Earnings to Watch This Week

The second of the 3 big weeks for S&P 500 type companies arrives; last week was an unqualified success of setting expectations low, cutting expenses aggressively and beating very slow-to-adjust analysts expectations. Now with the bar raised higher as expectations ramped up, I expect the sledding to be a bit tougher.

Here are names of interest in the early part of the week, with names the market will be watching and some additional ones that I like to look at. Tuesday will be the more interesting day. I forgot about earnings knee jerk reaction time, when I shorted American Express (AXP) and Capital One (COF) late Friday; both report Thursday so despite extreme overvaluations and gaps in each chart, I'll be heading to the sidelines before then on the 2 positions.

Monday

The Market will focus on:

Halliburton (HAL) - oil services, not sure much can be read into here at this point in the economic cycle, but the market loves to follow HAL.

Texas Instruments (TXN) - the market will look for some sort of follow-up to support the Intel (INTC) chip happiness parade. I would assume strength in China / Asia, combined with lots of cost cutting... the same playbook. The number of times we can rally off the same "surprises" continues to bemuse me.

Some names I like to follow or will keep an eye out for:

Eaton (ETN) - a good-sized diversified "power management" manufacturer with hands in many industries.

Johnson Control (JCI) - see Eaton, but with more exposure to automotive.

Tuesday

Market will focus on:

Apple (AAPL) - simple as that; we've picked some strange companies to use as proxies on the health of the American or global economy. We ignore CSX (CSX) and focus on Intel (INTC). We'll ignore any number of companies I'll list below and obsess about Apple. Granted, it's a proxy on the US consumer, but only a segment. Everyone on The Street knows the Apple game - lowball expectations massively, beat them soundly, then give a new round of guidance that is comical at best; which they'll beat. The only question is how much they will beat by and how much of that expectation is already in the stock price. But this will be Tuesday's obsession.

Caterpillar (CAT) - speaking of companies that are much better proxies of the state of the world is Caterpillar. See everything I said above for Texas Instruments - the China stimulus assuredly helped CAT, and then the rest of the world (ex other parts of Asia and perhaps Brazil ... via China) cross your fingers.

Freeport McMoran Copper & Gold (FCX) - this stock has effectively replaced oil as the "go to" reflation trade. After a steep fall the 4 weeks previous, investors piled back in last week, tacking on a nice 20%+. Again much like HAL, I am not sure what exactly they can say that will either support or not support the "reflationistas" - it's a commodity company. When copper is up, their CEO is a genius and vice versa.

Merck (MRK) - I don't bother with this type of company, but with all the healthcare talk, maybe it gets some headlines.

Starbucks (SBUX) - I suppose a proxy on the consumer still.

Yahoo (YHOO) - so 1999, not 2009. Some happy happy joy joy talk about new CEO and her moves; sad to see such a powerhouse in the most exciting innovation in our lifetime on restructuring #8 already. How quickly the shelf life of companies erodes.

Some names I like to follow or will keep an eye out for ...

A group of companies in either commodities or "industry" - AK Steel (AKS), CNH Global (CNH) [half Caterpillar, half Deere], Nabor Industries (NBR) - largest land driller in the states, Peabody Energy (BTU) - big fish in coal

Economic tells (real or perceived) - Robert Half (RHI): temporary staffing, Seagate Technology (STX): hard drives, Sherwin Williams (SHW)

Commercial Real Estate - Boston Properties (BXP)

Former holdings - Illumina (ILMN), Blackrock (BLK), New Oriental Education (EDU), Regions Financial (RF)

Been watching as it has outperformed of late, never held - Indian pharma Dr. Reddy's Labs (RDY)

Comments

[Andy1234:]

Cat looks like its going to pullback for the next day or two.

Jul 20 08:41 AM

[Marco Hickey:]

I think CAT will report better than expected, but it may be expected judging at the recent rally. Therefore I think it will sell off.


On Jul 20 08:41 AM Andy1234 wrote:

> Cat looks like its going to pullback for the next day or two.

Jul 20 11:11 AM

[Daniel Harr...:]

I agree that market expectations were at a big low last week, and that propelled stocks on the back of higher-than-expected earnings results. But I don't agree that things will be any tougher for stocks to make an upward surge this week. Analysts expectations are still ultra-low. In every recovery, there is a turning point where companies simultaneously smash earnings expectations set by analysts; this may well be the quarter.

Jul 20 02:27 PM

[Wisdom vs. ...:]

JCI is sucking on the stimulus teat by installing big solar arrays, a nice margin gig, so its results need to be broken down to figure out how they relate to autos

Jul 20 04:37 PM

[RiskReturnO...:]

Earnings are beating estimates, but revenues are below. Look for market pullback starting Tuesday - Wedn ... SPY looks toppy at 960 intra-day high of June ... solar eclipse is causing many technicals to view SPY 960 as double-top, with pull back into the mid-800s.

SPY earnings for 2009 likely to come in around $55 (operating basis) ... 15x PE gets to SPY $825 as fair value ... this is consistent with midpoint of trading range of 670-960.

With plenty of money on sidelines waiting to get re-invested, expect pull back to 850-870 level to provide very strong support ... perhaps 0.318 retracement is all we need to resume next leg up.

Jul 21 12:49 PM