A Busy Week Ahead For The Economy!
Stock Market Earnings Season Kicks Into High Gear!
by Ian Harvey
October 13, 2012
Third-quarter earnings season kicks into high gear in the week ahead with reports from several financial and technology bellwethers. Also due are economic reports from across a spectrum of important sectors.
Many multinationals with exposure to the slowing global economy are among the dozen Dow components and 80 S&P 500 companies reporting earnings. General Electric, IBM, Microsoft, Intel, Citigroup, McDonald’s and Coca-Cola are among them.
The election seems to come and go in terms of its impact. The tendency of the market is to trade with earnings – which are still the driver of stocks despite the fact that investors get distracted by all the policy measures. While the election on any given day will be a focus, it’s really all about earnings. There obviously is a connection between the election and earnings because the winner can affect policy. For now, the investor is going with what the companies are telling us.
Earnings in the Week Ahead
The stock market ramps into high gear this week, with 200 companies reporting results, including 80 from the S&P 500. It will be in much easier to comment on this reporting season by the end of the week, as by then we will have seen results from more than one-fifth of the S&P 500 members.
Third-quarter earnings season kicks into high gear in the week ahead with earnings reports from several financial and technology bellwethers. Also due are economic reports from across a spectrum of important sectors.
Citigroup (C) gets things rolling on Monday with Goldman Sachs Group (GS), Bank of America (BAC), American Express (AXP), and Morgan Stanley (MS) following.
Technology companies reporting in the week ahead include Google (GOOG), Intel (INTC), International Business Machines (IBM), Microsoft (MSFT) and eBay (EBAY).
Also on tap in the week ahead are Johnson and Johnson (JNJ), Coca Cola (KO), and Halliburton (HAL).
Company Earnings and News in the Week Ahead
Monday, October 15
Citigroup (C) will report earnings before Monday’s opening bell. Although earnings results from rivals JPMorgan Chase (JPM) and Wells Fargo (WFC) failed to excite Wall Street Friday, but the banking sector is still worth a look.
The banking group is cheap. The companies are making a great deal of money and they will soon be returning billions of dollars to shareholders, thanks to the robust mortgage market.
Unfortunately for Citi, though, there is a doubt it will have enough mortgage business to offset its weakness in emerging markets.
Tuesday, October 16
Coca-Cola (KO) is scheduled to deliver earnings Tuesday morning.
KO certainly outshone last quarter and it’s even a better bet that this time will be just as good or even better because the dollar has gotten weaker versus where it was the last time they reported -- that’s going to make for a potential upside surprise for this huge international company.
Coke has produced “incredibly strong” sales numbers in Asia lately -- it’s a very well-run company, too. This stock is worth considering.
Goldman Sachs (GS) is also slated to report earnings before Tuesday’s open.
The investment bank may give us a sense as to whether business is really coming back. The questions to consider in regard to GS are:-
• Has the government curtailed the opportunities Goldman used to have to make lots of money?
• Has the bountiful corporate bond issuance business made up for the dearth of IPOs and mergers and acquisitions?
Earnings results from Johnson & Johnson (JNJ) will also be presented. Alex Gorsky, the company’s new CEO, has been at the helm for some time. So he hopes to hear about a possible break-up. If Gorsky does mention something along those lines, then it is probable that the stock could instantly shoot $15 higher.
After the close, IBM (IBM) will also be reporting earnings. This is a consistent grower which is taking share. They are buying back stock with a new hardware product cycle – very few stocks give you what IBM has -- and it is probable that IBM delivers once again despite the slowdown in Europe.
Wednesday, October 17
Bank of America (BAC) will announce earnings before Wednesday’s opening bell.
The great untold story about this company is how it has systematically been cleaning up its balance sheet and buying in expensive debt left over from the bad old days -- with fewer foreclosures and some major settlements for liabilities, Bank of America is putting the past behind it.
So long as the bank stocks continue to get hammered, it is worth considering BAC as a buy ahead of earnings.
PepsiCo (PEP) will also report earnings Wednesday morning.
Pepsi’s last quarter was quite good -- its restructuring plans are already paying off while the company’s international growth will provide upside for its stock. It will be helpful if executives break down the strength of particular brands on a country-by-country basis and address New York City’s recent ban on large-sized sodas.
Thursday, October 18
Union Pacific (UNP) is expected to report earnings before Thursday’s open.
