Wall Street Waiting for Q4 2018 GDP Data Next Week

Zacks Equity Research

Two companies reporting Q4 earnings late Thursday are seeing their share prices tumble ahead of Friday’s opening bell. American pantry staple Kraft Heinz KHC posted an earnings and revenue miss, and tacked on a couple extra costs in the quarter that are absorbing an inordinate amount of fiscal pain. And Stamps.com STMP forecasted lower expectations after its earnings beat on Q4 estimates.

Kraft Heinz reported 84 cents per share, missing the Zacks consensus 93 cents and the 90 cents per share in the year-ago quarter. Revenues of $6.89 billion came up modestly short of expectations, down 0.85%. The company, whose shares had risen 12% year to date ahead of the report, are currently down 25% before regular trading Friday.

The company took a $15 billion write-down on declining brand value for some of its iconic names, such as Kraft and Oscar Mayer. Trends in the U.S. have been moving away from packaged foods such as those Kraft Heinz specializes in. The company’s CFO mentioned on the conference call that “we expect to take a step backwards” in 2019. Berkshire Hathaway BRK.B shares have also taken a hit. Warren Buffett’s conglomerate brokered the merger of Kraft and Heinz back in 2015.

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Kraft Heinz is also complying with the SEC regarding an investigation that found $25 million in revenues by the company went misreported in full year 2018, coming out in the Q4 numbers rather than in previous quarters. Thus, Kraft Heinz appears ready to put its issues behind it in a disappointing Q4 report and realign expectations going forward.

In the case of Stamps.com, the company topped earnings estimates by more than 25%, to $3.73 per share, on quarterly sales of $170.23 that outperformed by 7.58%. However, the loss of the company’s exclusive partnership with the U.S. Post Office has caused the company to drastically lower its forward outlook. Shares, which had been up nearly 30% year to date, are currently down 52% ahead of the opening bell.

Big Data Next Week

We don’t see any new economic data this morning, but next week is a different story: aside from Housing Starts and Building Permits from December and Durable Goods Orders from January (both delayed because of the government shutdown), we also get our first look at Q4 Gross Domestic Product (GDP). Analysts are looking for the first full-year of 3%+ growth since prior to the Great Recession a decade ago.

What will be interesting to note is whether Q4 can establish the first 3%+ headline for 3 consecutive quarters since the mid-Oughts. Following a Q2 of 4.2% growth, Q3 brought 3.4%. Projections for Q4 are right around 3%, which would bring full-year GDP growth (barring future revisions) to 3.2%.

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