While next week is still scheduled to be relatively slow on the earnings front, it marks the official kick-off of the earnings season with Alcoa (NYSE:AA) set to open its books. Other large companies which are scheduled to report their earnings next week are Wells Fargo (NYSE:WFC) and Family Dollar (NYSE:FDO).
Results from Well Fargo will be most closely watched, giving investors a potential clue about the state of the housing and mortgage market. Alcoa and Family Dollar have been extensively in the news lately creating some potential volatility this week.
The following is a quick overview of the expectations from each of those earnings.
The aluminum producer and provider to the aerospace and car industry is scheduled to release its earnings Tuesday, the 8th of July after the market has closed.
Consensus estimates for quarterly earnings stand at $0.12 per share, although there is some disagreement between analysts which have quite a wide earnings range forecast of nine to sixteen cents. In comparison, last year Alcoa posted earnings of just $0.07 per share.
While earnings are expected to improve, the mean consensus calls for revenues to drop by 3.3% to $5.66 billion.
Shares of Alcoa have seen very strong returns which has heightened expectations. Over the past quarter, shares have been up by 18% while they are up 41% for the year so far. The improving economy, continued cost cutting efforts, and business transformation to higher value-adding and the more profitable downstream businesses is applauded by investors.
Little over a week ago, Alcoa demonstrated its commitment to focus on the aerospace business after acquiring Firth Rixson for $2.85 billion.
Family Dollar, is an operator of general merchandise and discount stores. A few weeks ago, the chain was being ¨attacked¨ by well-known Carl Icahn which acquired a stake in the business and announced his desire for management to sell the business given the ¨underperformance.¨
Amidst this huge distraction and related turmoil, the company is scheduled to release earnings on Tuesday the 10th of July before the market open. Given the current rough times, analysts are projecting earnings to fall from $1.05 per share last year to $0.89 per share. Total sales are anticipated to be up by merely 1.6% to $2.62 billion.
On the back of Icahn's involvement, shares jumped 13% on the 9th of June when the news broke out. Despite the momentum lately, shares are still trading roughly unchanged so far in 2014, being up by a percent as investors worry about store closures and lower profitability of the operations.
While the earnings will be the official news the coming week, keep a close eye on what management will say regarding Icahn's involvement as so far it does not seem to be a very friendly collaboration yet.
And last but certainly not least is Wells Fargo which is scheduled to release its earnings on Friday the 11th of July before the market starts trading.
Analysts are projecting very little earnings per share growth with earnings seen three cents higher at $1.01 per share. As a matter of fact, revenues are seen down to $20.81 billion which would imply a 2.7% fall in sales. Continued pressure on interest rates and a difficult mortgage market make it difficult for banks to grow revenues in this environment.
The bank has done relatively well this year, outperforming most of its peers which have paid multi-billion settlements, or are being investigated regarding serious issues like FX rigging, breach of sanctions, dark pool trading or other issues. As such shares of the bank managed to rise by 6% over the past quarter, being up 17% over the past year.
Takeaway For Investors
As always, earnings reports do have the potential to move stock prices a lot. In this case a lot of focus will be on management's comments as well. This applies for Alcoa for which investors have high expectations, as management once more gets the chance to comment on its recent deal.
Perhaps most interesting is the release from Family Dollar which will be entirely focused on the attempt by Carl Icahn to sell the business. Last is Wells Fargo, which can give good indications about the health of the US housing market, mortgage availability and the impact of the rapid home price increases on affordability.
While things are looking good for corporate America in general, the lack of revenue growth is a major concern for many, as share repurchases and margin expansion have fueled operating margins to date. To sustain earnings growth, revenues will have to increase going forward. Each of these three names covered above have seen their own struggles to grow or even maintain revenues.
Please consider the risks when investing in companies when holding your positions over their earnings release, unless you are a truly long-term investor with a long time horizon. Good luck!
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.