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Earnings Watch

With earnings on track for best growth in more than a decade, here come Uber, Lyft and the vaccine makers

Earnings Watch: After big stock plunge in wake of new Labor secretary’s comments, ‘gig work’ companies will again make their case for a new approach to contract workers

Uber Technologies Inc. and Lyft Inc. have seen their ride-hailing revenue suffer as airport rides have disappeared; both companies will report earnings this week and lay out their expectations for a rebound.

AP

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After Big Tech reported record pandemic profits last week, corporate earnings are on track for their best performance in more than a decade, but now a new generation of tech companies with their own regulatory issues will take the stage.

Lyft Inc. LYFT, +0.54% and Uber Technologies Inc. UBER, +0.81% will report earnings Tuesday and Wednesday respectively, after President Joe Biden’s new secretary of the Labor Department, Marty Walsh, sent their stocks tumbling last week with a forceful statement about “gig workers” deserving employee status. The gig companies have been seeking to establish a new form of employment that exists between full-time employee and the independent-contractor model, an effort based on the companies’ successful California campaign that Uber has branded as IC+.

Lyft and Uber’s core ride-hailing business has been rebounding from the depths caused by the COVID-19 pandemic, with Lyft recently revealing its best week for ride-hailing since March 2020. An independent analysis shows that the two have recaptured more than half their ride-hailing volume so far, so expect executives to lay out a road map to a fuller recovery while detailing their plans to respond to possible federal pressure on their business models.

Don’t miss: Uber and Lyft expect ride-hailing to make a sharp recovery, but there are some potential roadblocks

The week ahead is lighter on blockbuster earnings than last week’s star-studded lineup, but another quarter of the S&P 500 will report after the results of last week gave a huge boost to overall earnings numbers. The S&P 500 SPX, +0.74% is on track to post its best quarter of earnings growth since the first quarter of 2010 as corporate profits have overwhelmingly exceeded expectations.

With more than 60% of reports already in, FactSet’s blended projection calls for 46.0% earnings growth for the first quarter, up from a projected 33.7% as of a week earlier and an estimated 15.7% as of late December. FactSet calculates that 86% of S&P 500 components have topped earnings estimates.

Tech giants, whose earnings performance have an outsize impact on the overall index since the S&P 500 is market-cap weighted, have posted massive profit beats that dramatically exceeded expectations, helping to fuel surging earnings growth for the index. Amazon.com Inc.’s AMZN, -0.45% profit more than tripled in the quarter, while Apple Inc.’s AAPL, +0.53% and Alphabet Inc.’s GOOG, +0.73% GOOGL, +0.62% more than doubled.

For more: Big Tech’s trillion-dollar pandemic year may be just the beginning

At least 136 members of the S&P 500 are due to report, though no Dow Jones Industrial Average components are on the docket. Here is what to expect.

Vaccine companies

With more than 100 million Americans fully vaccinated against COVID-19, two of the most prominent vaccine makers will report earnings this week, as Pfizer Inc. PFE, +1.00% is scheduled for Tuesday, and Moderna Inc. MRNA, +1.65% follows on Thursday.

COVID-19 vaccines add “volatility” to pharmaceutical earnings, wrote Mizuho analyst Vamil Divan in an April 21 note to clients, but he’s upbeat about Pfizer. Divan anticipates that the vaccine will help Pfizer top expectations for the first quarter and “meaningfully increase FY21 sales guidance for the vaccine based on additional agreements they have signed over the past three months.”

A more long-term issue for Pfizer is the company’s ability to make up for the roughly $18 billion in sales that the company will lose later in the decade due to patent expirations, he said.

Crypto plays

Both PayPal Inc. PYPL, +0.53% and Square Inc. SQ, +4.19% have attracted new interest amid the crypto boom as the companies offer ways for their peer-to-peer customers to buy bitcoin. The week ahead will show how those features are paying off financially, as well as with user engagement.

PayPal rolled out the ability for U.S. users to buy and sell cryptocurrencies like bitcoin BTCUSD, -4.21% and ethereum ETHUSD, -3.06% late last year, and more recently, it started allowing people to use those crypto balances for purchases at PayPal merchants. Crypto functionality is one aspect of the company’s “Super App narrative,” according to Barclays analyst Ramsey El-Assal, who wrote that PayPal’s ambitions to cater to more elements of people’s financial lives are of high interest to investors.

“We believe updated performance metrics on recently launched financial services products are an increasingly important catalyst for the stock,” he wrote ahead of the company’s Wednesday afternoon report.

Square’s earnings come a day later and will be worth watching for signs of growing ambitions in the crypto space. Bernstein analyst Harshita Rawat expects that the company will ultimately add the option for users to purchase additional cryptocurrencies besides bitcoin, while broadening out “crypto-native services” into areas like rewards.

“While the company has not made any announcements yet, we will be surprised if they are not in the making given how profitable crypto trading could be (even acknowledging that Square has (a) lower income consumer base vs. Coinbase),” she wrote.

Don’t tread on Peloton

Peloton Interactive Inc. PTON, +0.04% has been a big winner during the pandemic, but the company has faced negative headlines after the death of a child injured beneath a Peloton Tread+ machine.

The U.S. Consumer Product Safety Commission urged consumers with children living at home to stop using the Tread+, noting that “it is believed that at least one incident [of injury] occurred while a parent was running on the treadmill, suggesting that the hazard cannot be avoided simply by locking the device when not in use.”

Peloton may address the topic on its Thursday afternoon earnings call, but Stifel analyst Scott Devitt doesn’t believe that the issue will have a “lasting consequence” on Peloton’s business. The bigger question will be the progress of its U.S. manufacturing efforts, which should help the company relieve a backlog of orders that have hampered its growth.

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