5 Key Earnings Reports This Week

Includes: AABA, AMZN, FB, UAA, XOM
by: Bill Maurer

For some, earnings season is the most important, and sometimes most fun, time of the quarter. While a number of major names have already reported earnings, there are still plenty of heavyweights left to report. The S&P 500 (NYSEARCA:SPY) closed above 1,500 on Friday, and is at a 52-week high. Some of the names below will have an impact on whether or not the index stays above that key level. Here are five key earnings reports to watch this week:

Yahoo! (YHOO) - Monday, January 28th, after bell:

The struggling internet name will report its fourth quarter and full year results early this week. With shares very close to their 52-week high, expectations are fairly high. Shares are up nearly 40% since the end of August, so this definitely has the potential for the "buy the rumor, sell the news" phenomenon. Any good news will push this name to a new 52-week high.

Current expectations call for Yahoo to report a 3.9% rise in revenues to $1.21 billion, and a profit of $0.28 versus $0.24 in the year ago period. Yahoo has seen significant declines in both search and mail traffic, which is the core of the company's business. It's hard to convince advertisers to plop down huge sums of money when your site visits are going lower and lower. For the full year, analysts expect Yahoo to post a 1.8% rise in revenues to $4.46 billion, as well as a $1.13 profit (versus $0.82). Investors and analysts will also be interested to hear any commentary from CEO Marissa Mayer, who continues to overhaul Yahoo's management. Any vision she has for the company's future will certainly be something to listen for.

Investors and analysts might also have some questions regarding Yahoo's plan for Alibaba. There have been conflicting reports over whether or not Alibaba has hired bankers in an IPO effort. Yahoo still owns 23% of Alibaba, which was valued at $35 billion during last year's deal. With the site doing well, that value is likely a bit higher now. The question for Yahoo going forward is how long do they hold onto that stake. If Yahoo were to sell that stake, it could give the company even more cash to help it grow. Yahoo could use the money to help its mobile strategy, or maybe perhaps make an investment in Twitter? For now, expect them to hold some of the Alibaba stake as long as Alibaba is doing well. But if there is an Alibaba IPO, I would not be surprised if Yahoo cashes in some more of its stake.

Amazon (NASDAQ:AMZN) - Tuesday, January 29th, after bell:

Do profits actually matter? That question should be answered Tuesday afternoon, when Amazon reports. The online retailer is actually expected to post a loss for 2012, but yet its stock is now at an all-time high. Will that stand if Amazon posts another quarterly loss? We'll find out soon enough.

When it comes to Amazon, there will be four key items I will be looking for in Tuesday's report:

  1. Will the company hit its sales mark only by severely discounting items (i.e. how do margins look)?
  2. Analysts are looking for 27.7% revenue growth in Q1. Does the midpoint come in near that 28% level, or is Amazon going to guide a little lower around 25%?
  3. Operating income. Does Amazon guide to another operating loss midpoint? If the company does keep losing money, cash flow will be an issue.
  4. On the subject of cash flow, I'm interested to see how the balance sheet looks. Amazon raised $3 billion during the quarter. About 40% of that was expected to go the company's new headquarters. Amazon might show a large cash balance, but a lot of it may be spoken for already (add in content purchases for Prime and investment in fulfillment centers).

Current expectations call for Amazon to report a 27.8% rise in quarterly revenues to $22.27 billion. That's a bit towards the higher end of the $20.25 to $22.75 billion range Amazon provided. On an earnings per share front, analysts are looking for a profit of $0.28 compared to last year's Q4 profit of $0.38. Amazon doesn't provide earnings guidance, but guided to an operating loss midpoint of $90 million, compared to a $260 million operating profit in the year ago period. Amazon bears think a loss is definitely possible, especially after Q3's loss of $0.60.

For the full year in 2012, Amazon is expected to post a 29.2% rise in revenues from $48.08 billion to $62.09 billion. Despite the huge rise in sales, earnings per share are expected to decline from a profit of $1.37 to a loss of $0.03. Amazon will need a fourth quarter profit of roughly $0.31 to break-even for the year, and more than that for a profit. Otherwise, a yearly loss will be reported.

Many believe that Amazon's smoke and mirrors are fading. Despite soaring revenues, profits are falling, and the company's recent debt issue will add about $48 million of pre-tax interest costs per year. That doesn't seem like much for a company with $60 billion plus in revenues, but it is by the time you get that far down on the income statement. Amazon is also spending a ton on content to rival Netflix (NASDAQ:NFLX), and after Netflix's recent rise, Amazon will be pressured to spend more. Additionally, the sales tax issue is becoming bigger and bigger. As Amazon is forced to collect sales taxes in more states, it becomes less competitive. The company will either loss business, have to raise prices, see lower margins, or a combination of all three.

