ENB Pub Note: Sources; Bloomberg, CNBC, Reuters, EDGAR. An interesting week coming around the corner. Tax Credits and investor sentiment drive decisions to invest in renewable energy rather than increase drilling programs. The short answer is that in this political environment, drilling programs will not be increased, and prices will rise. A potential nuclear war will turn everything upside down, and pricing forecasts won’t matter at that point.
Barron’s mentions: Big Oil’s big bet on renewable energy is the cover story this week. Instead of being destroyed by the energy transition, Big Oil has is now seen being in a very strong position to generate profit from their clean energy investments. Renewable energy could increase to account for 60% of power generation in Western Europe and 35% in the U.S. by 2030, according to S&P Global Commodity Insights. Oil majors BP (BP), Shell (SHEL), Exxon Mobil (XOM), Total Energies (NYSE:TTE) and Chevron (CVX) have been reacting to the expected shift by investing in low-carbon business, building wind farms, producing fuel from plants and garbage, and developing strategies for carbon capture, bioenergy, convenience, electric vehicle charging, renewables, and hydrogen. A key point for investors is that Big Oil is increasingly confident that it can get greener without sacrificing profits. Helped by higher crude oil prices, the companies will have enough money to fund drilling, pay off debt, pay out dividends, and still make their aggressive investments in low-carbon businesses. Underpinning the clean energy strategies, new government subsidies for carbon-reduction technologies are set to give those clean energy investments a boost.
Earnings reports will pour in at warp speed next week with every sector sending in heavyweights to spill numbers. The blockbuster reports from Apple (NASDAQ:AAPL), Amazon, and Microsoft (MSFT) are being given the best chance to give investors a positive break from the unrelenting inflation and interest rate news cycle. Meanwhile, Intel’s (INTC) spinoff of Mobileye Global (MBLY) through an IPO is also expected to generate plenty of buzz and Elon Musk’s acquisition of Twitter (TWTR) is closing on its deadline date October 28 with plenty of drama still in the mix.
Earnings spotlight: Monday, October 24 – Packaging Corporation of America.
Earnings spotlight: Tuesday, October 25 – Valero Energy (VLO), General Motors (GM), UPS (UPS), Coca-Cola (KO), Alphabet (GOOG), Mattel (NASDAQ:MAT), Microsoft (MSFT), Visa (V), F5 (FFIV), Alphabet (GOOG), and Chipotle (CMG).
Earnings spotlight: Wednesday, October 26 – Boeing (BA), General Dynamics (GD), Kraft Heinz (KHC), Ford Motor (F), Meta Platforms (META), Canadian Pacific (NYSE:CP), and Hilton Worldwide.
Earnings spotlight: Thursday, October 27 – Comcast (CMCSA), Anheuser-Busch InBev (BUD), Caterpillar (NYSE:CAT), Merck (MRK), McDonald’s (MCD), Southwest Airlines (LUV), Altria (MO), Amazon (NASDAQ:AMZN), Apple (AAPL), and Intel (INTC)
Earnings spotlight: Friday, October 28 – Exxon Mobil (XOM), Chevron (NYSE:CVX), and AbbVie (ABBV)
IPO preview: The IPO market heats up next week with Intel (INTC) setting self-driving subsidiary Mobileye (MBY) free in an offering. Intel (INTC) expects the offering to be priced between $18 and $20 per share, which would value the Israel-based at close to $16B. After the IPO, Intel will still retain control of Mobileye by holding 750M shares of Class B stock which has 10X the voting power of the Class A stock. Mobileye (MBLY) has partnerships with notable automakers such as Audi, BMW and Volkswagen. In addition to the Mobileye IPO, watch Medical (NASDAQ:TNON), Ostin Technology Group (OST), HilleVax (HLVX), Belite Bio (NASDAQ:BLTE), and Marpai (NASDAQ:MRAI) next week with IPO lockup periods due to expire for certain blocks of shares.
Apple earnings preview: There is a sense that an Apple (AAPL) earnings beat and solid guidance could calm not only the tech sector, but the broad market. UBS is constructive on Apple based on recent trends, including stable production for iPhones, iPads and Macs despite signs of deteriorating consumer hardware spending intentions. Other crucial factors pointed out by the firm is that a record iPhone mix shift is likely to have more than offsets FX headwinds and the longer 14-week quarter does not appear to be built into some consensus estimates. Morgan Stanley said its latest checks indicated that iPad and Mac should grow above normal seasonality in the quarter as Apple catches up to past component shortages that limited iPad and Mac sell-in. The trajectory of services growth for Q4 and the gross margin guidance are called out by the firm as important on looking at which direction shares go after the report.
Amazon earnings preview: E-commerce powerhouse Amazon (AMZN) will report earnings on October 27. Heading into the report, analysts have expressed some concern that Amazon will dial back holiday sales expectations, especially with the second Prime Day shopping event in October pulling forward some sales. However, Amazon is also tipped by Bank of America to impress on the margin line for Q3. The firm pointed to positive factors such as higher fees across Prime, fuel surcharges, and holiday shipping surcharges. Lower energy costs and falling freight costs could also factor into a slightly better read on margins. Reducing employee oversupply and more discipline around growth investments could also boost the bottom line for Amazon. The takeaway is that a slight earnings miss and share price drop could give investors an attractive entry point with shares already trading at just 13X on EV/EBITDA and the entire Amazon enterprise value at 12.7X AWS revenue.
Tech overhang: A major topic in the week ahead will be the ramification of export restrictions on semiconductors to China. Expect to hear more analysts dive into both the near-term and long-term implications for individual companies if the issue has not hashed out. For its part, S&P Global Ratings said the impact from the semiconductor rules will depend on how tightly they are enforced. The ratings agency warned that the effects could also be felt outside the semiconductor/technology world in sectors such as auto, aerospace and defense, and energy. S&P has a Stable near-term ratings outlook for the U.S. semiconductor firms. Of course, the timing of the export controls issue coincides with general investor anxiety over a potential recession, high inflation, and ongoing supply chain constraints. Watch for more drama for semiconductor giants such as Nvidia (NVDA), ADM (ADM), and Intel (INTC) as the issue plays out.
Corporate events: Caterpillar (CAT) will display four electric machine prototypes at a trade show in Munich, Germany on October 24. Some analysts have the event circled as a potential share price catalyst just ahead of CAT’s earnings. Atai Life Sciences (ATAI) will host a R&D Day event on October 25 with presentations and KOL discussions. Charles Schwab Corporation (SCHW) will conduct a Fall Business Update for institutional investors on October 27. The event is designed to keep the investment community keep abreast of recent developments and management’s strategic focus. Read Seeking Alpha’s Catalyst Watch for a detailed list of events next week.
