3 Key Reports to Keep an Eye on This Earnings Season

Q2 earnings season is just around the corner, and the big banks are kicking the period into high gear, starting this Friday with their earnings. The overall earnings picture has remained stable in the lead-up, with Tech expecting another big result.

Of course, there are a few noteworthy reports that investors should keep an eye on – everyone’s favorites include Nvidia NVDA, McDonald’s MCD, and Discover Financial Services DFS.

Nvidia gives us more insight into the AI ​​industry, while MCD and DFS can give us deeper insight into the current consumer landscape.

Let’s take a closer look at how each of them is doing ahead of their premiere.

Nvidia’s Results Support AI Optimism

Nvidia’s solid performance over the past year has been fueled by continued demand for chips used in AI applications. The stock continues to have a favorable Zacks Rank #1 (Buy) on the back of a clearly bullish outlook across all time frames.

Investors will be watching the Data Center company’s earnings, which include sales of its AI chips. The company has consistently outperformed our consensus estimates for the metric, with the latest beat totaling $1.8 billion.

As shown below, all four of the last transactions have totaled over $1.4 billion, reflecting the overwhelming demand from the company.

Image Source: Zacks Investment Research

In terms of headline numbers, consensus estimates for both the top and bottom lines have risen over the past few months. Massive growth is expected, with current estimates suggesting a 130% increase in earnings on a 110% increase in sales.

Nvidia’s sales growth has been remarkable, with triple-digit percentage year-over-year gains in each of the last four quarters. Below is a chart showing the company’s revenue on a quarterly basis.

Image Source: Zacks Investment Research

Discover Financial Services enjoys growth in lending

DFS stock has loosely tracked the broader market in 2024, gaining about 18% compared to the S&P 500’s 18.5%. The stock enjoyed a positive response following its earnings release, despite missing earnings per share expectations, with favorable segment results enough to please investors.

Image Source: Zacks Investment Research

Analysts are bullish on the to-be-reported quarter, with the consensus estimate of $2.99 ​​a share up 8% from April. Revenue expectations have changed similarly, rising 2% to $4.2 billion in the same period.

Image Source: Zacks Investment Research

Although the company’s net charge-off rate rose to 4.9% in the latest quarter, the CEO noted that delinquencies were stabilizing. Loan growth was notably positive during the same period, rising 12% to $126.6 billion.

The story continues

McDonald’s under pressure from consumers

MCD stock has been significantly weaker since the beginning of the year, losing about 16% of its value and underperforming significantly. The stock has been unable to sustain its positive sentiment following quarterly results, with consumers apparently growing tired of high prices.

Image Source: Zacks Investment Research

Earnings expectations dipped following the last release but have remained steady since then, with the Zacks Consensus EPS Estimate of $3.10 suggesting a 2% pullback from the same period last year. Revenue expectations also dipped, with $6.7 billion expected versus the $6.8 billion estimate from the end of April.

Image Source: Zacks Investment Research

CEO Chris Kempcinski noted recent consumer stubbornness but remained positive, stating, “As consumers become more discerning about every dollar they spend, we will continue to earn their visits by providing leading, reliable, everyday value and exceptional execution in our restaurants. As we look to the rest of 2024 and beyond, we remain focused on leveraging our competitive advantages under our Accelerating the Arches plan and increasing our QSR market share to drive long-term growth.”

However, high prices have helped the company’s margins significantly, as seen below. It should be noted that the chart is based on the last twelve months.

Image Source: Zacks Investment Research

Summary

The Q2 earnings season has officially begun, but Friday’s results from the largest banks will really kickstart the period.

The earnings picture remained broadly stable, with the technology sector again expected to post strong growth.

Notable launches include Nvidia NVDA, McDonald’s MCD, and Discover Financial Services DFS.

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