Q4 Earnings Yield Stock Rally, But Corporate Clients Aren’t Driving Performance

This week’s B2B Data Digest offers a quick skim of the flurry of earnings data coming out of the corporate banking, finance and technology market. On the whole, numbers are good – better than good, in some cases – creating a stock market rally as the Dow surpassed 26,000 last week.

“Not only is the U.S. coming off a strong quarter, but the new tax reform measures are continuing to provide a boost, with investors keen to hear more about what impact this will have on future earnings,” said OANDA senior market analyst Craig Erlam in an interview with Reuters.

According to the publication, more than three-quarters of the 26 S&P 500 firms have surpassed profit estimates, a positive sign – especially considering the massive one-time tax hits from corporate tax reform in the country. But not everyone had a great quarter – and largely, it wasn’t corporate customers driving revenue spikes. Take a quick look at some of the major earnings announcements below.

American Express

Despite posting its first loss in 26 years, American Express was actually able to surpass expectations in its latest quarterly report, thanks to a boost in card spend. Revenues increased 10 percent year-over-year to $8.8 billion, with the company noting it expects to reach between $6.90 and $7.30 per share. Member spend increased 5 percent year-over-year. Its Global Commercial Services unit saw growth, too, posting Q4 income of $580 million, up 52 percent from a year ago.

Bank of America

Bank of America saw a Q4 boost, but it wasn’t corporate lending that led the charge: Consumer borrowing helped increase revenues by 5 percent year-over-year to $21.4 billion. Provisions expenses were up, with the bank citing a “single name non-U.S. commercial” customer as the cause for a $292 million charge. Bank of America said it processed $669 billion in payments in the quarter, with digital payments up 10 percent – again, boosted by consumer spend, not corporate.

GE

General Electric endured a stock plunge after it revealed its latest figures, with analysts attributing the drop to its $6.2 billion tax charge. CEO John Flannery said in a statement that the charge is “deeply disappointing,” and the company said its finance unit, GE Capital, will make statutory reserve contributions totaling an estimated $15 billion over the span of seven years.

IBM

The technology giant’s first growth in years couldn’t stop shares from falling more than 4.5 percent when it released its earnings last week. IBM surpassed analyst expectations for both the fourth quarter and the full 2017 year, posting $13.80 per share and $17 billion in cloud revenue for the year, a 24 percent increase year-over-year. Reports said $9.3 billion of that amount delivered as a service. IBM’s Technology Services and Cloud Platforms declined by 1 percent for the quarter with $9.2 billion in revenue, while its Global Business Services unit gained 1 percent to reach $4.2 billion in revenue.

Infosys

Infosys stayed pretty much in line with estimates in its quarterly earnings report posted last week, recording $0.25 earnings per share, while revenues hit $2.76 billion for the quarter, slightly above expectations. The figures are up from $0.24 EPS in Q4 2016, causing a bit of a boost in Infosys shares after posting the results.

JPMorgan Chase & Co.

Chase was able to squeeze past analyst expectations when it reported $1.76 earnings per share last week. The FI posted $24.15 billion in revenue for Q4, also surpassing expectations, while quarterly revenue was up 3.3 percent compared to Q4 2016.