24/7 Wall St. is probably not alone in noticing that there were very few earnings warnings issued by the major companies that dictate market trends going into the end of June. That and some recovering economic trends and lower commodity prices have all contributed to a feeling that the woes of Europe, as well as the woes of Japan and the tightening of China, are not quite as strong of headwinds that will easily kill the bull market. Earnings season is approaching fast and we are soon to get a direct reporting bias from many of the country’s top corporations. Whatever the reporting trend comes out to, the rest of the summer’s stock market bias is about to be set by this wave of earnings reports.
We have identified 15 of the first corporate earnings reports due in the next two weeks that are likely to set the broad tone for the market this summer. These top 15 companies are as follows: Alcoa, Inc. (NYSE: AA), Yum! Brands Inc (NYSE: YUM), J.P. Morgan Chase & Co. (NYSE: JPM), Google Inc. (NASDAQ: GOOG), Citigroup Inc (NYSE: C), Amazon.com Inc. (NASDAQ: AMZN), AMR Corporation (NYSE: AMR), Autonation Inc (NYSE: AN), International Business Machines Corporation (NYSE: IBM), Microsoft Corporation (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL), Coca Cola Co. (NYSE: KO), Johnson & Johnson (NYSE: JNJ), UnitedHealth Group Inc (NYSE: UNH), Intel Corporation (NASDAQ: INTC), and EMC Corp (NYSE: EMC).
We looked at the current Thomson Reuters expectations for the past quarter and the coming quarter, and we have also added in data on prices and on recent trading ranges. More importantly, we have shown why these matter, what other companies or sectors they matter to, and added in additional color of what to look for on each.
Alcoa, Inc. (NYSE: AA) will kick earnings off for the summer on Monday, July 11 and Thomson Reuters has estimates of $0.35 EPS and $6.32 billion in revenues; next quarter estimates are $0.36 EPS and $6.36 billion in revenues. At $16.23, the market cap is roughly $17 billion and the 52-week trading range is $9.92 to $18.47. Alcoa has a dual purpose for investors. It can influence all of the metals and industrials, but some even try to interpolate “The Alcoa Effect” to a broader earnings season. Just because it is a DJIA component does not give it that right, but that is how some try to think. It did actually make our value screen of basic materials stocks in recent days. The obvious area to watch is future orders and pricing. We are not overly concerned with what it says about last quarter, but whether or not it comments about business picking up now for the second half. The look-back question is whether higher alumina prices have offset weakness out of Japan, India and China.
Yum! Brands Inc (NYSE: YUM) reports on Wednesday, July 13, and Thomson Reuters has estimates of $0.61 EPS and $2.70 billion in revenues; next quarter estimates are $0.84 EPS and $3.03 billion in revenues. At $56.30, the market cap is roughly $26 billion and the 52-week trading range is $38.43 to $57.04.YUM! is no McDonald’s, but the investment community is likely to treat many aspects of the fast-food and casual dining segment based upon its report. What will matter is whether or not it offers a clearer picture for the casual dining trends domestically. It will also act as a bellwether for the Chinese food and entertainment spending markets, where it is the go-to stock to make that determination. YUM! is also still working through PR issues at the Taco Bell level, even if the ‘problems’ were not exactly correct. Yum! could still be a top dividend rival of McDonald’s in the years ahead.
J.P. Morgan Chase & Co. (NYSE: JPM) reports on Thursday, July 14, and Thomson Reuters has estimates of $1.22 EPS and $25.22 billion in revenues; next quarter estimates are $1.19 EPS and $24.65 billion in revenues. At $40.56, the market cap is roughly $161 billion and the 52-week trading range is $35.55 to $48.54. Chase Bank is not the bank of the U.S., but it is “The Bank of the Privileged.” Investors will still try to use this as a benchmark “for the rest of us.” We continue to expect the individual credit metrics in credit card delinquencies and also in charge-offs to show improvement and we expect this bank to have been a beneficiary of all of the recent consumer credit improvements. The wild card is going to be the aftermath of Dodd-Frank and the higher imposed reserves that will be implemented after this year. It could be a serious drag to that continued earnings recovery. Another hint we will be looking for is a “raised guidance” of a sort as far as its dividend is concerned.
Google Inc. (NASDAQ: GOOG) did not confirm its earnings report until just this week. It is set to report earnings on Thursday, July 14. The online search giant, and online conglomerate, has estimates of $7.86 EPS and $6.53 billion in revenues; next quarter estimates are $8.30 EPS and $6.85 billion in revenues. As a reminder, those sales are ex-TAC, or ex-Traffic acquisition cost revenues. This matters for anything internet-related. It also matters for anything related to off-line advertising as well. It was just a short period ago that Google was tanking and heading well under $500.00, but a recent analyst call reiterated its same $800 price target.