The Week Ahead: Key Earnings Reports For The Week Of July 16th

Includes: ACN, C, GE, IBM, JPM, KO, MSFT, NOK, WFC
by: Bret Jensen

Citigroup (C) became the latest major bank to report better than expected numbers, joining JPMorgan (JPM) and Wells Fargo (WFC) who reported well received earnings numbers last week which caused their stocks to rally. The financial sector has had a good start to the earnings season (it helps to have low expectations). We are now entering the heart of earnings seasons and reports from key S&P components this week should provide insight on how slowing worldwide economic growth is likely to impact earnings prospects for the rest of the year, and should give clues on how the market will behave for the rest of the quarter. Here are the four key earnings reports I am watching this week.


Coca-Coca (KO)- Analysts see the world's largest beverage manufacturer reporting a 1.7% rise in earnings to $1.19 per share. Revenues are seen growing 4.7% to $113.6 billion. Coke has reported earnings that were "in-line" five of the last six quarters, so no surprises are the likely outcome of this earnings report.

What to Watch:

  • How is the strong dollar affecting earnings due to FX translation? This could offer good guidelines for other companies set to report that get the majority of their sales overseas.
  • Is soft drink consumption in North America continuing to decline? U.S. soft drink consumption came in at the lowest levels since 1996 last year.
  • How are Overseas sales holding up? Investors should get some clarity on how the slowdown in the rest of the world is impacting sales of consumer based multi-nationals. I will especially be interested in seeing what European sales come in at.


International Business Machines (IBM)- Consensus analysts' estimates call for $3.43 a share in earnings for the second quarter on approximately $26.3B in revenues. The company has beat expectations by 2% to 5% over the last four quarters, so anything less than a 3 to 10 cent beat could hurt the shares.

What to Watch:

  • How is tech services revenue holding up? This should offer important clues on the tech services business and could impact other vendors in the space like Accenture (ACN).
  • The company has managed to post 15% annual EPS growth over the past five years even as revenues increased less than 1.5% a year. Is IBM out of ways to improve margins on tepid sales growth?
  • Any guidance on the company sees corporate tech spending for the rest of the year should offer key insights into this segment of the tech sector.


Microsoft (MSFT)- Analysts expect 62 cents a share of earnings in the quarter on slightly over $18B in revenue. Estimates have come down from 66 cents a share two months ago. Given Microsoft's recent history of being estimates by a cent or two, I am looking for 64 cents a share.

What to Watch:

  • How fast is PC growth slowing? The company's comments on PC demand and the impact of the slowdown in China and how bad the European situation is impacting sales should be illuminating.
  • How is the company doing outside its core revenue streams of Windows and Office? How much did it lose in its online business (primarily Bing and Xbox)? Comments on its partnership with Nokia (NOK) and its recent acquisition of Yammer will also come up in the conference call after earnings.
  • Any updates to the key product releases of Windows 8 and Office 15 will be appreciated for being able to peg sales growth in the medium term.


General Electric (GE)- Analysts expect 37 cents in EPS on almost $38B in worldwide sales. Given the company's recent history, my prediction is that they beat by a penny. Revenues will be the more important metric to watch.

What to Watch:

  • Updates on its progress to continue to lessen the impact of its financing business on the company's overall revenues.
  • Guidance on how it sees slowing worldwide growth impacting sales of its big ticket items (EX, jet engines) for the rest of the year should be insightful.
  • Comments on FX impacts on revenues will be useful as well any insight on another dividend increase (although that will probably happen next quarter)

Disclosure: I am long JPM, MSFT, WFC.