🔮 Earnings-season forecast

’Tis the season… but it may not be so jolly. Earnings season is upon us, and expectations aren’t high for the first-quarter stocking. Quarterly profits from S&P 500 companies are expected to have dropped 6.8% from last year — that would be the sharpest earnings decline since lockdown-era 2020 and the second straight quarter of falling profit. Meanwhile, analysts expect that sales inched up a measly 1.8%. But the kickoff to earnings season pleasantly surprised:

• Bank buster: On Friday JPMorgan Chase and Citi reported stronger-than-expected #s, with JPM posting record revenue and a 50% profit surge on higher interest rates.
• Stocking stuffer: Despite less-than-stellar earnings expectations, the S&P 500 is up 8% for the year, while the techy Nasdaq has gained 17%.

Growth at all costs < profit at less cost… Soaring interest rates and sticky inflation have eaten into profits and cooled demand. Cue: companies are shifting away from growth-driven investments to focus on cost-cutting profit boosters. It’s “the year of efficiency,” Meta CEO Zuck says. Corporate titans are tightening their belts to prep for a downturn. Last week the Fed said it expected that the banking-crisis fallout would tip the US into a recession this year.

• Cold-brew cuts: In addition to sweeping layoffs, companies like Meta, Goldman Sachs, and Salesforce have cut cushy employee perks like barista-brewed coffee. Google is swapping pricey MacBooks for Chromebooks.
• Robo-savings: Companies like Disney and Microsoft are backtracking on big bets like the metaverse. Instead, corporations are investing in things that could reduce costs long term (think: Walmart and Amazon leaning into warehouse automation).

Biscoff cookies en route to Cabo… United Airlines and Alaska Air may have reason to join the spring-break party when they report this week. While US airline fares are up 17% on the year, travel demand is still taking off. The TSA's expecting a record-breaking year for flights, and analysts think this may be airlines' busiest spring ever. Last week Delta unloaded a quarterly loss, but projected strong growth and profit ahead. It expects record advance summer bookings as consumers prioritize delayed YOLO experiences.

It’s finally here… Tuesday is the deadline to file tax returns for most Americans (many residents of CA, GA, and AL have until October). And it may be the last go-around for what you could call “IRS 1.0.” Over the next two years, the IRS will use billions in federal funding to upgrade its ’60s-era tech and hire 20K new employees. For you: faster returns and shorter phone wait times. Next tax year, the IRS will require anyone earning $600+ on payment apps (for goods and services — not from splitting checks) like Venmo to report it.

An apple a day… keeps the bills away. More Americans could see a boost in their credit scores after credit agencies scrapped 70% of all medical debt in collections. Last year, Experian, TransUnion, and Equifax removed already paid medical debt from millions of credit reports. Last week they took it a step further by removing all unpaid debt up to $500. Nearly a tenth of US adults owe at least $250 in medical debt, but many don’t notice until it dings their credit score. The move could provide relief at a time when US households carry record debt.

Still watching… Votes will be counted today to see if the Writers Guild of America will strike in the event that a new contract agreement isn’t reached with studios by May 1. If the WGA strikes, we could see a repeat of the last screenwriting stoppage in 2007, which lasted 100 days. On the table: shortened TV seasons, cancellations, and a bump in unscripted content (imagine: more “Love Is Blind”). A strike would be a headache for streamers who are hungry for the next “Succession.” They’re expected to splurge $23.4B on scripted titles this year.

• Stuck: Amazon's $1.7B deal to buy Roomba maker iRobot is gathering dust as the FTC gets tougher on mergers. As antitrust gets anti-er, companies might think twice before snagging startups.
• Oops: Samsung workers reportedly leaked secret company info while asking ChatGPT for help. Nearly half of companies (and the Biden admin) are exploring guidelines for AI-chatbot usage.
• Volt: Tesla's building a Shanghai “Megapack” plant to build more energy-storage solutions for businesses and homes. Rising energy demand could fuel Elon’s biz as EV growth slows.

• RTO: Niche consultants attempting to get WFH’ers back to the office without a morale plunge are imploring execs to ditch return-to-office mandates in favor of communal perks like yoga and lunch.
• Emote: Lots of young Chinese men have grown emotionally attached to AI companions like Microsoft's spinoff Xiaoice, which had 650M users in 2018. Robo-romances could give China a leg up in the AI race.
• Exhausted: The EPA’s new pollution-standards proposal that seeks to limit tailpipe emissions could speed up the EV transition. It would require up to 67% of all new cars sold in the US to be electric by 2032.

• Monday: Earnings expected from Charles Schwab
• Tuesday: Tax Day. Earnings expected from United Airlines, Bank of America, BNY Mellon, Johnson & Johnson, Goldman Sachs, and Lockheed Martin
• Wednesday: Earnings expected from Morgan Stanley, Ally Financial, Citizens Financial, and Abbott
• Thursday: Earnings expected from AT&T, TSMC, American Express, Alaska Air, and Union Pacific
• Friday: Earnings expected from Procter & Gamble

Authors of this Snacks own shares: of Amazon, Alaska Air, Google, Delta, Disney, Tesla, Microsoft, and Walmart

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