was conceived during escalating tensions between the U.S. and China in 2018, with the talks featuring emissaries from U.S. finance and senior Chinese regulatory officials.

Previous meetings between Chinese officials and Wall Street banks have included participants such as BlackRock, Vanguard, JPMorgan and Fidelity.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Bhargav Acharya in Bengaluru; Editing by Kim Coghill)

 

Marketmind: “A Ways Off” and That’s Good

You couldn’t call China’s data dismal — average growth actually surpassed Q1 while June retail sales and industrial output beat expectations. But it does show authorities, who last week unleashed one trillion yuan into the financial system, will ensure conditions stay loose.

But markets’ delight after Powell told Congress he saw no need to rush the shift towards tighter post-pandemic monetary policy, has not lasted long.

World stocks are off recent record highs, tempered possibly by spiking COVID-19 cases across Asia and signs the post-pandemic bounce in company earnings is hitting a peak.

Asian shares rallied, led by a 1% rise in Shanghai but U.S. futures are mostly lower, with the exception of the tech-heavy Nasdaq. European markets too, are opening weaker and 10-year Treasury yields are down at 1.33%, almost 10 basis points off Wednesday’s high point.

The news from the corporate world is all good — the four biggest U.S. banks, Wells Fargo, Bank of America, Citigroup and JPMorgan have posted a combined $33 billion in profits. Asset manager BlackRock beat estimates, with assets at a record $9.5 trillion.

Omens in Europe are good too, with Sweden’s SEB, carmaker Daimler and food delivery firm Just Eat all reporting buoyant earnings. And earlier in Asia, Taiwanese chipmaker, TSMC, posted an 11% rise in Q2 profits.

Key developments that should provide more direction to markets on Thursday:

– South Korea held rates but signalled pandemic era record-low interest rates was coming to an end

-UK added 356,000 jobs in June

-ECB Board Member Frank Elderson speaks

-Philly Fed index

-Bank of England interest rate-setter Michael Saunders speaks

Fed events: Powell testimony continues, Chicago Fed President Charles Evans speaks

US earnings: BNY Mellon, Charles Schwab, US Bancorp, Morgan Stanley, Alcoa

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sujata Rao; editing by Dhara Ranasinghe)

 

Marketmind: It’s Jay Time!

Inflation in the world’s top economy barrelling ahead for a third straight month has doused the equity rally, just as stocks were staging a come-back after navigating last week’s bond market volatility.

Powell will face questions on how transitory price pressures might be and how fast the Fed might need on withdrawing the monetary support which has been critical for markets.

Wednesday’s figures prompted markets to bring forward the timing of the Fed’s first rate hike, bets that lifted the dollar to a three-month high versus the euro and a one-week high versus the yen.

An added complication was weak demand at Wednesday’s auction of 30-year Treasury bonds, which pushed 10-year yields above 1.4%. And after a softer Wall Street close, Asian stocks fell while European and U.S. markets are tipped to open lower.

Price pressures are a hot topic elsewhere too, with data showing British inflation rising further above the Bank of England’s target, hitting 2.5%.

Some central banks, meanwhile, are going full steam ahead with stimulus withdrawal plans — New Zealand announced a halt to its pandemic-linkd QE programme. Bets on a rate hike this year have sent the Kiwi dollar surging 1%.

Later in the day, the Bank of Canada is also expected to announce plans to taper asset purchases.

Key developments that should provide more direction to markets on Wednesday:

-UK inflation jumps to 2.5% in June

-Bank of Canada expected to taper

-New Zealand c.bank ends bond purchases, paves way for possible rate hikes

-Turkey, Chile and Croatia central bank meetings

-India WPI inflation

-Swedish CPI

-Euro Area Industrial Production

-ECB Board Member Isabel Schnabel speaks

-Bank of England Deputy Governor Dave Ramsden speaks

-Auctions: German 10-year Bund

-Earnings: Citi, BofA, BlackRock, Wells Fargo, Delta Airlines

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Karin Strohecker; editing by Sujata Rao)

Earnings to Watch Next Week: Most Big U.S. Banks, PepsiCo, Delta Air Lines and UnitedHealth in Focus

Earnings Calendar For The Week Of July 12

Monday (July 12)

Ticker Company EPS Forecast
FRHC Freedom $0.72

 

Tuesday (July 13)

IN THE SPOTLIGHT: JPMORGAN, PEPSICO, GOLDMAN SACHS

JPMorgan: The New York City-based multinational investment bank and financial services holding company is expected to report its second-quarter earnings of $3.16 per share, which represents year-over-year growth of over 128% from $1.38 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered earnings surprise all four times, with of over 32%.

