Before Microsoft and Alphabet report after the close on Wednesday, the earnings season has already produced a clear scoreboard, and it is mixed in a way that should temper expectations for the evening. PayPal shares gained 2 percent after posting third quarter adjusted earnings of 1.45 dollars per share, outpacing the consensus estimate of 1.31 dollars. United Parcel Service shares surged 5.8 percent after reporting adjusted earnings of 1.69 dollars per share, surpassing the consensus of 1.63 dollars. Freeport-McMoRan rose 1.2 percent after posting adjusted earnings of 0.88 dollars per share, beating the consensus of 0.80 dollars. Those are clean beats, and the market rewarded them.
Boeing told the opposite story. Its shares plunged 10.7 percent after reporting a third quarter adjusted loss of 0.34 dollars per share, wider than the consensus estimate of a loss of 0.21 dollars. A miss of that size, in a company that investors already watch closely for execution problems, produces a reaction that is disproportionate to the headline number, because it raises a question that a single quarter cannot answer: whether the miss is a one off, or a sign of deeper trouble. The market, on Wednesday morning, answered that question pessimistically, and Boeing’s drop was one of the sharpest of the day.
What the scoreboard says about Wednesday evening
The pattern across those four reports is instructive. Companies that beat expectations by a clear margin were rewarded, companies that missed by a clear margin were punished, and there was little middle ground. That pattern matters for Microsoft and Alphabet, because both report after the close with options markets implying moves of about 5.09 percent and 5.99 percent respectively. A beat that is merely in line with expectations may not be enough to lift shares that have already risen on AI optimism, while a miss, even a small one, could produce a Boeing style reaction in companies that are far larger and more widely held.
Tuesday’s broader session adds context. The Nasdaq Composite rose 1.2 percent to 26,477.81 and the S and P 500 added 0.6 percent to 7,722.60, while the Dow rose just 16 points to 52,377.57, with six of 11 sectors falling. The Federal Reserve announces its rate decision at 2 p.m. Eastern Time on Wednesday, before the earnings arrive, which means the evening’s verdict will be delivered into a market that has already digested a policy decision. Vertiv’s rise of about 16 percent before the open, after a blowout quarter, showed that the market is still willing to reward strength, particularly in the power and cooling infrastructure behind AI.
Scoreboard, not forecast
Reports of the company results recorded the beats and the miss side by side, and the reminder stands that a scoreboard describes the past, not the future. Boeing’s plunge, UPS’s surge and PayPal’s gain are facts about the third quarter. Microsoft and Alphabet will add two more facts on Wednesday evening, and the market will decide, within minutes, whether those facts justify the prices it has already paid for the AI trade.
