5 Non-Apple Earnings Reports To Watch This Week

by: Bill Maurer

Although it is a shortened week of trading, there will be plenty of action this week as earnings season heats up. Everyone will be focused on Wednesday afternoon, as Apple (NASDAQ:AAPL) will report its quarter. I always do an official Apple earnings preview article, so I encourage you to check it out. This article will not focus on Apple! It will focus on five other names reporting this week to watch. All of the estimates in this article are as of Tuesday morning, and thus, could change before these companies report on their respective days.

Google (NASDAQ:GOOG) - Tuesday, after bell:

Google is hoping that it doesn't repeat last quarter. Google's third quarter results came out around lunchtime, sparking a huge craze over whose fault it was. The other question was if the early reported numbers were correct, because it was a huge miss in terms of both revenues and earnings. Well, Google confirmed those numbers, and the stock dropped more than $100 over the next couple of weeks.

Since Google completed its Motorola Mobility acquisition, the company's margins have dropped tremendously. From Q1 of 2012 to Q3, GAAP gross margins fell from 64.41% to 53.52%, and GAAP net profit margins plunged from 27.15% to 15.43%. Over the next couple of quarters, Google will be looking for a margin rebound. Google has certainly bolstered its presence in the smartphone space with the acquisition, and they still are working to integrate the Motorola divisions. Last month, they sold off the Motorola Home division, which makes TV set top boxes. I would expect them to sell off more divisions if they find them not in the long-term core plan.

Google still has two more "unique" quarters to report, and by that I am referring to quarters that include Motorola Mobility results. Google's results started including Motorola in Q2 of 2012, so that's why you see huge revenue growth numbers for the Q4 of 2012 and Q1 of 2013 estimates. Once we hit Q2, we'll get our first glimpse at comparable Motorola to Motorola results, minus the Motorola Home segment most likely. When that happens, the growth numbers won't appear to show explosive growth, and should be back at more normal levels.

When it comes to this quarter, the expected revenue growth numbers are tremendous. Current estimates call for Google to report non-GAAP revenues of $12.36 billion, which would represent a 52% rise from last year's Q1 revenue total of $8.13 billion. Analysts use non-GAAP results because Google reports revenues two ways. They first report GAAP revenues, which include traffic acquisition costs ("TAC"). After you subtract those out, you get the non-GAAP numbers.

Google follows a similar pattern for earnings per share, reporting both GAAP and non-GAAP numbers. The analysts follow non-GAAP numbers. Google's non-GAAP operating income excludes stock-based compensation (SBC) expense, as well as restructuring and related charges recorded in our Motorola business. Non-GAAP net income and earnings per share are based off those exclusions, net of tax. For this quarter, Google analysts are expecting earnings per share of $9.50, compared to $10.52 in the prior year period. Thanks to those huge margin declines, analysts believe Google earnings will fall about 10% despite a roughly 50% rise in revenues.

Advanced Micro Devices (NASDAQ:AMD) - Tuesday, after bell:

Shares of the chipmaker fell more than 10% on Friday after the Q4 disappointment from Intel (NASDAQ:INTC). Intel missed on revenues again, issued soft Q1 revenue guidance, and upset many investors with its large capex spending plan for 2013. AMD, like Intel and many of the other semiconductor names, had been on a tear until Friday. AMD shares had rallied from a 52-week low of $1.81 in mid-November to a recent high of $2.78. After Friday's loss, they now stand at $2.46, with a huge portion of the rally having been wiped out.

AMD investors will be looking to this earnings report to restart the rally. AMD has missed earnings estimates the past two quarters and will be looking to reverse that trend this quarter. Current estimates call for $1.15 billion in quarterly revenues, which would mark a decline of 32% from the prior year period of $1.69 billion. On an earnings per share front, the company is expected to swing from a profit of $0.19 a year ago to a $0.20 loss in this quarter.