JPM has less excess capital as a % of the market cap relative to other names in the group, which drives a lower benefit from buybacks. We are valuing the group on normalized 2023 EPS. We expect a V-shaped recovery will drive higher reserve release and share buybacks over the next 2 years, with “normalized” post-recession earnings beginning in 2023,” noted Betsy Graseck, equity analyst at Morgan Stanley.

“We see more upside elsewhere in the group, particularly in consumer finance stocks which have been under more pressure. This drives our Underweight rating.”

PEPSICO: The Harrison, New York-based global food and beverage leader is expected to report its second-quarter earnings of $1.53 per share, which represents year-over-year growth of over 15% from $1.32 per share seen in the same quarter a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue of $17.91 billion. In the last four consecutive quarters, on average, the company which holds approximately a 32% share of the U.S. soft drink industry has delivered an earnings surprise of over 6%.

GOLDMAN SACHS: The New York-based leading global investment bank is expected to report its second-quarter earnings of $9.52 per share, which represents year-over-year growth of over 52% from $6.26 per share seen in the same quarter a year ago.

It is worth noting that in the last two years, the world’s leading investment manager has surpassed market consensus expectations for profit and revenue most of the time. The better-than-expected number would help the stock hit new all-time highs.

“Our 2Q EPS est. increases to $10.05 from $9.53 on positive markets and higher equity investment revs. The equity investment line will likely again be a meaningful rev. swing factor (we model $1.4B vs. $3.1B in 1Q21). Post-DFAST, GS indicated that the dividend will increase to $2.00/qtr. from $1.25/qtr., but did not provide specifics on buybacks. We model 2Q share repurchase of $1.5B (vs. $2.2B cons.) and $2.5B/qtr. (vs.$2.3B/qtr. cons.) for the remainder of this year,” noted Daniel T. Fannon, equity analyst at Jefferies.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 13

Ticker Company EPS Forecast
FAST Fastenal $0.41
CAG Conagra Foods $0.52
JPM JPMorgan Chase $3.16
PEP PepsiCo $1.53
GS Goldman Sachs $9.96
FRC First Republic Bank $1.73
HCSG Healthcare Services $0.30
AMX America Movil Sab De Cv Amx $0.32

 

Wednesday (July 14)

IN THE SPOTLIGHT: WELLS FARGO, BANK OF AMERICA, CITIGROUP, DELTA AIR LINES, BLACKROCK

WELLS FARGO: The fourth-largest U.S. lender is expected to report a profit in the second quarter after last year posting its first loss since the global financial crisis of 20028.

Wells Fargo, Bank of America, Citigroup, JPMorgan will tother report profits of $24 billion in the second quarter, up significantly from $6 billion seen last year.

There is no relief for Delta Air Lines, which is expected to post a loss of $1.36 per share on $6.19 billion in revenue.

BLACKROCK: The world’s largest asset manager is expected to report its second-quarter earnings of $9.28 per share, which represents year-on-year growth of over 18% from $7.85 per share seen in the same quarter a year ago.

The New York-based multinational investment management corporation’s revenue would grow over 25% of $4.56 billion. In the last four consecutive quarters, on average, the investment manager has delivered an earnings surprise of over 11%.

The better-than-expected number would help the stock hit new all-time highs. The company will report its earnings result on Wednesday. BlackRock’s shares rose over 24% so far this year. The stock ended 2.83% higher at $901.31 on Friday.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 14

Ticker Company EPS Forecast
WFC Wells Fargo $0.95
BAC Bank Of America $0.77
PNC PNC $3.09
C Citigroup $1.99
DAL Delta Air Lines -$1.36
BLK BlackRock $9.28
INFY Infosys $0.17

 

Thursday (July 15)

Ticker Company EPS Forecast
WIT Wipro $0.07
WNS Wns Holdings $0.68
BK Bank Of New York Mellon $1.00
MS Morgan Stanley $1.66
CTAS Cintas $2.31
UNH UnitedHealth $4.43
USB US Bancorp $1.12
TFC Truist Financial Corp $0.98
HOMB Home Bancshares $0.46
AA Alcoa $1.28
VLRS Controladorauelaavcncv $0.80
PGR Progressive $1.07
TSM Taiwan Semiconductor Mfg $0.93
PBCT People’s United Financial $0.34
WAL Western Alliance Bancorporation $1.96

 

Friday (July 16)

Ticker Company EPS Forecast
ERIC Ericsson $0.13
ALV Autoliv $1.40
FHN First Horizon National $0.40
ATLCY Atlas Copco ADR $0.45
STT State Street $1.77
KSU Kansas City Southern $2.18
SCHW Charles Schwab $0.76

 

BlackRock Q2 EPS to Rise Over 18% to $9.28; Shares to Scale New Highs

The world’s largest asset manager BlackRock is expected to report its second-quarter earnings of $9.28 per share, which represents year-on-year growth of over 18% from $7.85 per share seen in the same quarter a year ago.

