RBP Probabilities for a Few of Today’s Big Earnings Announcements

Today is a big day for earnings releases. Some of the most closely followed companies will report. Below find some brief Required Business Performance (RBP) analyses, including RBP Probabilities (the probability that the RBP will be reached).

Yum! Brands (YUM):
Yum’s Required Business Performance implies revenue growth of 1.6%. This is the level of performance the company’s management must produce to support the current stock price of $32.17. The company has an RBP Probability of 88.4%, indicating that it has a high probability of meeting this Required Business Performance. This probability is slightly higher than the sector median RBP Probability of 86%.

McDonald’s (MCD):
McDonald’s is another company in the Restaurant and Bars subsector. Its Required Business Performance implies revenue growth of zero. This results in an RBP Probabilty of 80.3%, which is lower than the sector median of 86%, but higher than the Restaurant and Bar subsector median RBP Probability of 78%.

Freeport McMoRan (FCX):
Freeport McMoRan’s current stock price actually implies a revenue decline of 25%. While this may seem like an easy hurdle for the company to meet, recent struggles have made it unlikely that the company can. The RBP Probability of Freeport McMoRan is 67.3%, which is on par with other companies in the Nonferrous metals subsector, but well below the Industrial Metals Sector median RBP Probability of 88%.

Apple (AAPL):
One of the most hotly anticipated earnings releases will come from Apple. Its RBP implies revenue growth of 9.4%, which many expect to be difficult given that both iPod and Mac shipments seem poised to decline. Nevertheless, Apple’s RBP Probability is 88.2%, which is roughly equal to both the sector and subsector medians.

eBay (EBAY):
The stock of eBay has certainly not been immune to the market downturn, and currently sells for a price 50% lower than that of a year ago. This puts its Required Business Performance at a seemingly low level. In fact, its stock price of $15 implies revenue will decline by1% over the next twelve months. Further, in a sector like retailers, eBay stands far above the rest, with an RBP Probability of 86.6%, versus 64% for the median retailer.

Boeing (BA):
Boeing is an interesting case because its RBP implies revenue growth of 10.6%, but company management simply doesn’t have a very good track record of delivering that type of peformance. For example over the past eight quarters revenue has declined by an average of 3.5%. As a result, Boeing’s RBP Probability is a mere 14.0%, contrasting with an Aerospace & Defense Sector median of 86%.

AT&T (T):
The largest company (by market cap) to release earnings today is AT&T. A true economic bellwether, the comapny will need to deliver revenue growth of 2% to meet its Required Business Performance. The company’s RBP Probability 74.7%, slightly better than the sector median of 71%.