Yet another earnings season has nearly arrived. 24/7 Wall St. wanted to look at the current trends to alert its readers what to be on the leery side of in this coming earnings season as third-quarter results are announced and as investors begin to look to the fourth quarter and into 2015.
Investors will want to consider several key issues in this coming earnings season in particular, though there are many other issues as well. Some of our key issues are the dollar against the euro and other currencies and a slowing emerging market story. Deflationary pressure could be an issue, as could stock market and growth sector valuations. Even the quality of balance sheets should start to matter. One bit of good news is that key dividend hikes should still be seen, even if stock buybacks may be slowing.
These are the seven earnings season surprises that investors need to brace for in this October reporting season.
The Alcoa Barometer Lives Again!
Alcoa Inc. (NYSE: AA) has moved its earnings report from the first part of the week out to Wednesday, October 8, after the close. What is so different now is that Alcoa is getting in an ever better position, one less and less dependent just on aluminum trends. This stock has now effectively doubled off of its 52-week lows and is becoming more favorable to analysts who were very late to the transformative turnaround story. Alcoa is sometimes used as a barometer for earnings trends ahead. We expect that the Alcoa barometer will be used again now that it is becoming key for components and product parts.
King Dollar — Could be a Joker!
The U.S. dollar has screamed higher. Maybe it is just that outside economies (particularly Europe) have been so weak. Either way, the currency markets are always on a relative basis, and it is very possible that companies are starting to feel the pressure when it comes to exports from the United States becoming uncompetitive in price. This may not be absolute as of yet, but another six months of this trend would be potentially devastating for U.S. companies that ship goods and services out of the country. The United States is not really an island, but it is beginning to feel that way.