The New York-based multinational investment management corporation’s revenue would grow over 25% of $4.56 billion. In the last four consecutive quarters, on average, the investment manager has delivered an earnings surprise of over 11%.

The better-than-expected number would help the stock hit new all-time highs. The company will report its earnings result on Wednesday, July 14. BlackRock’s shares rose over 24% so far this year. The stock traded 2.38% higher at $397.42 on Friday.

“Shares of BlackRock have outperformed the industry over the past 12 months. The company has an impressive earnings surprise history. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters. With a strong liquidity position, strategic acquisitions and initiatives to restructure the equity business are likely to keep aiding revenues, and expand the company’s global reach and market share,” noted analysts at ZACKS Research.

“Steadily improving assets under management (AUM) balance are expected to continue to support revenue growth. Also, the capital deployments activities look sustainable and will enhance shareholder value. However, persistently increasing operating expenses (owing to higher administration costs) are expected to hurt the bottom line. Further, the company’s high dependence on overseas revenues makes us apprehensive.”

BlackRock Stock Price Forecast

Thirteen analysts who offered stock ratings for BlackRock in the last three months forecast the average price in 12 months of $949.62 with a high forecast of $1,017.00 and a low forecast of $850.00.

The average price target represents 5.76% from the last price of $897.93. All of those 13 analysts rated “Buy”, none rated “Hold” or “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $1,017 with a high of $1,456 under a bull scenario and $513 under the worst-case scenario. The firm gave an “Overweight” rating on the investment manager’s stock.

Several other analysts have also updated their stock outlook. UBS raised the target price to $984 from $890. JP Morgan lifted the target price to $959 from $905. Deutsche Bank upped the price target to $1,005 from $922. Evercore ISI raised the price target to $955 from $896.

Analyst Comments

“We believe BlackRock (BLK) is best positioned on the asset mgmt barbell given leading iShares ETF platform, multi-asset & alts combined with technology/Aladdin offerings that should drive ~13% EPS CAGR (2020-22e) via ~6% avg LT organic growth,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“We see further growth ahead for Alts, iShares, international penetration, and the institutional market in the US. Recently acquired Aperio also bolsters solutions offering and organic growth. We expect the premium to widen as BLK takes share in evolving industry and executes on improving organic revenue growth trajectory.”

Check out FX Empire’s earnings calendar

From Inflation to Free Popcorn Bubble

Inflationary pressures remain the focus for now. According to Google, search interest for “inflation” is at an all-time high. It has also been largely discussed during the last companies’ earnings calls, especially the two main sources of inflation, that is the increase of supply costs (commodities, transportation, chip shortage, etc.); and the increase in wages, due principally to the difficulty of finding workers.

It seems that people currently receiving unemployment benefits till September are not in a rush to go back to work. As a result, in order to attract employees, many companies announced increases in salaries. With higher costs leading to increased prices, it does not look to us like inflation will be only transitory, as most of Fed and Treasury officials keep saying.

Note, that the only phenomenon that could be temporary is the comparative economic data which compares current economic performance to last year’s performance. This is at best quasi-irrelevant as last year’s numbers obviously reflect an economy that was then shut down.

While a rate hike is unlikely, the Fed could decide to reduce its bond purchases. Indeed, the release of the latest Fed meeting minutes gave some hints that such a move could possibly be announced during the next meetings – but more likely in July or September than in June. In Europe, the ECB made it clear that no tapering would happen before they see further evidence of a full economic recovery.

May was also marked by progress on the President’s massive infrastructure plan. Republicans made a $928 billion counteroffer to Biden’s $1.7 trillion original plan, proposing the use of existing funds for financing instead of a tax hike. A compromise must be negotiated and accepted by each side in order to pass the bill as soon as possible, as the Democrats wish to do.

On the ETFs side, ESG (Environmental, Social and Corporate Governance) ETFs, encountered more inflows than any other ETFs in Q1 and hit new records in terms of size. In addition, the new Ultra Short Bonds ETF of Vanguard, launched in April, has already raised $730 million, indicating that some cash is seeking to be invested on the sidelines for the time being.