Intuitive Surgical (NASDAQ:ISRG) - Tuesday, after bell:

The surgical robot maker will also report on Tuesday afternoon. Intuitive is known for beating revenue and earnings estimates handily, being one of the best "earnings reporters" over the past few years. This time around, the company faces a different kind of challenge. Shares have fallen a bit recently after a couple of negative notes were published by Citron Research. Citron is a notorious short seller, and I wouldn't be surprised if we see some legal teams get involved in this one. There has been a bit of criticism regarding Citron, with some companies actually going after Citron. This story is not over yet.

It will be interesting to see if and how the company responds to any of Citron's claims, but in the end, the earnings report is important too. Procedure growth is slowing, which has concerned some, but it also is due to tough conditions in Europe. Intuitive remains an industry leader, has sky-high margins, and a very impressive balance sheet. The company has an ongoing buyback plan, which probably kicked into gear with this latest decline in shares.

For the quarter, analysts are looking for revenues of $584.36 million, which would be an increase of 17.6% over last year's Q4 revenues of $496.80 million. On an earnings per share front, analysts are calling for a profit of $4.04, compared to the $3.75 profit in the prior year period. With analysts only expecting a 8% rise in earnings, roughly half that of the revenue growth figure, I think there is a bit of room for an earnings beat here if the company delivers on the top line.

Netflix (NASDAQ:NFLX) - Wednesday, after bell:

The streaming video giant will have the bulls and bears fighting forever, and Wednesday's report will be the next chapter of the saga. Netflix will be in the spotlight for only a few minutes, as the company will issue its report just a handful of minutes before Apple. No matter what Netflix does or doesn't say, it will most likely get buried behind the media storm that Apple will bring.

Netflix's original goal was to add 7 million domestic streaming subscribers in 2012, but that became too optimistic early on. Netflix added just 3.43 million over the first 3 quarters, and the high end of their guidance range was for 2 million adds in Q4. Realistically, Netflix is looking at about 5 million domestic streaming adds this year. The stock has soared as Carl Icahn piled in and a deal with Disney (NYSE:DIS) was announced, and two more new content deals were announced early in 2013. But some of these deals don't start till 2014 or beyond, meaning the true financial impact of them won't be felt for a while.

Current analyst averages call for Netflix to post revenues of $934.37 million, a rise of 6.7% from last year's Q4 total of $875.58 million. That would be a little higher than the midpoint Netflix guided to, a range of $919 million to $943 million. Analysts currently expect a loss of $0.12, compared to a profit of $0.73 in last year's period. Netflix is moving to a much lower margin business in streaming with the elimination of their DVD segment over time. Additionally, they are expanding rapidly internationally, which is proving to be very expensive. Netflix guided from a $0.23 loss to a $0.04 profit.

A couple of key numbers to watch include the following:

  • Can Netflix hit 27 million domestic streaming subs?
  • Can they hit 5.5 million international streaming subs?
  • Will DVD fall below 8 million subs?
  • Will they lose money overall?
  • How much does the cash position decrease? They told us they will start burning cash as they move to more original programming and free cash flow has trailed net income.

Microsoft (NASDAQ:MSFT) - Thursday, after bell:

The second half of 2012 was an extremely weak period for PC sales, and that appears to be hurting the launch of Windows 8. The boom in tablet sales has knocked down PC sales, and Microsoft has launched its own product, the Surface. From all accounts, Surface is off to a slow start, and investors and consumers are waiting for better models to come out. A lot of people are counting out Microsoft right now.

Microsoft shares took a hit after last quarter's disappointment, and fell more than 10% from their near $30 level in early November. Recently, shares were trading close to their 52-week low, but have bounced about $1 off that level.

Current expectations call for a small 3.3% increase in revenues to $21.56 billion, after last year's fiscal second quarter came in at $20.88 billion. On an earnings per share front, analysts are looking for a three cent decline to $0.75. Margins are expected to compress a little. It's not a surprise that the PC space is weak currently, but investors will be looking for clues of a turnaround. That could start with Microsoft's earnings report on Thursday, but a bad report might signal that conditions are even worse than we previously thought.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ISRG over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.