10-20-26: Earnings Highlights from Week #1 of Third-Quarter Results

by Louis Navellier

October 20, 2026

Among the major earnings announcements released last week, United Healthcare (UNH) reported better-than-expected third-quarter results and raised its guidance, and this helped lift the entire healthcare sector. Also, Johnson & Johnson (JNJ) announced better-than-expected third-quarter results and raised its guidance, further reflecting healthcare sector growth. Eli Lilly (LLY) remains my favorite pharmaceutical stock, and I expect it will also announce a positive third-quarter earnings surprise and raise its guidance.

Last Wednesday, ASML announced that its third-quarter sales rose 47% to $13.05 billion, and its earnings surged 127% to $14.50 per share. The analyst community was expecting sales of $13.14 billion and $12.17 EPS, so ASML posted a slight (0.7%) sales miss and a 19% earnings surprise. The company raised fourth-quarter sales guidance, adding that it will not be able to meet demand in 2027 and 2028, signaling that its order backlog remains massive, which is a good sign for the entire semiconductor industry.

On Thursday, Taiwan Semiconductor (TSM) reported third-quarter revenues up 51%, with its earnings surging 69%. The company also raised 2026 revenue guidance to 44%. TSM operating margins tightened a bit due to its 2-nanometer ramp up, but TSM’s third-quarter announcement exceeded analyst estimates.

Also on Thursday, Semtech (SMTC) raised its fiscal third-quarter guidance to $417.5 million, representing 56% revenue growth. The company cited data center connectivity via its LoRa products driving its revenue growth. Semtech also said its operating margins remain healthy and that it is utilizing its improving cash flow to pay down debt. So, in summary, last week was a great start to earnings season.

Rising Inflation Raises Questions About Next Week’s FOMC Meeting

Two major mid-month inflation indicators came in hotter-than-expected last week. First, on Wednesday, the Labor Department announced that the September CPI rose 0.6%, significantly above the economists’ consensus estimate of a 0.4% increase. The core CPI, excluding food and energy, rose 0.3% in-line with economists’ consensus expectation. In the past 12 months, the CPI and core CPI are up 3.7% and 2.6%, respectively. Interestingly, food prices were unchanged, while energy prices surged 5.2%, led by a 9.1% increase in gasoline prices. Shelter costs rose 0.4% in September. Overall, higher energy prices accounted for over half of September’s increase. Treasury yields surged after this hotter-than-expected CPI rise.

Then, on Thursday, the Labor Department said the producer price index (PPI) surged 1.3% in September, which was well above the economists’ consensus estimate of 0.4%. The core PPI, excluding food and energy, rose 0.7%, substantially above the top economists’ consensus estimate of 0.2%. Wholesale food prices rose 1.2% in September, while wholesale energy prices rose 10.8%. Interestingly, transportation and warehousing prices surged 3.4% in September, so higher energy and shipping costs have definitely impacted the supply chain. In the past 12 months, the PPI and core PPI have risen by 6.3% and 5.0%, respectively. Wholesale goods prices soared 2.6% in September, the largest monthly increase ever, in that category. Additionally, wholesale service costs rose 0.8% in September, the largest monthly increase since April. But then, believe it or not, Treasury yields actually declined in the wake of this big surge in the PPI.

Also last Thursday, the Commerce Department announced retail sales rose 0.8% in September, and August retail sales were revised to a 1.3% gain, so clearly consumer spending remains strong. However, sales at gas stations rose 6.4% in September and that artificially boosted retail sales in September, but excluding vehicle and gas station sales, retail sales only rose 0.2%. Also notable is the core control group of retail sales that go into GDP calculations, rose only 0.1%. Additionally, only eight of the 13 sectors surveyed reported a sales increase in September. The news that core consumer spending is slowing was the primary catalyst why Treasury rates declined in the wake of retail sales report, despite the PPI report.

Pending home sales are now at a 12-year low, so it is obvious higher mortgage rates are hurting overall home sales. Interestingly, the National Association of Realtors on Tuesday announced that sales of existing homes grew by 1.5% over the previous month to a seasonally adjusted annual rate of 3.99 million. This was a surprise, since economists were expecting a 0.8% decline in existing home sales.

In other economic indicators released last week, the Federal Reserve announced U.S. industrial output rose 0.7% in September, the largest increase in the past five months. Interestingly, utility production surged 3.5% in September, so clearly the data center boom is driving the demand for electricity. I should add that September was unseasonably warm, so the demand for electricity was also likely distorted by air conditioning demand. Overall, this was a positive report, indicating strong GDP growth.

Even though many prices are declining, all eyes seem to be on crude oil prices, especially after President Trump got Russia to release diesel reserves to world markets. The shocking Houthi missile attack on Saudi Arabia’s Riyadh airport will obviously escalate the retaliation against the Houthis in Yemen, since there were at least 20 civilian deaths and hundreds injured. Saudi Arabia’s refineries are operating now, but five were temporarily closed when a pipeline to the Red Sea was closed over missile attacks.

Taking all these indicators together, market pundits currently expect about a 20% chance of a Fed rate increase next week, but I lean toward the 80% majority in believing the FOMC will leave rates alone.

The Dollar Remains Strong – As Europe Faces Political Revolutions

The British pound and euro continue to drop in value, while the U.S. dollar remains strong. The Wall Street Journal had an article last week entitled “The Welfare State is Crushing Britain.” The article described a contagion risk spreading in Europe. In France, Marine Le Pen already controls the Parliament there, which is why there is so much gridlock. Britain does not have gridlock, but quantitative easing will insure the British pound remains weak, and chaos bodes well for U.S. Treasury securities.

In an interview with the Financial Times, Le Pen said she anticipates a fight with the European Union (EU) if she is elected President of France next year. Le Pen also said any nationalist gains from elections in Italy, Poland, and Spain would pressure the EU to stop holding back EU economies. She was adamant France should cut its contribution to the EU budget. In the meantime, the EU is rushing to implement a seven-year budget deal with France before the 2027 Presidential elections, which ironically would exacerbate France’s fiscal demise due to its deficit woes and surging bond yields. No wonder the euro is falling in value, since the EU just wants to protect Brussels and the expense of its member nations.

Complicating matters further for Europe, President Trump has curtailed intelligence sharing and the Starlink connection with Ukraine, demanding President Zelensky pursue a peace agreement with Russia. In a Financial Times interview, Zelensky said he was disappointed with President Trump and would resume bombing Russian refineries, despite the fact that would drive energy prices higher. The EU has sided with Zelensky, so there is now a big rift now regarding Ukraine that could undermine NATO.

Any time you think America has problems, look at the rest of the world for some more serious problems.

Navellier & Associates; own ASML Holding NV Sponsored ADR (ASML), Eli Lilly and Company (LLY), Johnson & Johnson (JNJ), Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM) or Semtech Corporation (SMTC) in managed accounts. We do not own UnitedHealth Group