From its assessment of the coal industry, cro
ps or intermodal freight, there are many reasons to listen to this railroad’s conference call. Union Pacific has re-priced many of its contracts lately, too, which should improve margins. This stock might be worth buying on a pullback ahead of the quarter.
After the close, Chipotle Mexican Grill (CMG) will report its quarterly results. This is a damaged stock.
A bunch of boutique investment firms came out in the last few days, saying alternately that same-store sales are back on a higher trajectory for Chipotle and that those sales would disappoint – this is complete contrast to other information! Unless we hear about a 9 to 10 percent same store-sales gain, you’re likely going to get still one more leg down in this stock, as there are a lot of smart short-sellers in the name.
Google (GOOG) will also deliver earnings Thursday. This will be one of the hottest momentum stocks going into the end of the year. For those interested in playing it ahead of the quarter, it is worth considering deep-in-the-money call options.
Also, Microsoft (MSFT) is also expected to announce earnings Thursday. The company will likely discuss Window 8, which it’s preparing to launch soon. Being as the PC market is struggling, though, how bad will Microsoft’s quarter be?
Friday, October 19
General Electric (GE) is to report earnings Friday. The conglomerate has been very bullish lately -- how much more bullish executives will be on the conference call, including the possibility of dividend boost is yet to be seen.
Finally, Honeywell (HON) will also announce earnings Friday.
This is about the only major industrial that has consistently guided above the street or reaffirmed with some degree of upside. The world has slowed since it spoke last, though, and it is feared that the streak may be broken. If this is so, then you will be able to get this stock in the mid-$50s, it will be a steal.
TOP OPTIONS TRADES SINCE JULY 01, 2012
|DLTR Aug 110 Calls||32%||UIS Oct 17 Calls||79%|
|HSY Aug 70 Calls||56%||TSO Nov 25 Calls||54%|
|NKE Oct 92.50 Calls||49%||HLF July 47.50 Calls (again)||38%|
|FB Aug 25.00 Puts||500%||DISH Sept 30.00 Calls||100%|
|APPL Jan 13 650.00 Calls||71%||CSTR Oct 42.50 Puts||400%|
|LNKD Aug 92.50 Puts||30%||LNKD Aug 100.00 Calls||250%|
|SLV Nov 30.00 Calls||114%||JCP Nov 25.00 Calls||67%|
|GLD Nov 165.00 Calls||72%||LVS Dec 45.00 Calls||67%|
|GLD Oct 170.00 Calls||52%||MON Jan 2013 87.50 Calls||26%|
Economy in the Week Ahead
There is a full economic calendar in the week ahead, with retail sales, the Empire State Manufacturing Survey, and business inventories out on Monday. Then on Tuesday, we get the Consumer Price Index, which may be interesting, as the Producer Price Index last Friday was higher than expected at 1.1%.
Also out Tuesday are industrial production numbers and the Housing Sentiment Index. The charts on the homebuilding stocks do look overextended, so this report may be quite interesting. This report provides a reading not only on the demand for housing, but also the homebuilders' view of economic momentum, and therefore may impact the markets.
More data from this sector follows on Wednesday with housing starts, and then Friday brings existing home sales. Of course, on Thursday we get the jobless claims, which dropped sharply last week, but the report was discounted due to a lack of quarterly data from one state. On Thursday, we also get the Philadelphia Fed Survey on manufacturing, as well as the Leading Indicators.
