Money & Markets Week Ahead for the week of Oct. 12, 2020: This is a big week for investors as the financial sector kicks off third-quarter earnings season on Tuesday.
No earnings are scheduled for Monday due to the Columbus Day holiday.
Here are some things investors should watch this week on Wall Street:
On the IPO Front
Array Technologies (Nasdaq: ARRY), a massive solar company, plans to launch its initial public offering (IPO) on Wednesday.
What is the company: Array Technologies has been in business for 30 years, making ground-mounted systems that are used in solar energy products.
It manufactures a system that includes steel supports, electric motors, gearboxes and electronic controllers, referred to as a single axis “tracker.”
These trackers move the solar panels during the day to provide maximum connection to the sun and increase the energy production of the panels.
In the 12 months ending June 30, 2020, the company reported revenue of $975 million.
The financial skinny: The Albuquerque, New Mexico company is offering 33.8 million shares at a price range of $19 to $21 per share.
The company hopes to raise around $675 million with its IPO.
Using the midpoint of $20 per share, Array Technologies would have a market value of around $2.5 billion, according to Renaissance Capital.
The bookrunners for the IPO include Goldman Sachs & Co. LLC, JPMorgan, Morgan Stanley, Credit Suisse, Barclays and UBS Investment Bank.
Array plans to use the proceeds from the IPO to repay debt, increase working capital and pay into operating expenses and capital expenditures.
My thought bubble: This is a good time for solar companies, despite the political climate and market headwinds.
The Solar Energy Industries Association estimates there are nearly 90,000 U.S. solar installations combined between utility companies, residential and non-residential.
That’s up from around 73,000 total installations in 2019.
As of 2019, there were close to 250,000 Americans working in the solar industry — doubling the number from 2012.
The industry generated nearly $18.7 billion of investment in the American economy in 2019.
Earnings to Watch
The financial sector will kick off the third-quarter earnings season this week with several big banks and investment houses reporting:
- Citigroup Inc. (NYSE: C)
- JPMorgan & Chase Co. (NYSE: JPM)
- Bank of America Corp. (NYSE: BAC)
- S. Bancorp (NYSE: USB)
- Wells Fargo & Co. (NYSE: WFC)
- Citizens Financial Group Inc. (NYSE: CFG)
- State Street Corp. (NYSE: STT)
The financial sector had a tough go in the second-quarter with earnings only being boosted by investment activity.
According to FactSet, the estimated earnings decline for the S&P 500 is 21%. If that holds true, it will be the second-largest year-over-year decline in earnings reported by the index since the second-quarter of 2019.
One bright spot is that 45 S&P 500 companies have reported positive earnings guidance for the third-quarter while only 22 reported negative guidance.
In terms of the financial sector, I think we’ll see similar results this quarter as we did in the second-quarter — earnings will be boosted by investment activity and not from traditional banking operations.
Overall, I believe we’ll see stronger, but muted earnings in the third-quarter.
Over the course of the quarter, I can see the S&P 500 gaining around 10% — it gained 8.5% in the second-quarter — even with a presidential election in the fold.
Money & Markets Week Ahead: Data Dump
There are no data reports expected on Monday, due to the Columbus Day holiday.
However, the week will be filled with outlooks on the manufacturing industry in various regions.
It’s a monthly survey of manufacturers in the Third Federal Reserve District — eastern Pennsylvania, southern New Jersey and Delaware.
For September, the current activity index fell two points to 15 — its fourth consecutive month of positive readings. A reading above 0 indicates positive sentiment.
The survey also indicated that manufacturers in the district were optimistic about higher production.
Likewise, on Thursday morning, the Federal Reserve Bank of New York will release its “” — a monthly survey of manufacturers in New York State.
In September, the survey registered a 17, indicating manufacturers were somewhat positive about the state of manufacturing in the state.
Like the Philly Index, a reading above 0 indicates positive sentiment.
The data dump continues on Thursday when the Labor Department releases its initial and continuing jobless claims.
Last week, claims were around 840,000 — higher than the estimate of 825,000 — signaling that an economic turnaround is moving slower than expected.
Investors are also prepping for the next gross domestic product (GDP) estimate for the third-quarter. The forecast is for 31.4% growth in GDP.
In the second-quarter, GDP fell 31.4%.
The next GDP forecast is expected on Oct. 29.
To finish off the Money & Markets Week Ahead, here’s a look at some of the key earnings reports due out next week:
No earnings reports are scheduled.
Citigroup Inc. (NYSE: C)
JPMorgan & Chase Co. (NYSE: JPM)
Johnson & Johnson (NYSE: JNJ)
Bank of America Corp. (NYSE: BAC)
U.S. Bancorp (NYSE: USB)
Wells Fargo & Co. (NYSE: WFC)
Home Bancshares Inc. (Nasdaq: HOMB)
Morgan Stanley (NYSE: MS)
Walgreens Boots Alliance Inc. (Nasdaq: WBA)
Ally Financial Inc. (NYSE: ALLY)
Bank of New York Mellon Corp. (NYSE: BK)
Citizens Financial Group Inc. (NYSE: CFG)
State Street Corp. (NYSE: STT)
That’s all for this week.
Until next time…
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He’s the host of our podcast, The Bull & The Bear, as well as the Marijuana Market Update. Before joining the team, he spent 25 years as an investigative journalist and editor — covering everything from politics to business.