Only 13 companies have issued upbeat profit forecasts for Q1, but earnings are due from this pessimism-resistant industry

After a year in which the travel industry often found itself overwhelmed by the rebound in vacations and business trips, those companies report as Wall Street tries to measure how much “revenge” is left in consumer spending, as higher prices chew up savings and recession fears weigh. However, they also report as consumers’ travel habits start to look a little more like those before the pandemic, potentially widening the gap between winners and losers.

In addition this week IT-infrastructure providers Cisco Systems Inc. and Arista Networks Inc. will roll out results as other executives grow more downcast about the months ahead.

Of the S&P 500 index companies, 58 have put out pessimistic earnings-per-share forecasts for the first quarter, according to FactSet data. Only 13 have issued positive outlooks on the bottom line and more results than usual for the fourth quarter have been flops.

However, at a moment where pessimism has become a reflex for Wall Street, investors have been slightly kinder to the companies whose results have topped expectations.

“S&P 500 companies that have reported positive EPS surprises have seen a slightly larger price increase than average,” FactSet Senior Earnings Analyst John Butters said in a report on Friday.

He said companies that beat fourth-quarter earnings expectations have seen an average stock-price increase of 1% “two days before the earnings release through two days after the earnings release.” That’s a bit better than the five-year average of 0.9%.

This week in earnings

While the earnings reporting tidal wave from last month is receding, 61 S&P 500 companies — including two from the Dow — still report in the week ahead, according to FactSet.

Wednesday will be the busiest, with results from companies like Kraft-Heinz Co.
KHC,
+1.90%,
Zillow Group Inc.
Z,
-0.83%,
Roku Inc.
ROKU,
-0.16%,
Roblox Corp.
RBLX,
-4.34%
and Analog Devices Inc.
ADI,
-0.03%.

Elsewhere, results from Coca-Cola Co.
KO,

on Tuesday will offer some sense at consumers’ desire for soda, sports drinks, coffee and tea as rising prices force them to separate luxury from “affordable luxury.”

Results from DoorDash Inc.
DASH,
-6.68%
on Thursday will shed more light on the gig economy and food delivery, as diners return to restaurants and some analysts see an influx available drivers if a recession hits. Toy maker Hasbro Inc.
HAS,
+0.97%
also reports Thursday, following layoffs, Mattel Inc.’s
MAT,
+0.71%
dismal results and the prospect of toy and game fatigue after a pandemic-era boom.

The calls to put on your calendar

Arista, Cisco and a humbled tech world: Cloud-network gear developer Arista Networks Inc. reports on Monday, while networking giant Cisco Systems Inc. reports Wednesday, as the tech industry resets its expectations in the wake of a digital boom and bust that followed two years of COVID-19 quarantining. And as businesses get pickier about the IT equipment they spend on, results from both companies will provide a supplier’s view of the pullback in the tech world, which is still feeling its way toward a bottom.

Arista will be coming off a third quarter in which its results cleared modest expectations. But Monday’s results could offer a window into demand from Meta Platforms Inc.
META,
-2.12%
and Microsoft Corp.
MSFT,
-0.20%
— two tech giants that have scaled back this year but also account for a big chunk of Arista’s sales.

Cisco
CSCO,
+1.13%,
as with others in the tech industry, has begun laying off employees. However, management, in November, said its fiscal 2023 was “off to a good start” and noted a “modest improvement” in deliveries for the components that power IT networks. However, they also said trends in Europe were more precarious, as the region deals with spiking energy prices that have led to a cost-of-living crisis.

Raymond James analysts, in a research note on Thursday, said that more bearish investors are worried about weaker order trends and slimming market share. But said Cisco should have an easier time shipping its network components — which include routers, switches and and other data-center and cloud-infrastructure hardware — as cramps in the supply chain ease.

“Cisco’s size hinders its ability to defy macro challenges, but its price hikes, software strategy, and backlog enable better stock prospects than the market has reflected,” they said.

The numbers to watch

Lodging and travel demand: On Tuesday, Marriott
MAR,
-2.02%,
Airbnb
ABNB,
-5.28%
and Tripadvisor report results. Wyndham
WH,
-1.91%
and Hyatt
H,
-2.11%
report on Wednesday and Thursday, respectively.

Analysts have said Marriott — which also runs the Ritz-Carlton and W Hotel chains — is more dialed in to the luxury set, which is likelier to be less anxious about rising costs. While China’s economy is reopening after the lifting of COVID restrictions, Europe’s cost-of-living issues could make for a difficult quarter internationally. And after a rise in demand for alternative travel accommodations — that is, places to stay that weren’t hotels — Airbnb, and its ranks of independent hosts, face more competition from hotels as travelers return to pre-pandemic habits.

Those results will come after shares of travel-booking website Expedia Group Inc. sank following quarterly results that missed expectations. Executives blamed bad weather but they reported “markedly stronger” demand since the start of the year, along with “record app usage and member counts.” And they said they were confident they could deliver double-digit percentage growth for sales and profit this year, with fatter margins.

Within the airline industry, executives have generally remained upbeat about the nation’s enthusiasm for travel, after the pandemic shut down many vacations and business trips in 2020 and 2021. However, United Airlines Holdings Inc.
UAL,
-1.93%
Chief Executive Scott Kirby said that airlines were at risk of scheduling more flights than they could handle, as struggles to hire pilots and modernize technology threaten to derail more trips.