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Earnings season hits its stride as investors consider their options

by LLB Reporter
25th Jan 23 10:38 am

It seems pretty hard to find just the balance to please investors at the moment. If sales haven’t quite lived up to the hype yesterday but profits look better going forward, is that the special sauce or is a bird in the hand preferable to promises that might not materialise?

Judging from today’s crop of earnings investors are a bit torn, but then it depends entirely on the sector. Big pharma companies have all been dragged into the slow lane today thanks to an update from Johnson & Johnson which delivered something of a mixed bag and warnings that inflation’s grip is still likely to cause problems well into the next financial year.

Danni Hewson, AJ Bell financial analyst, said: “And it’s a year that will bring big change to the company as it splits off its consumer health business, a chance to differentiate and focus minds on what works and, as covid vaccine sales fall, what will be the next big money spinner.

“Another US bellwether General Electric was similarly afflicted by the good news bad news paradigm. It’s still trying to work out the kinks as it pushes more tentacles out into the renewable energy arena. As another company flirting with splitting apart and with the travel sector taking off post-Covid, it’s looking to cash in further on its engines business which is currently flying high.

“Verizon’s share price bounced back after it warned on profits. It’s had a hard fight on its hands as customers get more savvy and competitors gnaw at market share, but promotions can’t go on forever if margins are to be protected.

“All in all, it’s been a pretty gloomy day and investors must be wondering if the clouds will have a silver lining or deliver a deluge. It will feel like a long wait till the closing bell tolls and Microsoft delivers its much-anticipated update. How will faltering consumer confidence have impacted those big tech players? The next couple of days is likely to determine whether the love affair with growth stocks is about to be rekindled or whether it will remain on ice for a little longer.

“In London it’s also been a mixed affair, with some pretty gloomy data suggesting the UK private sector has had its confidence knocked by the economic storm buffeting the country. Strikes, rising interest rates and that cost-of-living crisis have all played a part in holding back business – not exactly a recipe for growth.”

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