The U.S. corporations started to release their earnings for the previous quarter, and this week we have already seen some important names reporting their performance. When interpreting financial statements, it is important to make the distinction between the financial position and the financial performance of a company.
In the first case, the document you might want to study is the balance sheet, which shows the total assets a company has in terms of the sum of its liabilities and equities. In the second case, the income statement reveals the company’s financial performance over a period of time.
In the case of quarterly earnings, investors typically focus on the bottom line or the net income and earnings per share. If the actual is higher than what the market expected, the shares are likely to appreciate as they are considered undervalued. The opposite, obviously, is true if the actual EPS are smaller than the estimates. For investors, the balance sheet is far more important as it is the document to study if you want to invest, not only to speculate on a company’s share price.
Big Tech Names Due to Report Earnings
Today is a big day for the tech sector. Tesla, Facebook, and Apple will release earnings for the last fiscal quarter – all of them after hours. Next week, the other two big names in the American tech spaces will do the same – Amazon and Google report their earnings on Tuesday 2nd of February, once again, after hours.
Yesterday, Microsoft opened the tech giants’ earnings season by beating once again the expectations. It reported EPS of $2.03 on an estimated $1.64 for the last quarter, fueled by growth in revenues from $43.1 when compared to $40.20 expected. Unsurprisingly, the company’s shares are seen higher in the pre-market, at $243.32 after closing yesterday at $232.51.
If Microsoft is a benchmark for the other tech companies mentioned, we should expect something along the same lines for today’s releases and the ones scheduled for next week. The focus will be on Tesla, as last year it had a stellar market performance.
In particular, investors should focus on the MD&A (Management Discussion and Analysis) forward guidance. The new U.S. President, Joe Biden, was quoted recently saying that plans exist to replace the Federal Government fleet with electric vehicles. On any hint in the MD&A that Tesla might already have signed some pre-deals with the Government, investors might interpret it as a bullish signal.
Why? The U.S. Government had more than 645,000 vehicles in its fleet in 2019.