Earnings Reports Have a High Bar to Clear to Impress This Market

On Monday, we saw the market rebound nicely, but on Tuesday the rubber will hit the road, the earnings road, as the pace of quarterly reports picks up speed and only accelerates further as we barrel toward the end of October.

In Friday’s Weekly Roundup, we shared that the only Portfolio company reporting this week is United Rentals (URI) on Thursday (October 23), and given the lack of economic data, we’ll be doubling down on connecting the dots learned from the rush of earnings over the next few days.

Who do we have on tap today?

Tuesday morning’s batch includes 3M (MMM) , Coca-Cola (KO) , Danaher (DHR) , GE Aerospace (GE) , Lockheed Martin (LMT) , Northrop Grumman (NOC) , Paccar (PCAR) and Quest Diagnostics (DGX) .

Already, General Motors (GM) and Pulte (PHM) have their September quarter reports out, and initial indications are favorable with GM delivering a beat-and-raise quarter. Pulte also delivered a September quarter earnings beat, but its backlog of homes continued to fall, hitting 9,888 homes. That compares to 10,779 exiting the June quarter and 12,089 homes leaving the September 2024 one. We’ll be interested in Pulte’s comments about home prices, margins and the use of incentives to spur new home activity.

On Tuesday afternoon, all eyes will be on Netflix (NFLX) and the mix of revenue between subscription and advertising streams. We’ll be interested in its comments about both, and we’ll be sizing up its advertising comments against guidance from advertising firm Omnicom (OMC), which also reports after Tuesday's close. In that report, the mix between traditional and digital advertising in the September quarter will be one thing, but how that mix is expected to evolve over the coming quarters will be more important.

Also, after Tuesday's close, Intuitive Surgical (ISRG) will report, as will Texas Instruments (TXN) . Given the work we are doing on surgical robots, market and company comments from Intuitive will be helpful in our work. With Texas Instruments, its end market comments will bring another layer of insight for the personal electronics and communications equipment markets.

While we dig into those particulars, we will also be gauging the market reaction to these reports and those coming over the next several days. We’ve talked several times about those falling 2H 2025 consensus EPS expectations relative to 1H 2025, now we’ll see if the market was right or if companies were lowering the collective bar so they could walk over it over the next few weeks.

You’ll remember that for a stock to work during the June quarter earnings season, a company needed to deliver a beat-and-raise quarter. A June quarter beat and reiterated 2025 guidance wasn’t cutting it. Given where the market was as of Monday night, with the S&P 500 not that far away from a record high and its P/E valuation back at 25.1x expected 2025 EPS of $267.96, that’s likely to be the case once again.

Our view has been that for the S&P 500 to move meaningfully higher, investors will need to see the E in its P/E start to move higher. We continue to have that view, and that’s why the Portfolio has the holdings it does.

Let’s get to work…

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At the time of publication, TheStreet Pro Portfolio was long URI.