Next week kicks off earnings season for the second quarter, with Alcoa traditionally leading the announcements. As last week was one of the market’s best in the last two years, investors seem to be optimistic. Here’s what to look for:
Guidance for 2011 earnings. Companies may beat their Q2 earnings estimates, but the yearly earnings guidance (which will also be reported) reflects the company’s outlook – changes in guidance can make or break the report.
Given the end of quantitative easing, the threat of more problems in Europe, and zigzagging confidence from American consumers, there may be more uncertainty for the rest of the year than in what happened in Q2.
The bottom and top lines of Q2. These are the headline numbers of the earnings reports, indicating whether the companies performed better or worse than analyst expectations in the second quarter.
Hints can be found from many sources. For instance, lead-reporter Alcoa was recently given a lower FY11 EPS estimate from Citigroup. Also, the price trends of aluminium will probably have a material impact on Alcoa’s earnings, since they are an aluminium maker.
For earnings season, profits come in the form of surprises. Knowledge is your best friend when it comes to following the reports, so be sure to study up.
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Here we list 5 of the largest companies reporting earnings next week. They are ranked in the order of their releases.
1. Alcoa, Inc. (AA): aluminium Industry. Market cap of $17.27B. Earnings to be released on 7/11/11. The stock has gained 55.26% over the last year.
Analysts at Citigroup recently lowered their FY11 EPS estimate for Alcoa to $1.25 vs. consensus estimate of $1.29 citing increases in input costs and lowered forecasts for the price of aluminium.
2. Yum! Brands, Inc. (YUM): Restaurants Industry. Market cap of $26.14B. Earnings to be released on 7/13/11. The stock has gained 44.31% over the last year.
On July 7, Goldman Sachs downgraded its investment rating of Yum! Brands from neutral to sell citing risk related to Chinese same-store sales and increased risk of margin pressure. The consensus estimated for Q2 EPS is $0.61.
3. Marriott International, Inc. (MAR): Lodging Industry. Market cap of $13.16B. Earnings to be released on 7/13/11. The stock has gained 20.1% over the last year.
JP Morgan recently commented on Marriott’s earnings, stating that they remain “Overweight” in the stock amid low investor expectations and international growth prospects. The consensus estimate forQ2 EPS is $0.37.
4. JPMorgan Chase & Co. (JPM): Money centre Banks Industry. Market cap of $161.17B. Earnings to be released on 7/14/11. The stock has gained 7.81% over the last year.
JPMorgan is expected to release Q2 EPS of $1.22. According to Dealogic, the bank ranked number one in investment banking revenue for the first half of 2011.
5. Citigroup, Inc. (C): Money centre Banks Industry. Market cap of $122.70B. Earnings to be released on 7/15/11. The stock has had a good month, gaining 10.35%.
Citigroup’s consensus Q2 EPS estimate fell from $0.99 to $0.98 over the past week, which may reflect macroeconomic concerns.
(List compiled by Alexander Crawford)