Facebook (NASDAQ:FB) - Wednesday, January 30th, after bell:

Facebook's announcement will probably be the most anticipated release of the week, although Amazon could argue that point. Facebook shares have rallied hard since November, going from $19 to $31.54. Recently, shares took a hit after Facebook announced Graph search. Facebook shares had soared into the report, so it became a "buy the rumor, sell the news" event. This earnings report could be a repeat of that if shares potentially rally too much into earnings.

Current estimates call for revenues of $1.52 billion and a profit of $0.15. Analysts will definitely be listening in for clues on how Facebook's mobile strategy is doing, which will be crucial for the company going forward. Facebook shares have risen in recent months on the promise of mobile. Facebook received another upgrade on Monday. Like many analysts have recently, Raymond James put an outperform rating on the stock and a $38 price target. Their reasoning has echoed recent thoughts:

"our expectation for increasing monetization driven by mobile, new ad formats, and international," as well as signs of improving "usage trends driven by mobile" and "expectation for upside to consensus estimates."

Analysts have significantly raised their revenue and earnings expectations for 2013. The current expectations for 2013 stand at $6.58 billion and $0.66, respectively. That's the highest point I've seen them at since Facebook went public, and well up from October 24th when expectations called for $6.28 billion and $0.62. Analysts have also been raising their price targets significantly. The average target now stands at $33.50, up another 70 cents from my last article, and the October 24th low around $28.00.

Given the huge rally in Facebook shares, it would seem logical that upside after the report could be limited. Additionally, the number of Facebook shares short is at a new low. Just under 25.5 million shares were short as of mid-January, compared to more than 95.3 million shares just two months prior. There aren't too many short sellers left, so don't expect a huge short squeeze. Expectations for Facebook are high, and the company will need to deliver.

Under Armour (NYSE:UA) - Thursday, January 31st, before bell:

Shares of the high growth athletic apparel maker will be put to the test this week. Recently, investors were uneasy after the departure of a senior executive. Shares have rebounded, but look for some questions on the conference call regarding this issue. With shares trading at more than 32 times expected 2013 earnings, Under Armour must deliver. Recently, Canadian apparel maker lululemon (NASDAQ:LULU) declined as revenue growth missed analyst expectations. These names trade at high multiples, and are expected to deliver fast growth. When they don't, these names get hit, and hard.

Current expectations call for the company to report revenues of $497.88 million, a rise of 23.5%. Analysts are expecting a fair deal of growth, as that estimate leads to a full year number of $1.83 billion, above the company's latest guidance for $1.82 billion. On an earnings per share front, analysts are looking for $0.46 in Q4, compared to $0.31 for the prior year period. The profit for 2012 is expected to be $1.20 compared to the $0.93 we saw in 2011.

As I stated, these types of names trade for high multiples. Investors and analysts will focus in on the company's guidance for 2013. Estimates currently stand at $2.22 billion in revenues and $1.50 in earnings per share. If the company doesn't come in near those expectations, you can figure a 5% to 10% decline in the stock is likely.

Under Armour is known a lot for its "cold gear" products, and this winter has been a bit colder than last year's. While we haven't gotten as much precipitation, temperatures in the New York City area are down anywhere from 10 to 30 degrees compared to last year. Under Armour will look to reap the benefits of that, so I wouldn't be surprised to see a very strong fourth quarter and decent to strong guidance.

Exxon Mobil (NYSE:XOM) - Friday, February 1st, before bell:

The global energy giant could report its earnings on Friday as the largest market cap company in the United States, if Apple (NASDAQ:AAPL) doesn't pass it back. Exxon took over the #1 spot this past week as Apple has plunged after earnings. Despite it's large market cap, which represents more than 3% of the S&P 500, Exxon is only the 6th largest Dow component, since that index is price-weighted.

Current estimates call for Exxon to report a 4th quarter revenue decline of 3.6% to $117.25 billion. On an earnings per share front, analysts are looking for a profit of $2.02, up a nickel from last year's period. For the full year, analysts are looking for a larger revenue fall, by 5.4%, which is expected to accelerate to 5.8% in 2013. On an earnings per share front, analysts are looking for $7.94 in 2012 after $8.42 in 2011. A slight rebound to $7.99 is expected in 2013, but analysts have taken down their 2013 forecasts by about 20 cents in the past three months. Exxon will need a good report to stay in the #1 market cap spot, as any Apple rebound could help Apple retake the top spot.

One question that should be asked on the conference call is the company's plan for Iraq. Exxon has put its 60% stake in the southern West Qurna-1 oilfield up for sale after upsetting Baghdad by signing deals with the Kurdish region, which is in dispute with Iraq over oil resources. It is unclear at this point whether an offer from Iraq is dependent on the sale being put on hold. Exxon was the first major oil company to test the waters in the Kurdistan area, and Iraq is not in favor of that. I'm hoping to hear some information from the company on this issue during the call.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within 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. 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.