An Exxon Mobil-operated oil refinery in the U.K. Keep an eye on the company’s downstream operations in its coming earnings report.
Photo: Luke MacGregor/Bloomberg NewsEarnings season is a good time to not only assess the health of corporate America but also a chance to get a picture of the state of the consumer.
As the reports roll in, investors will be awash in data, and it can be difficult, especially in this uncertain economic environment, to identify the most telling numbers. The coronavirus pandemic has been a boon to some sectors, such as technology, while battering companies in the financial and energy industries.
The uneven performance is reflected in the market’s returns this year. The S&P 500 is off just 0.2% in 2020. The tech sector has surged 17%, while the financial and energy groups are off 22% and 39%, respectively. Given the wide gap, investors need to parse data across sectors. Here are a few key metrics to watch:
Whirlpool’s North American Sales
Whirlpool WHR -1.21% Corp. makes washers, dryers and kitchen appliances, so its sales trends show homeowner appetite for big-ticket items. Home Depot Inc. and Lowe’s Cos. offer similar products, but they sell so many other things, it is impossible to know the size of the individual purchases.
Whirlpool’s quarterly North American sales had been pretty steady at about $3 billion for the past two years. They slid to $2.5 billion in the first quarter and are expected to fall to $2.3 billion in the second quarter. Analysts don’t expect a recovery to prior levels until the third quarter of 2021, according to FactSet. Whirlpool shares are down 3.4% this year.
Whirlpool is scheduled to report results Wednesday.
Discount-Store Sales
For a sense of how the consumer is faring, take a look at discount stores.
When times are tough and Americans are looking to save money, discount stores are an obvious destination. So while rising sales are good news, it is a sign that times might be tough out there.
Walmart Inc., the world’s largest retailer, is a good proxy for the state of the consumer. But Walmart has been trying to sell more upscale products and going toe-to-toe online with Amazon.com Inc.
Watch for Dollar General Corp. ’s sales. It has 16,000 stores in 46 states, so it has broad reach. Sales were rising through 2018 and 2019 as job creation and economic growth were tapering off. They were up again in the first quarter and are expected to post a rise in the second as well. Dollar General shares are up 21% this year, while Walmart is up 11%.
Dollar General has yet to set an earnings date.
Apple’s iPhone Sales
The iPhone isn’t just an iconic product. It is a great proxy for discretionary spending. Are people willing to shell out more for it, or are they saving money and buying Android phones? Or not buying phones at all?
Apple AAPL -0.20% has a loyal and affluent customer base that can afford the phones, even with the current economic conditions, said Canaccord Genuity analyst T. Michael Walkley. The results will give an indication of how the upper-end consumer is faring.
Sales of the iPhone are projected to register a fall to $22.21 billion in Apple’s most recent quarter. Although that is well below the $29 billion it sold in the previous period, it likely reflects that people are waiting for the next upgrade cycle.
Apple, shares of which are up 31% this year, is scheduled to report July 30.
Freddie Mac’s Mortgage Loans Gains and Losses
There is no bigger financial commitment most people will ever make than buying a house.
The Federal Home Loan Mortgage Corp., or Freddie Mac, is a government-sponsored enterprise that buys mortgages on the secondary market, packages them into securities and then sells those to investors.
The company’s quarterly reports have a wealth of valuable information on the mortgage market. Keep an eye on the delinquency rate and look for anything executives say about forbearance efforts as homeowners struggle to keep up with their bills.
In May, the company reported its delinquency rate on single-family homes rose to 0.81% from 0.64% in April. It had been steady around 0.6% before that.
“All the data in terms of [mortgage] forbearance we’ve been watching like a hawk,” said Larry McDonald, author of the Bear Traps Report newsletter.
Freddie Mac has yet to set a date for its second-quarter report. The stock is down 29% this year.
Exxon Mobil’s Downstream Operations
Even with the current emphasis on sustainability, oil is still one of the most important commodities in the world, and the amount that is being consumed is a proxy for economic activity.
Exxon Mobil’s “downstream” operations are an important area to watch. This business segment represents all of its operations, like refining and selling, after it pumps oil out of the ground. Downstream revenue is expected to fall to $24.68 billion in the second quarter, from $44.69 billion in the first and $54.03 billion a year earlier. Shares are down 38% this year.
Exxon is scheduled to report results July 31.
Write to Paul Vigna at paul.vigna@wsj.com
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