Analysts are projecting a 10.5-per-cent drop in total sales and a 24-per-cent drop in earnings per share when Tesla reports on Wednesday, the worst quarterly sales drop since 2012.CHRIS DELMAS/AFP/Getty Images
Like most people, I couldn’t look away from the train wreck of the Astronomer CEO caught cheating on a kiss cam at the Coldplay concert in Boston. In less than 30 seconds, an inter-office affair was exposed, and it took the internet by storm.
But on to the business at hand: We’re in for a big earnings week with 110 S&P 500 companies and 15 TSX companies reporting. Here are the five things investors should watch out for:
Show me where it hurts: The auto sector will be in focus with General Motors Co. GM-N and Tesla Inc. TSLA-Q reporting quarterly results. Consumers rushed to buy cars from GM in the first quarter ahead of tariffs, with sales surging 17 per cent in the United States. Will this sap demand in the second quarter? Analysts are still optimistic, projecting a 7-per-cent increase in sales when GM reports on Tuesday. The automaker has already warned that tariffs will be a US$4.5-billion headwind this year. However, 3M Co. MMM-N last week reduced its projections of how much tariffs would cost it. Will GM be able to do the same?
Tesla has become more than a car company; it is a political symbol and that has crushed sales in certain markets, especially Europe. Analysts are projecting a 10.5-per-cent drop in total sales and a 24-per-cent drop in earnings per share when Tesla reports on Wednesday. This would be the worst quarterly sales drop since 2012 and put Tesla on track for its first-ever drop in annual sales as a public company. But is that priced in? At 177 times earnings, you tell me.
Ask ChatGPT: Alphabet Inc. GOOGL-Q will report results Wednesday and investors will look for clues that Google is losing share in search to ChatGPT and other platforms. However, analysts have noted plenty of positive momentum at Alphabet – the cheapest Magnificent Seven stock. There are three major things to watch in the results. First, are Google’s AI initiatives such as Overview (AI summaries of search terms) helping to boost ad pricing? Second, is there still momentum in the cloud business? It is expected to grow around 27 per cent. Google is in third place in cloud services behind Amazon.com Inc. AMZN-Q and Microsoft Corp. MSFT-Q Finally, watch for how much Alphabet increases spending plans to invest in AI. The last point will have implications for Nvidia Corp. NVDA-Q, which thrives off AI spending.
Ride the rails: Canadian National Railway Co. CNR-T has had a tough time getting back on track. The stock recently bounced off a four-year low but has given up most of those gains. The railway operator reports on Tuesday and investors will be watching for how tariffs have affected freight demand. Because of frequent volume data, we already know CN Rail struggled across major categories except for grain. Still, one analyst is willing to stick his neck out and buy the stock ahead of results. “Our decision to upgrade CN was admittedly difficult given the underwhelming traffic performance YTD, the risk of another guidance cut, and, more broadly, the company’s lackluster operating/earnings performance over the past two years,” wrote Steve Hansen, managing director and equity analyst at Raymond James. So why the upgrade? CN Rail is coming up on very easy comparisons for the back half of the year because of labour and port disruptions last year. “If CN management can deliver, we see the prospect for healthy earnings growth to resume & multiple expansion to accrue (CN is currently the cheapest Class 1 rail),” he wrote in his upgrade last week.
Call on Line 1: Rogers Communications Inc. RCI-B-T will set the tone for the telcos when it reports on Wednesday. It’s had a nice lift from the April low and the results may be the determining factor as to whether it can continue. Investors will be looking for signs that price competition between other carriers is abating. Maher Yaghi, managing director and media and telecom analyst at Bank of Nova Scotia, says this is going to be the singular factor driving telcos this earnings season, and he expects management will sound slightly more optimistic about their ability to raise prices. “BCE and Rogers are likely the two stocks that could see the most multiple expansion on the back of an improved wireless outlook,” Mr. Yaghi wrote in a preview note to clients. For Rogers in particular, investors will be keen to hear about deleveraging plans after it scooped up additional stakes in MLSE while it is still digesting its major Shaw acquisition.
Shop till ya drop: Canadians are expected to show buyer exhaustion when retail sales figures come out Thursday. Headline sales are expected to have fallen 1 per cent in May from April. While this is backward-looking, it will capture the full impact of tariff anxieties on consumers. Statistics Canada will also provide a flash estimate for June, giving a more current picture.
We might get a better sense of the mood from businesses with the Bank of Canada business outlook survey on Monday. While many are downbeat on Canada, Earl Davis, head of fixed income and money markets with BMO Global Asset Management, said on my podcast last week that he takes the opposite view. “The No. 1 reason why I’m optimistic on Canada is we are inherently a commodity-based economy. If you saw the last international trade numbers, we’re having record sales of aluminum to Italy, oil to Singapore, Japan natural gas. It’s incredible, the demand for our commodities here and that’s underpinning a good economy here.”
In the Money with Amber Kanwar brings you actionable insights from top portfolio managers and business leaders. New episodes out Tuesdays and Thursdays. Subscribe now! www.inthemoneypod.com