MCHP and AIG To Fall > -30% in Q3, Timbre !
Earnings season for most S&P 500 companies is a time to post impressive growth.
However, a cohort of companies from S&P 500 index, is about to shrink instead.
For growth investors, this is something to watch out for.
Cohort samples include:
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$Microchip Technology(MCHP)$. Reporting Q3 earnings on 05 Nov 2024, evening.
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$American International Group Inc(AIG)$. Reporting Q3 earnings on 04 Nov 2024, evening.
The above companies are expected to post a revenue drop of at least -30% for Q3 2024, after data analysis from (a) S&P Global Market Intelligence and (b) MarketSurge,
According to FactSet, VP & Senior earnings analyst, John Butters, a -30% fall in revenue by these stocks, stand out in a bad way.
$SPY - Trending up over time
This is especially so, when compared to the S&P 500 index (itself) that is reporting a +4.70% revenue growth for the same quarter. (see above)
S&P 500 - Trailing Growth Sectors.
Most S&P 500 sectors will post growth in the quarter. But not all.
As of 18 Oct 2024, FactSet reported that :
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70 of S&P 500 companies have reported their Q3 earnings.
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Of which, 79% have reported actual EPS above estimates, that is above the 5-year average of 77% and above the 10-year average of 74%.
Investors expected tech stocks to do very well, and they were right!
FactSet said tech stocks will post the strongest growth of 11.7%.
Realistically, not every sector will report growth.
For a start, both (a) industrial and (b) energy companies, are expected to do worse.
Analysts think industrial companies' sales will dip marginally by -0.1% and energy companies by a wider margin of -4.90%.
Microchip Technology.
Given tech's strong growth, Microchip Technology is an outlier — in a bad way.
Analysts expect the company to post quarterly revenue of $1.2 billion, that will be a down for nearly -49% YoY.
Such a poor outlook helps explain the stock's -14.4% drop in 2024, manifesting in a “17” RS Rating.
The 41 EPS Rating is low, too, as earnings are seen coming in down -18% this year.
Forecast & Technical Analysis.
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Above is analysts’ forecast for MCHP’s Q3 earnings.
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EPS is expected to fall by a massive -73.46%.
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Strangely enough, of the 16 analysts polled, MCHP’s overall consensus is “Moderate buy”.
Based on Wed, 23 Oct 2024’s closing price of $75.27, below are MCHP’s resistance and support level.
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Pivot point 1st Resistance level (high) - $76.23.
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Pivot point 2nd Resistance level (high) - $76.62.
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Pivot point 1st Support Point (Low) - $74.31.
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Pivot point 2nd Support Point (Low) - $73.92.
American International Grp.
In Southeast Asia especially, AIG the group is better known as “AIA” (American International Assurance).
Financials in the S&P 500 are expected to have a decent growth for third quarter 2024.
Analysts think the sector will show +4.9% top-line growth. That is only because AIG as an anchor, is holding the financial sector up.
For Q3 2024, the insurance giant is estimated to post revenue of $6.8 billion, that unfortunately will be down -47% YoY.
Strangely enough, investors don't seem too concerned yet.
Shares are still up nearly +16% YTD. with an RS Rating of “61”. (see above)
Propping up AIG somewhat, is its decent profit growth despite contracting revenue.
Analysts think the company's bottom line will shrink just -6% in 2024 before growing +34% in 2025.
Forecast & Technical Analysis.
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Above is analysts’ forecast for AIG’s Q3 earnings.
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EPS is expected to fall by a massive -31.01%.
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Strangely enough, of the 17 analysts polled, AIG’s overall consensus is “Moderate buy”.
Based on Wed, 23 Oct 2024’s closing price of $77.43, below are MCHP’s resistance and support level.
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Pivot point 1st Resistance level (high) - $77.77.
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Pivot point 2nd Resistance level (high) - $78.11.
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Pivot point 1st Support Point (Low) - $76.90.
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Pivot point 2nd Support Point (Low) - $76.37.
Other S&P 500 Expected To Shrink in Q3.
The above post covered 2 stocks (MCHP & AIG) with fair amount of details on the possible fall in Q3 results.
The remaining 5 stocks that analysts do not favour can be found in above table. (see above)
They include $Moderna, Inc.(MRNA)$ (covid-19 darling stock), $Fidelity National Information(FIS)$, , $John Deere(DE)$ and then some more.
My viewpoints : (mine only)
When it comes to investing in US stocks, one really has to be diligent about one’s portfolio of stocks.
Even a blue-chip could lose its value over time. No need to look further than chip maker Intel Inc, to know this is true.
Apart from that, I find sector Healthcare stocks hard to grapple with as well. (see below)
Take Moderna Inc for instance:
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The pharmaceutical & biotechnology company became a public company in December 2018,
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It was the largest IPO of a biotechnology company in history, raising $621 million at $23 per share.
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With the onset of the Covid pandemic worldwide, Moderna was able to leverage on its mRNA technology / technique to develop the vaccine mRNA-1273.
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It went on clinical trial in March 2020 and received expedited approval by US’s FDA authority for emergency use authorization in the US.
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By 19 Aug 2021, its stock price peaked at $488.47 per share.
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This was a +2,123% jump from its IPO price.
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On 23 Oct 2024, it ended the day at $53.39 per share.
Root Cause.
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Waning covid-19 demand.
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High R&D spending without corresponding new products release.
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Broader Healthcare sector stock market volatility.
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Investors’ jitters.
When investing, read to stay updated with your stocks. Otherwise may end up like “Project runway”s slogan - “One day you’re in, the next day you’re out”.
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Do you think MCHP & AIG are good pedigree stocks to own, while it’s on the “cheap” ?
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Do you think Moderna Inc will ever rise back to the average $100+ range?
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