Earnings, News, Stocks

Will big pharma, oil, and financial outperform tech giant in earnings this week?

Written by Leonardo Hadi · 2 min read >
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Disclaimer

This week’s calendar will be the most sought-after earnings announcement as the tech giants, big oil, big financials, and big pharmaceutical will announce their earnings this week between Oct 26 – Oct 30, 2020. 

Big Pharma

Pfizer, Merck, and Gilead are among the big pharmaceutical companies in the race to find Coronavirus’s vaccine. Their earnings this week will be the signal on how the market responds to their effort to be the front-runner in the vaccine race. 

Coronavirus pandemic has taken a lot of life, crippled the economies, and bankrupted many businesses. The only way to solve the pandemic issue is a vaccine. The big pharmaceutical companies will be the central focus of every country’s health and economic recovery on the planet.

Tech Giant

Apple, Amazon, Google, and Facebook will release their earnings on Thursday, Oct 29, 2020. Microsoft and AMD will release the earning on Tuesday, Oct 27, 2020. Twitter, eBay, Etsy, Shopify, and Spotify will also release their earnings this week. Many of them are the top stock performers during the pandemic. 

The technology sector performs exceptionally well during the pandemic as more people have to work, learn, and maintain social life remotely. This week’s earnings from the tech giants will be a strong indicator of the overall health of the economy during the pandemic.

Big Oil

BP will be the first out of the big oil to release the earnings. The event will occur on Tuesday, Oct 27, 2020. BP is shifting its focus from petroleum towards green energy, which becomes the main theme for European oil companies.

Suncor, a Canadian oil company, will release the earning on Wednesday, followed by TC Energy, Royal Dutch Shell, Conoco Phillips, Exxon Mobil, Chevron, Phillips 66, and Imperial Oil. Exxon Mobil, Shell, BP, and Suncor’s layoff announcement gives a strong indication that the energy sector is still under significant pressure from the pandemic. 

Sector Index Performance
The year-to-date stock performance of S&P 500 (SPX), Nasdaq 100 (NDX), Energy Select SPDR Fund (XLE), iShares US Pharmaceutical (IHE), and Financial Select SPDR Fund (XLF). Source: https://www.hivelr.com/market-data/

The figure above shows the stock index performance year-to-date:

NDX (blue) is the Nasdaq 100, +31.79%

XLE (red) is Energy Select SPDR Fund, -49.83%

IHE (light purple) is iShares US Pharmaceuticals ETF,  +4.68%

SPX (green) is the S&P 500 index, +6.37%

XLF (dark purple) is the Financial Select SPDR Fund, -18.76%

Nasdaq 100/NDX (blue) is comprised of major technology companies. The fund measures the overall performance of the technology industry. Nasdaq 100 gains 31.79% from the beginning of the year. The index dropped during the coronavirus outbreak, but it recovered quickly as the economies moved from brick-and-mortar to digital economy overnight. 

Energy Select SPDR Fund/XLE (red) measures the performance of the oil and gas companies. The oil and gas sector suffers the most among all the indexes. XLE drops -49.81% year-to-date. The pandemic wipes out the demand for oil and gas overnight as fewer people travel during the lockdown. Saudi Arabia and Russia’s decision to increase production creates a supply shock, which reduces the oil price even more. XLE fund rose recovered nicely after the dip, but the geopolitical factor hurt the oil price and triggered the layoff, production shut down, bankruptcies, as well as merger and acquisition.

iShares US Pharmaceuticals ETF/IHE (light purple) is the fund that tracks pharmaceutical companies. IHE gains 4.68% year-to-date, on par with the S&P 500 Index (green) of 6.37% gain. The race of finding the vaccine may contribute to big revenue in the future, but the cost of research, development, clinical trials is very expensive. Besides, the rate of failure is very high. This is why the pharmaceutical sector is not performing as well as the technology sector despite big earnings potential.

Financial Select SPDR Fund/XLF (dark purple) measures the stock performance of financial companies. The coronavirus pandemic disrupts the financial services industry as businesses declare bankruptcy, homeowners default on their mortgage, and interest rate drops to zero—the financial sector losses -18.76% year-to-date. The digital payment industry has a better outlook as fewer people will transact with physical cash, thanks to covid-19. 

Will big pharma, oil, financial outperform tech giant in earnings this week?

In conclusion, the tech giant performs exceptionally well with a gain of 31.79% year-to-date. History may not necessarily predict the future, but based on year-to-date stock performance, the tech giant is the clear winner. 

However, big pharma, oil, and financial gain momentum as soon as the vaccine is released. The economy returns to normal, and fewer people will rely on technology to continue their daily activities. 

Disclaimer

What is your analysis for the companies announcing their earnings this week?

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Photo by Unsplash.

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Written by Leonardo Hadi
MBA from the University of Illinois at Urbana-Champaign. Quantitative Fund Investor. Professional Engineer. Operations Professional. Profile

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