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Investors await big earnings reports: Nvidia and Walmart in focus

US markets might be closed today for the Presidents Day holiday, but after that, investors face a big test with the quarterly earnings from AI figurehead Nvidia and retail giant Walmart dominating the dying days of the December reporting season.

Besides Walmart and Nvidia, department store retailers Dillard’s and Macy’s are also due to release quarterly updates, while Home Depot, America’s biggest hardware player, releases its figures Tuesday.

Payments group Square is also down to report, and there are a host of global companies also reporting, including banks HSBC and Standard Chartered, Singapore Airlines, BASF, the German chemicals group, Lloyds Bank of the UK, Nestle, the world’s biggest consumer products producer, Zurich Insurance, Daimler, and a host of big miners led by BHP, Rio Tinto, Glencore, Vale, and Fortescue Metals Group.

In fact, the quarterly figures from Nvidia on Wednesday (early Thursday morning, Sydney time) will be the dominant report of the season and will have a greater impact than Walmart the day before and on previous reporters from the Magnificent Seven stocks like Meta, Apple, Amazon, Tesla, and Alphabet.

Earnings forecasts for Nvidia are huge: analysts expect Nvidia’s revenue could more than triple from the same period a year ago amid a surge in demand for its expensive ($US10,000 a pop) artificial intelligence chips.

Investors will likely be looking for growth in the chipmaker’s data center segment, which boosted Nvidia’s earnings in the September quarter.

Analysts are also looking for Nvidia to provide more details on its reported plans to launch a new custom chip unit, which would be positive.

Net income is expected to be $US10.4 billion, up from $US1.41 billion in the fiscal fourth quarter of 2023, while earnings per share forecasts are around $US4.18, compared to 57 US cents in December 2022.

The question is how much of this is already in the price – the shares are up nearly 51% year to date in 2024, so the huge gain could already be factored in.

If the figures are better, watch tech share prices surge for a while, though ahead of the release of the data, they certainly slowed last week. Nvidia shares could only manage a rise of a very slim 0.03% over the five sessions to Friday’s close, and the wider market eased for the first time since the start of the year.

Meanwhile, Walmart is expected to post a roughly $US11 billion rise in sales for the quarter spanning to January 31, or up 4%, according to analyst estimates.

As a result, Walmart is expected to report sales of $US645 billion for fiscal 2024, more than double its closest bricks-and-mortar competitor (and well ahead of Amazon).

Walmart is expected to continue to expand its e-commerce sales, with $US28.22 billion in global online revenue, a 15.7% year-over-year increase.

Some analysts think earnings will do well, while others think there will be a fall as momentum in earlier quarters of the year faded in the final three months.

Shopper visits to Walmart’s 5,000 U.S. stores rose 4.5% during the quarter, analysts at brokers Cowen said, citing an internal survey. Shoppers also spent more, with credit card spending rising nearly 4% from November to mid-January, Cowen said.

Analysts also expect Walmart to show stronger profitability thanks to lower supply chain costs and the falling price of gas since November, analysts said. Net profit is expected to rise 8%.

So with 79% of the companies in the S&P 500 having reported for Q4 2023 to date, financial data group Factset says 75% have reported actual earnings per share (EPS) above estimates, which is below the 5-year average of 77% but above the 10-year average of 74%.

“In aggregate, companies are reporting earnings that are 3.9% above estimates, which is below the 5-year average of 8.5% and below the 10-year average of 6.7%,” according to Factset.

(Historical averages reflect actual results from all 500 companies, not the actual results from the percentage of companies reporting up to Friday).

“Due to the stronger performance of companies compared to estimates in recent weeks, the index is reporting higher earnings for the fourth quarter today relative to the end of last week and relative to the end of the quarter. On a year-over-year basis, the index is reporting earnings growth for the second consecutive quarter,” Factset.

The improvement started in mid-January, in the week of January 19.

“Positive earnings surprises reported by companies in multiple sectors (led by the Industrials and Information Technology sectors) were the largest contributors to the increase in overall earnings for the index during the past week.

“Positive earnings surprises reported by companies in multiple sectors (led by the Information Technology, Industrials, Consumer Discretionary, and Health Care sectors), partially offset by negative earnings surprises reported by companies in the Financials sector, have been the largest contributors to the increase in overall earnings for the index since the end of the quarter,” according to Factset.

So it is all set up for Nvidia to star this week. Will it?