Also interesting was the rebalancing of some of BlackRock’s ETFs. The giant asset manager decided to reduce the concentration and the volatility of its clean energy ETFs by adding a component of “energy transition” stocks, making the thematic ETFs a bit more mainstream. Moreover, it heavily rebalanced its USA Momentum Factor ETF, by switching most of the tech exposure with value stocks, especially Financials that now account for 1/3 of the ETF. An interesting new weighting, that although based on the past six months momentum, gives a clear indication of the outlook according to prominent actors.

Finally, May saw the fall of Bitcoin and the comeback of frenzied trading. After the cryptocurrency more than doubled in value in only a few months, one-third of its value was erased following Chinese regulators’ announcements and Musk’s tweets, both against the digital coin. Also, AMC Entertainment stock that was paired with GameStop during the Reddit saga in January made a comeback as traders’ favorite stock of the month: its shares were up more than 500% in one month only, based on nothing but meme-trendy-viral-trading.

The earnings season for the first quarter showed exceptional numbers and overall good guidance for the rest of the year. Since it is too early to price a rate hike, we continue to believe that, despite the current valuations, equity markets could be further supported. Having said that, everyone who follows the markets this year can feel the fragility and keep expecting the unexpected. In this context, we continue to reduce risk, to be prepared for an eventual sharp pullback.

As always, risk management combined with rigorous sector and geographical diversification will remain key factors for investment performance.

You are more than welcome to contact us to discuss our investment views or financial markets generally.

For a look at all of today’s economic events, check out our economic calendar.

BlackRock, Inc: Big Money Is Buying This Stock

What do I mean when I say “Big Money”? That’s when a stock goes up in price alongside chunky volumes. It’s often indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And BlackRock has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the stock trades is what points to more upside. The Big Money has been loving the shares this past year.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all of the big money signals BLK has made the last year.

Last week there was one too. Each green bar signals big trading volumes as the stock ramped in price:

Source: www.mapsignals.com, End of day data sourced by Tiingo.com

In 2021 alone, BLK made 12 of these rare signals. Generally speaking, that means more upside is ahead. The lone red selling signal was short-lived as markets got back on track.

Now, let’s check out a few technicals grabbing my attention:

  • Year-to-date performance of +23%
  • 1 year outperformance vs. market (+29% vs. SPY)

Outperformance is huge for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, BlackRock has been growing sales at a breakneck pace. Take a look:

  • 1-year revenue growth rate (+14%)
  • 3-year revenue growth rate (10.27%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, BlackRock has been a top-rated stock at my research firm, MAPsignals, multiple times the last year. That means the stock has buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

BLK has been a constant Big Money favorite since 2020. And since its first appearance on this report in 2016, it’s up +186%:

Source: www.mapsignals.com, End of day data sourced from Tiingo.com

Let’s tie this all together.

BlackRock continues to fire on all cylinders technically and fundamentally. With many high-quality growth stocks beginning to breakout with Big Money, I like the long-term story of the stock.

The Bottom Line

The BlackRock rally likely has further upside. Big money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds no position in BLK at the time of publication.

For a look at all of today’s economic events, check out our economic calendar.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/

 

Blackrock Directors, Executive Pay Pass at Annual General Meeting

The world’s largest asset manager, with nearly $9 trillion under management, also said that executive pay was backed by 93% of shareholder votes. A shareholder proposal to convert the company into a public benefit corporation was rejected, receiving only 2.3% of the vote.

(Reporting by Kate Duguid and Ross Kerber; Editing by Chizu Nomiyama)

Best ETFs For June 2021

A portfolio of outlier stocks can become chock full of monster gains for years to come, if chosen wisely.

But wouldn’t it be great if there was already a collection of outliers we could buy without even having to think about it?

Well maybe there is a way to do just that… through outlier ETFs.

So, here I’m going to give you the best ETFs that big money is getting involved in this month.

First thing’s first: to find them, I looked at all the ETFs making Big Money signals. I did that by heading over to MAPsignals.com and then looked at the Big Money ETF Buys and Sells chart. I looked at days with the biggest buying, circled here:

Once I had all the ETFs, I wanted to know which were the best potential opportunities. ETFs are baskets of stocks. And because MAPsignals scores over 6,000 stocks every day, as long as I know which stocks make up the ETFs, I can rank them all.

Here are the 5 best ETFs with scores: The Composite score, Technical score, and Fundamental score. These were computed by accounting for each components stock’s score and its associated weighting in the ETF. (keep in mind that weightings will change from time to time)

Below we see each ETF, their recent Big Money activity, and their scores. XLF, ITB, and XLC are top ranked ETFs. That makes sense because financials, home builders, and communications stocks have been leading the market much of this year so far.

