Earnings playbook: Netflix and Goldman Sachs headline a big week of reports

US Top News and Analysis

The third-quarter earnings season will pick up steam in the week ahead following a solid start. JPMorgan Chase, Citigroup and Wells Fargo reported better-than-expected quarterly result Friday. On Thursday, Delta posted earnings and revenue that exceeded expectations. Overall, about 6% of the S & P 500 has posted third-quarter results, with 81% of those companies topping estimates, according to FactSet. Expectations for the overall earnings season are muted. FactSet data showed that, heading into the reporting period, analysts expected earnings would fall 0.3% year over year. That would be the fourth straight quarter of declining profits for the S & P 500. This week, 54 S & P 500 members are slated to report, including investment banking giants Goldman Sachs and Morgan Stanley, along with Netflix. Take a look at CNBC Pro’s breakdown of what’s expected from each of these key reports. Tuesday Bank of America is set to report earnings before the bell. Management is slated to hold a call at 8:30 a.m. ET. Last quarter: BAC posted better-than-expected earnings thanks to higher interest rates . This quarter: Analysts polled by FactSet expect the bank to report slight year-over-year earnings and revenue growth. What CNBC is watching: Bank of America shares have struggled this year, losing more than 19%. However, UBS analyst Erika Najarian thinks improvements for the banking giant will be seen in the upcoming report. “We feel like the market is focused on yesterday’s catalysts, the two ‘Bs’ — bond losses and betas on deposits (which BAC has held down nicely by the way — and not enough on the two ‘Cs’ that we see as forward catalysts — credit and capital),” Najarian said in a note. What history shows: Bank of America beats earnings expectations 78% of the time, according to Bespoke Investment Group. However, the stock averages a 0.8% drop on earnings day. To be sure, BofA shares popped more than 4% after the company posted its second-quarter numbers. Johnson & Johnson is set to report earnings in the premarket, followed by a call at 8:30 a.m. ET. Last quarter: JNJ hiked its full-year outlook due to strong medtech sales . This quarter: Analysts see a slight earnings decline from the year-earlier period, FactSet data shows. What CNBC is watching: Investors could be in for a muted third-quarter report, given J & J has already updated its guidance to reflect the Kenvue spinoff from earlier this year, according to Bank of America. To be sure, the bank noted that “investors remain focus on Pharma biz 2025 outlook (BofA $55B vs. $57B guidance) given looming LOE and talc litigation.” What history shows: J & J has a strong record of exceeding analyst earnings estimates, posting a beat 95% of the time, according to Bespoke. In fact, the last time J & J missed on earnings was in the second quarter of 2003, FactSet data shows. Goldman Sachs is set to report earnings before the open. Corporate leadership will hold a call at 9:30 a.m. ET. Last quarter: GS earnings missed expectations following hits from GreenSky and real estate . This quarter: Goldman’s third-quarter report is expected to show a year-over-year earnings drop of more than 30%, per FactSet. What CNBC is watching: Goldman last week warned its third-quarter results would be hurt by its deal to offload GreenSky. This comes as the company pares back efforts to enter the retail banking space. Investors will also be looking at how well the company’s trading business has done. What history shows: The investment banking giant has missed earnings expectations in two of the last three quarters, according to FactSet. The stock rose nearly 1% after Goldman’s second-quarter numbers came out, but it fell following the previous two releases. United Airlines is set to report earnings after the bell. A call with management is set for Wednesday. Last quarter: UAL forecast strong profits for the quarter. The company also trimmed its Newark, N.J., schedule . This quarter: Analysts forecast a double-digit percentage earnings drop for the airline, according to FactSet. What CNBC airlines reporter Leslie Josephs is watching: “Investors will focus on how United will fare in the off-season after a hot summer, especially for United’s strong suit: international travel. Airlines are grappling with a return to more seasonal booking patters and higher costs which some competitors have already warned will crimp margins. Also in focus is United’s larger expenses: including a new pilot contract and, further into the future, upsized order for Boeing and Airbus jets. United’s executives are also sure to be asked whether the Middle East war is curbing demand for international travel in general.” What history shows: Bespoke data shows United beats earnings estimates 69% of the time. After its second-quarter report came out in July, shares rose 3.2%. Wednesday Morgan Stanley is set to report earnings in the premarket, with a call scheduled for 8:30 a.m. ET. Last quarter: MS topped expectations, boosted by record revenue from its wealth management business . This quarter: FactSet data shows Morgan Stanley is expected to report year-over-year earnings and revenue declines. What CNBC is watching: Investors will look through Morgan Stanley’s report for catalysts that can take the banking giant out of a recent rut. Morgan Stanley shares are down more than 12% in the past month. Last week, UBS downgraded the stock to neutral, noting that despite “its successful transformation into a WM-focused firm with a solid, wirehouse peer leading growth profile, MS is confronted with obstacles such as deposit sorting/yield seeking .” What history shows: Morgan Stanley earnings exceed analyst expectations 77% of the time, per Bespoke. The stock also averages a post-earnings gain of nearly 1%. Netflix is set to report earnings post-market close. A call with management is slated for 6 p.m. ET. Last quarter: NFLX said subscriptions jumped 8% and revenue climbed amid the company’s password sharing crackdown. This quarter: The streaming giant’s earnings are expected to have grown by more than 10% from the year-earlier period, per FactSet. What CNBC is watching: Netflix shares have struggled since Netflix posted its second-quarter results, losing more than 25% in that time. To be sure, recently added shows such as “Suits” have pulled billions of viewing minutes on the platform. Investors will look for clues on whether the company can maintain that viewing momentum, and how will it build on its ad-supported subscription tier. “NFLX will be investing in ad tech and content, which will reduce margin expansion but also accelerate revenue. We’re below Street for the upcoming Q4 guide, but patient buyers,” Wells Fargo analyst Steven Cahall wrote. What history shows: Netflix beats earnings estimates 81% of the time, according to Bespoke. That, however, doesn’t usually translate into a stock gain. Netflix shares average a 0.2% drop post earnings. To be sure, the stock has risen after two of the last three reports were posted. Thursday American Airlines is set to report earnings in the premarket, with a conference call set for 8:30 a.m. ET. Last quarter: AAL hiked its 2023 earnings forecast . This quarter: The airline is forecast to report a sharp year-over-year earnings drop, according to FactSet. What CNBC airlines reporter Leslie Josephs is watching: American Airlines executives will be asked about off-season demand. The carrier already said it expects higher costs like fuel will squeeze its margins in the third quarter, and how much airlines can drum up revenue during an off-peak season for travel with business travel demand not back to 2019 levels remains a question. The carrier’s management team will also likely be asked about its ongoing labor negotiations with its flight attendants, it’s largest work group, after sealing a deal with pilots earlier this year. What history shows: American Airlines, per Bespoke, beats earnings expectations 90% of the time. The stock also averages a 0.3% decline on earnings day, but shares have risen after two of the last three releases. — CNBC’s Michael Bloom contributed reporting.