Earnings: Citigroup (C), Gannett(GCI), Charles Schwab (SCHW)
• 8:00 a.m. New York Fed President William Dudley
• 8:30 a.m. Retail sales
• 8:30 a.m. Empire State survey
• 10:00 a.m. Business inventories
• 12:45 p.m. Richmond Fed President Jeffrey Lacker
• 1:10 p.m. St. Louis Fed President James Bullard on economy
• 8:30 p.m. San Francisco Fed President John Williams
Earnings: Coca-Cola(KO), Goldman Sachs (GS), Johnson and Johnson (JNJ), United Health, Intel, IBM, Mattel, PNC Financial, CSX, Cree, Intuitive Surgical
• 8:30 a.m. CPI
• 9:00 a.m. Treasury international capital flows
• 9:15 a.m. Industrial production
• 10:00 a.m. NAHB housing
• 12:00 p.m. Atlanta Fed President Dennis Lockhart
• 9:00 p.m. Second presidential debate
Earnings: Bank of America (BAC), PepsiCo (PEP), American Express (AXP), Ebay (EBAY), US Bancorp (USB), Quest Diagnostics (DGX), Stryker, Kinder Morgan, Bank of NY Mellon, Blackrock (BLK), Northern Trust, Halliburton (HAL)
• 7:00 a.m. Weekly mortgage applications
• 8:30 a.m. Housing starts
• 10:30 a.m. EIA oil inventories
Earnings: Microsoft (MSFT), Google (GOOG), Morgan Stanley (MS), Philip Morris (PM), Travelers, Union Pacific, Verizon (VZ), Advanced Micro Devices, Nokia (NOK), Chipotle (CMG) Capital One (COF), Sunoco (SXL), Key Corp, Genuine Parts, Danaher, Etrade (ETFC)
• 8:30 a.m. Jobless claims
• 10:00 a.m. Philadelphia Fed survey
• 10:00 a.m. Leading indicators
Earnings: General Electric (GE), McDonald’s (MCD), Schlumberger, Air Products, Honeywell (HON), Ingersoll-Rand (IR), Baker Hughes
• 10:00 a.m. Existing home sales
• 10:00 a.m. Regional/state employment data
|Company||Ticker||Current Qtr||Year-Ago Qtr||Last EPS Surprise %||Report Day||Time|
|ICU MEDICAL INC||ICUI||0.69||0.65||5||Monday||AMC|
|JOES JEANS INC||JOEZ||0||-0.01||100||Monday||AMC|
|WD 40 CO||WDFC||0.7||0.61||-6.56||Monday||AMC|
|CATHAY GENL BCP||CATY||0.33||0.28||3.13||Tuesday||AMC|
|COCA COLA CO||KO||0.5||0.51||2.52||Tuesday||BTO|
|FOREST LABS A||FRX||0.02||0.91||-16||Tuesday||BTO|
|GRAINGER W W||GWW||2.91||2.51||0||Tuesday||BTO|
|INTL BUS MACH||IBM||3.61||3.28||2.63||Tuesday||AMC|
|JOHNSON & JOHNS||JNJ||1.21||1.24||0.78||Tuesday||BTO|
|LINEAR TEC CORP||LLTC||0.46||0.48||-4.35||Tuesday||AMC|
|PINNACLE FIN PT||PNFP||0.3||0.21||9.52||Tuesday||AMC|
|PNC FINL SVC CP||PNC||1.61||1.55||14.55||Tuesday||BTO|
|STANLEY FURN CO||STLY||-0.06||-0.12||-25||Tuesday||AMC|
|STATE ST CORP||STT||0.96||0.96||2.02||Tuesday||BTO|
|UTD RENTALS INC||URI||1.11||0.92||8.2||Tuesday||AMC|
|ALIGN TECH INC||ALGN||0.29||0.27||21.43||Wednesday||AMC|
|AMER EXPRESS CO||AXP||1.09||1.03||4.55||Wednesday||AMC|
|ASML HOLDING NV||ASML||0.86||1.14||0||Wednesday||BTO|
|ASTORIA FINL CP||AF||0.13||0.12||0||Wednesday||AMC|
|BANK OF AMER CP||BAC||0||0.28||26.67||Wednesday||BTO|
|BANK OF NY MELL||BK||0.54||0.53||14||Wednesday||BTO|
|BOSTON PRIV FIN||BPFH||0.17||0.13||0||Wednesday||AMC|
|CHECK PT SOFTW||CHKP||0.73||0.68||-1.39||Wednesday||BTO|
|CORE LABS NV||CLB||1.1||0.89||-0.87||Wednesday||AMC|
|CROWN HLDGS INC||CCK||1||1.01||0||Wednesday||AMC|
|EAST WEST BC||EWBC||0.47||0.41||2.17||Wednesday||AMC|
|ETHAN ALLEN INT||ETH||0.29||0.25||-6.9||Wednesday||AMC|
|FIRST CASH FINL||FCFS||0.68||0.59||0||Wednesday||BTO|
|FIRST REP BK SF||FRC||0.71||0.66||-1.64||Wednesday||BTO|
|KINDER MORG ENG||KMP||0.58||0.44||-21.28||Wednesday||AMC|