IGV and ARKG, however, rank low on our list of ETFs. But there is opportunity here because the low scores are due to weak technicals. Big Money has been selling these ETFs, largely because they are heavily concentrated in growth stocks. But these stocks have excellent fundamentals: growing sales and earnings and big profits. These weak ETFs represent great potential bargains.

Let’s quickly look at the year-to-date performance of these 5 ETFs:

  • XLF +29.3%
  • ITB +29.2%
  • XLC +13.5%
  • IGV -4.0%
  • ARKG -18.1%

Now let’s quickly look at Big Money buying in the ETFs. Each chart below has many green bars which represents unusually large buying. The few red bars represent unusually large selling. What jumps out is the huge buying in all the ETFs.

Only with IGV and ARKG, there was recent selling too. But again, selling on ETFs and stocks with great fundamentals represents a value opportunity.

Source: www.mapsignals.com, End of day data sourced from Tiingo.com

Here’s why I like these ETFs: they are highly concentrated with fundamentally superior stocks. Below we see a table of three stocks in each ETF. They are some of the highest weightings in each.

Notice their fundamental scores are very strong on a scale from 0-100. This means strong growing sales, earnings, and profits over one and three years. This is how MAPsignals boils down all its fundamental research into one elegant score.

Now with XLF, ITB, and XLC – we see the stocks also have strong technical scores. That means Big Money has been pouring into them, lifting them to new highs. They are buoyant with Big Money support. But in IGV and AKG, we see weak technical scores. This means Big Money has been exiting the stocks.

But before you get spooked, let’s keep the recent environment in mind: Growth has fallen out of favor while value and reopen stocks have become all the rage. But it’s essential to remember these growth companies create phenomenal products and services enhancing our lives. I don’t foresee that stopping in the future. The recent selling is temporary and thematic.

What really drives this home is looking at how long-term Big Money buying can lead to monstrous gains. Below are charts showing all the instances these stocks were Top stocks in our research since 2015: our weekly report of outliers. We don’t need to go into details on each chart.

I’d like you to notice a few things:

  • When Big Money buying pours in, stocks go up
  • Repeated outliers, especially for years often means outsized gains

Owning outlier stocks is the way I try to beat markets. Easy exposure to many stocks can be achieved by buying ETFs. But just like anything, you must be in the 1% if you want to be in the 1%.

We can find outlier ETFs by tracking the Big Money. But that alone isn’t enough: when we catalog the components and find outlier stocks underneath… that’s the winning recipe.

So, there you have it: the 5 best ETFs that Big Money has been trafficking in recently. Outlier ETFs hold outlier stocks. Finding them is the key to finding potentially outlier gains.

Now let’s look at what those look like:

Source: www.mapsignals.com, End of day data sourced from Tiingo.com

The Bottom Line

XLF, ITB, XLC, IGV, & ARKG represent top ETFs for June 2021. Financials, homebuilders, & Communications stocks have performed well lately, which should continue. Software and Genomics companies have reached interesting levels, too. Paying attention to the fundamental quality of ETF constituents is paramount.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions GOOGL, CRM, & REGN in managed accounts, but no positions in XLF, ITB, XLC, IGV, ARKG, BLK, SCHW, SPGI, DHI, LEN, LOW, FB, ATVI, ADBE, MSFT, TDOC, & VRTX at the time of publication.

Investment Research Disclaimer

BlackRock Expands China Footprint with Wealth Management Licence

The U.S. fund giant said on Wednesday its wealth management venture with a unit of China Construction Bank Corp (CCB) and Singapore state investor Temasek Holdings (Pte) Ltd can now start business.

The venture, 50.1% owned by BlackRock and 40% by CCB’s wealth management unit, will draw on BlackRock’s investment expertise and CCB’s vast distribution network, the U.S. firm said in a statement.

BlackRock will “support China in building a sustainable ecosystem for investing,” Chairman and CEO Laurence Fink said in the statement.

“The Chinese market represents a significant opportunity to help meet the long-term goals of investors in China and internationally.”

China opened its massive financial sector last April as part of an interim Sino-U.S. trade deal.

Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission (CBIRC), said in March that Chinese regulators welcome more foreign entry into China’s financial sector, including the wealth management space.

Amundi has set up a wealth management joint venture with Bank of China, and Schroders has applied to partner with Bank of Communications (BOCOM) in wealth management.

BlackRock CCB Wealth Management Ltd, which received the licence from CBIRC, will expand BlackRock’s presence in China.

BlackRock already owns a mutual fund venture with Bank of China, and is setting up a wholly-owned mutual fund house in the country.

(Reporting by Shanghai Newsroom; Editing by Christopher Cushing and Jacqueline Wong)