Earnings Reports season is coming again! How to prepare in advance?

The recently concluded third quarter was not calm for the US stock market. Significant pullbacks occurred in early August and early September, but the three major indices still achieved positive returns at the end of the quarter. A cloud of recession once loomed, but expectations of a soft landing regained the market's upward momentum along with the Federal Reserve's policy shift.

In the third quarter, the Dow Jones Industrial Average rose over 8%, the S&P 500 rose over 5%, and the Nasdaq also recorded an increase of 2.6%.

Starting from the second week of October, the US stock market entered a period of concentrated disclosure of third-quarter reports. Public companies can choose different fiscal year periods according to their business needs and operational strategies, such as $Apple(AAPL.US)$ The fiscal year ending in the last Saturday of September each year.

However, more than 80% of companies still use the calendar year as their fiscal year, typically with large financial institutions being the first to release results. This fiscal quarter will still be kicked off by $JPMorgan(JPM.US)$ on October 11.

According to Refinitiv statistics, nearly 80% of S&P 500 companies that announced their second-quarter reports exceeded analysts' expectations, while the long-term average is 66%. Will the strong performance continue in the third-quarter reports? What strategies can be deployed?

Which industries and companies are favored by the market?

FactSet data shows that the market expects the S&P 500 Index's earnings growth rate for the third quarter to be 4.6%. If achieved, this would mark the fifth consecutive quarter of positive growth. The market also anticipates that earnings for the entire year of 2024 will grow by 10% year-on-year, and 15.2% in 2025. The forward PE for the S&P 500 over the next year is 21.4, slightly above the five-year average of 19.5.

Among the 11 sectors of the S&P 500 Index, eight industries are expected to achieve year-on-year earnings growth in the third quarter. Notably, Information Technology, Medical, and Communication Services are expected to see double-digit growth.

Belonging to the Information Technology sector, $NVIDIA(NVDA.US)$ , and in the Communication Services sector, $Alphabet-C(GOOG.US)$ and $Meta Platforms(META.US)$ are expected to significantly drive industry earnings growth. $Pfizer(PFE.US)$ and $Eli Lilly and Co(LLY.US)$ Large pharmaceutical companies such as

The NENGYUANHANGYE is expected to face nearly a 20% decline in earnings in the third quarter due to the drag from falling oil prices. However, the recent escalation of the situation in the Middle East has led to a rebound in oil prices.

Looking at specific companies, among the ten companies with the highest Buy ratings, three are part of the Magnificent Seven: namely, $Amazon(AMZN.US)$ 、 $Microsoft(MSFT.US)$ and NVIDIA. Amazon ranks first, with 95% of analysts from Factset giving Buy ratings, 5% giving Hold ratings, and no analysts giving Sell ratings. After spinning off assets to rejuvenate itself, $GE Aerospace(GE.US)$ ranks third.

Other companies include oilfield service company $Schlumberger(SLB.US)$ , gun concept stocks $Axon Enterprise(AXON.US)$ , and medical insurance companies. $UnitedHealth(UNH.US)$ And benefiting from AI demand, the leading power companies. $Vistra Energy(VST.US)$ Two airlines also made it to this list. $United Airlines(UAL.US)$ And $Delta Air Lines(DAL.US)$ Most companies on the list have performed well this year as well.

Data Source: FactSet. Data as of September 20, 2024. The content of this chart is for reference only and does not constitute any investment advice. Past performance is not indicative of future results; the market carries risks and investments should be made cautiously.

Although recent economic data has intensified the vulnerability of the stock market, this may not mean that investors should opt for puts. The research department of Goldman Sachs noted that if the market experiences another pullback, the Federal Reserve is likely to continue intervening to provide a buffer for the stock market and economy. If the market adjusts in the future, it is more likely to be an opportunity to buy the dips, just as occurred a few months ago. Goldman Sachs' multivariate analysis model shows that the downside risk in the stock market has increased but remains at a low level.

The content of this chart is for reference only and does not constitute any investment advice.

How to deploy the earnings report of the third quarter using Futubull?

For companies nearing earnings release dates, mooers can directly find relevant information on individual stock quote pages. Taking JPMorgan as an example, before the earnings release, not only can the current Analyst Target Price and ratings be seen, but one can also make online appointments for the company's earnings call and add calendar reminders for the earnings release.

You can also check the company's profit forecast data, including revenue, EPS, and EBIT, among other Indicators. The path is: individual stock quote page > Company > Financial Estimates.

The case is for illustrative purposes only and does not constitute any investment advice or guarantee.

If you have been tracking a particular Industry or company for a long time, you can make estimates based on the existing information and compare them with current market expectations, thus adjusting your trading strategy. The 'Company' section also has more fundamental information, including financial statements, valuation levels, and Company Business Data breakdown.

The function entrance of the 'Earnings Reports Calendar' allows you to pay attention to company dynamics in advance. You can search for the corresponding company to enter the individual stock page and add calendar reminders.

Before the release of Earnings Reports, the volatility of the underlying assets usually rises and then quickly drops afterward. You can use this characteristic to construct options strategies. For example, NVIDIA announced its Q2 earnings report for fiscal year 2025 on August 28. Before the earnings report was announced, NVIDIA's volatility climbed to a high position. After the earnings report was released, the volatility rapidly decreased, a phenomenon also referred to as volatility crush (IV Crush).

Implied volatility values, IV rankings, and IV percentiles are theoretical estimates; actual market conditions may not always align with the theoretical information shown. Investors should act cautiously when making investment decisions and use multiple sources of information, as there is no guarantee that using tools or information provided on the Futubull application will lead to investment success or reduce investment risk.

In a risk-neutral situation, the lower the implied volatility of the underlying asset, the less premium needs to be paid, theoretically favoring the options buyer. If it is believed that volatility will rise before the earnings release but it is unclear whether it will rise or fall, Long Straddles or Long Strangles can be constructed when volatility is low. Of course, one can also take advantage of the characteristic of volatility crush by choosing to Sell Straddles or Strangles when volatility is high before the earnings report is released.

Due to the different characteristics of assets, the implied volatility value alone cannot fully reveal the situation. The volatility analysis tool can assist in determining the current volatility level, showing the overall volatility of the asset symbol rather than the volatility of a single option.

You can also compare the past year's performance of the symbol for a more comprehensive observation. The IV level shows the current implied volatility position among all values over the past year, while the IV percentage indicates how many trading days had implied volatility lower than the current level. The smaller both values are, the lower the current implied volatility level may be.

Never walk alone on the investment road, Futubull will also timely track key company dynamics during the earnings report season, providing fresh interpretations, ahead of performance insights and post-performance commentary, hoping mooers will stay tuned.

Risk Disclosure: This content does not constitute a research report, is for reference only, and should not be used as the basis for any investment decision. The information contained herein is not a comprehensive description of the securities, markets, or developments mentioned. Although the sources of information are considered reliable, the accuracy or completeness of the above content is not guaranteed. Furthermore, there is no guarantee regarding the accuracy of any statements, viewpoints, or forecasts provided in this article.

Options trading carries a high risk and may not be suitable for all investors. The characteristics of options can lead to losses exceeding the principal. Before trading options, please read our "U.S. Options Product Disclosure Statement," "U.S. Options Target Market Confirmation Letter," and documents published by the Options Clearing Corporation (OCC) regarding the "Characteristics and Risks of Standardized Options."