Everyone is saying to watch the earnings report from Apple (NASDAQ:AAPL) later today, but the better proxy for the overall market is going to be Caterpillar (NYSE:CAT), which is expected to earn $0.06 per share on $7.49 billion in revenue. The stock is up 161.0% from its March lows, and while it has beaten the Street's earnings estimates in the last two quarters (including a beat of 227.0% for the June quarter), there is lingering uncertainty. The thing is that earnings estimates have edged lower from three-months ago when the conesensus was $0.17 per share for the just completed quarter. Moreover, the stock is changing hands at a price to earnings ratio of 29.0 times. So, the stock is richly valued, and the hurdle has been lowered.
Afternoon Notes from WSS Research Desk
- A report from Bain suggests the luxury goods market is on the mend, which is good news to likes of Tiffany & Co. (NYSE:TIF) and Movado (NYSE:MOV). In the case of TIF, it doesn't discount products and would feel less pressure to do so this holiday season and 2010. Instead it will offer more silver jewelry, which is lower priced but higher margin compared to statement pieces. Stronger overseas currencies will bring tourists to their flagships. For MOV, a better outlook from the first half of the year will give its main place where its sells its merchandise, department stores, confidence and in turn spark increased initial orders and reorders. Also, the closing of independent jewelers is not done, and as they exit post this holiday season it will only boost prices in the market.
- Whirlpool's (NYSE:WHR) under the radar comments the last few days of production increases at select U.S. manufacturing sites suggests demand is returning. However, there is a sense that the appliance maker will have bottlenecks in the production process as in many respects it does not have the parts on hand to meet renewed demand, mostly from Asia. Once this demand is met, it could mean lost sales opportunities for Whirlpool as retail partners shift business to rivals who were better able to match their demand needs. The company reports 3Q09 earnings later this week.
- The world's largest beverage company, the Coca-Cola Company (NYSE:KO) reports earnings for its third quarter tomorrow morning, and the biggest question is going to be volumes and pricing overseas. Volumes at its largest rival PepsiCo (NYSE:PEP) were weak last week as the weakness in North America was only partially offset by strength in Latin America, Africa, and the Middle East. It is interesting to note that the bottlers for KO and PEP saw more stabilization in the volumes than PEP reported.
- Group 1 Automotive (NYSE:GPI) increased its revenue and earnings guidance for the current quarter last week as strength from the cash for clunkers program and higher cost cuts will benefit the top and bottom lines. The automotive retailer segment is performing well today, with AutoNation (NYSE:AN) and Penske Automotive Group (NYSE:PAG) leading the way.
Written by Charles Payne, CEO and Principal Analyst of Wall Street Strategies (wstreet.com) providing independent stock market research to over 30,000 subscribers, in more than 60 countries. Mr. Payne is a regular contributor to the Fox Business and Fox News Networks. For more information about Mr. Payne, please refer to the company’s website www.wstreet.com.