More DJIA Component Earnings On Deck (AXP, MSFT, HON)

We still have two DJIA components to report earnings this week.  If you can believe it this week marked 12 of the 30 components reporting earnings, and that takes us to a total of 18 of the 30 components that will have reported earnings after the end of the week.  This afternoon we have American Express Company (NYSE: AXP) on deck with earnings, and Microsoft Corporation (NASDAQ: MSFT) is on deck tomorrow morning.  Also on deck Friday morning is Honeywell International Inc. (NYSE: HON), a former-DJIA component which many traders feel should have never been taken out of the DJIA.

We have compiled data using Thomson Reuters consensus data and added in color on options expectations, analyst calls, and technical analysis where appropriate. We have also included share performance from June 30, and then  provided performance since the March 9 close that traders are using as the official date of the end of the death spiral in the financial markets.

American Express Company (NYSE: AXP) is on deck for Thursday afternoon.  Estimates have increased slightly in the last few days to $0.38 EPS, above the $0.36 estimate of last week, and $5.92 billion in revenues.  The change in estimates is because of peer comments and because it noted last week that delinquencies had stabilized.  Be advised that before any banks had reported, estimates here were $0.34 EPS and had been only $0.30 less than two months ago.  As noted previously, shares have already risen over 50% since June 30 and are up a whopping 250% since the March 9 close.

Options traders appear to be handicapping a move of up to $1.50 $1.60 in either direction for the American Express earnings.  Shares have been using $36.00+ as resistance in recent trading.  It turns out that the average analyst price target is also right around current prices, and the only recent solid analyst change was from FBR Capital with an upgrade to “Market Perform.”

Microsoft Corporation (NASDAQ: MSFT) is no longer reporting in the afternoon and is reporting earnings Friday morning.  The software and tech giant is expected to post $0.32 EPS and $12.37 billion in revenues, and the next quarter estimates are $0.52 EPS and $17.14 billion in revenues.  There are too many moving parts to peg just one issue here, but we would still view today’s release of Windows 7 as the biggest upcoming event.  As noted earlier this week, shares had risen about 10% since June 30 and more than 70% since the March 9 close.

Options traders appear to be handicapping a move of up to a range of $1.10 to $1.15 in either direction for Mr. Softy’s earnings. Whiles shares were higher than this all week, the prior resistance level had been right around $26.25. We’d also note that $27 to $28 is where most of the average analyst price targets come into play.  A key issue to consider here is that the company has already given some of the expectations for the release of Windows 7.  For this stock to hold its recent gains, a logical expectation would seem to be that the company has to echo the return of demand from PC makers and that we have seen from the chip and processor giants.

Honeywell International Inc. (NYSE: HON) is a former-DJIA component, but many traders and investors think this one should have never been removed as a DJIA component.  It never blew up as bad as G.E. as it also does not have anywhere near as broad of a finance unit.  Honeywell was once a long-ago buyout target of G.E., but that buyout was blocked by the European Union in 2001.  As Honeywell is a conglomerate, we might watch transport and aerospace comments, but it is hard to pin any single metric here considering that the company has already given some commentary on the aerospace front in the last week or so.  Shares are up about 21% since June 30 and are up about 65% since the March 9 close.  Estimates are $0.72 EPS and $7.88 billion in revenues, and the estimates for Q4 are $0.91 EPS and $8.44 billion in revenues.  As this is no longer a DJIA component, we’ll stop there.

Jon C. Ogg
October 22, 2009