|KNIGHT CAP GP||KCG||-2||0.48||100||Wednesday||BTO|
|LASALLE HTL PRP||LHO||0.7||0.5||-2.7||Wednesday||AMC|
|M&T BANK CORP||MTB||1.84||1.53||3.57||Wednesday||BTO|
|SMITH (AO) CORP||AOS||0.68||0.39||11.94||Wednesday||BTO|
|ST JUDE MEDICAL||STJ||0.8||0.78||1.15||Wednesday||BTO|
|STANLEY B&D INC||SWK||1.45||1.34||-13.16||Wednesday||BTO|
|TAYLOR CAP GRP||TAYC||0.33||0.27||70.83||Wednesday||BTO|
|UMPQUA HLDGS CP||UMPQ||0.22||0.19||0||Wednesday||AMC|
|UNIVL FST PRODS||UFPI||0.38||0.29||-5.63||Wednesday||AMC|
|ADV MICRO DEV||AMD||0.01||0.15||-14.29||Thursday||AMC|
|ASSOC BANC CORP||ASBC||0.25||0.2||0||Thursday||AMC|
|B&G FOODS CL-A||BGS||0.32||0.25||10||Thursday||AMC|
|BRIGGS & STRATT||BGG||-0.18||-0.11||-21.43||Thursday||BTO|
|CAPITAL ONE FIN||COF||1.74||1.88||-75.56||Thursday||AMC|
|COBIZ FINL INC||COBZ||0.13||0.05||27.27||Thursday||AMC|
|E TRADE FINL CP||ETFC||0.08||0.24||18.18||Thursday||AMC|
|FIFTH THIRD BK||FITB||0.39||0.4||2.86||Thursday||BTO|
|FORWARD AIR CRP||FWRD||0.4||0.44||4.35||Thursday||AMC|
|GOOGLE INC-CL A||GOOG||8.65||8.33||0.69||Thursday||AMC|
|HANMI FINL CP||HAFC||0.42||0.24||-76.32||Thursday||BTO|
|HUBBELL INC -B||HUB.B||1.44||1.37||4.88||Thursday||BTO|
|INDEP BK MASS||INDB||0.56||0.56||-17.31||Thursday||AMC|
|LIFE TIME FITNS||LTM||0.77||0.66||1.39||Thursday||BTO|
|NOKIA CP-ADR A||NOK||-0.12||0.04||9.09||Thursday||BTO|
|PENN NATL GAMNG||PENN||0.57||0.62||0||Thursday||BTO|
|PEOPLES UTD FIN||PBCT||0.19||0.19||0||Thursday||AMC|
|PPG INDS INC||PPG||2.21||1.96||0||Thursday||BTO|
|UNION PAC CORP||UNP||2.19||1.85||7.14||Thursday||BTO|
|WESCO INTL INC||WCC||1.25||1.13||-4.96||Thursday||BTO|
|AIR PRODS & CHE||APD||1.44||1.51||-1.5||Friday||BTO|
|COOPER INDS PLC||CBE||1.14||0.98||0.89||Friday||BTO|
|FIRST HRZN NATL||FHN||0.18||0.12||0||Friday||BTO|
|IDEXX LABS INC||IDXX||0.73||0.66||1.11||Friday||BTO|
|KANSAS CITY SOU||KSU||0.86||0.78||1.19||Friday||BTO|
|MANPOWER INC WI||MAN||0.68||0.97||5.56||Friday||BTO|
|ROBBINS & MYERS||RBN||0.97||0.79||2.22||Friday||BTO|
|TCF FINL CORP||TCB||0.18||0.2||11.11||Friday||BTO|
Reports for the Economy to Watch in the Week Ahead
Monday, October 01
• We will get the September Retail Sales numbers and the October Empire State regional manufacturing survey in the morning, with both measures expected to modestly improve from the preceding month’s level. Retail Sales are expected to increase 1% on a ‘headline’ basis and 0.9% excluding Autos, up from Augusts’ 0.9% and 0.8% gains, respectively.
Tuesday, October 02
• We will get the September CPI and Industrial Production numbers in the morning, while the October Home Builder’s Index comes out after the market’s open. The Industrial Production report is expected to reverse Augusts’ 1.2% decline by showing 0.2% increase.
Wednesday, October 03
• We will get the September Housing Starts, with expectations at 773K vs. 750K in August.
Thursday, October 04
• Weekly Jobless Claims will be coming out this morning. It will be interesting to see if we get a reversal of the sharp drop in claims last week, which reportedly was caused by missing data from one state.
Friday, October 05
• We will get the September Existing Home Sales numbers after the market opens, with expectations of little change from the preceding month’s 4.8 million level.
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