Week in Preview: First Earnings Reports and Economic Readings

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AlcoaAlcoa (AA), Intel (INTC) and JPMorgan Chase (JPM) will usher in earnings season this week when they report their results for the fourth quarter of 2010. Here's a quick look at what analysts surveyed by Thomson Reuters expect to see, followed by a glance at what's coming up on the economic calendar.

Alcoa

During its fourth quarter, Alcoa saw increased demand in emerging markets, sold surplus properties, and shared revenue targets with investors. Analysts forecast that earnings for the period will come to 19 cents per share, up from just a penny per share in the same quarter of last year. The New York-based aluminum producer also is expected to post revenue of $5.7 billion for the three months that ended in December, which is 4.5% more than a year earlier.

For the full year, analysts expect to see earnings of 53 cents per share, compared to a year-ago per-share loss of 80 cents, on revenue of $20.9 billion (up 13.4%). Alcoa's earnings were better than expected in the previous two quarters, and if it beats consensus estimates again, this will be the most profitable quarter in more than a year.

Alcoa's forward price-to-earnings (P/E) ratio is 16.5, but that's much less than the trailing P/E ratio of 49.6, meaning the company has become a better value. The dividend yield is 0.7%, and short interest fell in November and December, but is still 5.3% of the float. Though the First Call consensus recommendation is currently to hold Alcoa, the stock was Jim Cramer's top pick for 2011. Shares have marched upward more than 30% in the past three months, bringing the price close to the neighborhood of its 52-week high of $17.60.

Intel

Analysts anticipate that leading microprocessor-maker Intel will report Thursday that its earnings grew 24.5% year-over-year to 53 cents per share. Intel boosted its dividend and upgraded facilities during the three month period that ended in December, and revenue for the quarter is predicted to total $11.4 billion, up 7.6% from a year earlier.

The full-year forecast calls for per-share earnings of $1.99 (up 61.3%) and $43.5 billion in revenue (up 23.9%). In recent quarters, Intel earnings have grown sequentially, as well as topping consensus expectations by as much as a dime per share.

Intel's long-term EPS growth forecast of 11.8% is higher than that of competitors Advanced Micro Devices (AMD) and Texas Instruments (TXN). And Intel's forward P/E ratio of 10.9 much less than the industry average. The Santa Clara, Calif.-based company has a PEG ratio of 0.9 and a dividend yield of 3.2%. The consensus recommendation for more than 90 days has been to buy Intel, and the stock was also a Cramer pick for 2011. The mean price target is $23.72. Shares are about 6% higher than three months ago, despite a recent pullback that dropped their price below the 50-day moving average, which is around $21.

JPMorgan Chase

During the three months that ended in December, JPMorgan launched an iPad app and acquired a European headquarters for its investment bank. The New York-based financial holding company is expected to post earnings of 99 cents per share, an increase of 25.3% from a year ago. But analysts are looking for an 3.1% annual decline in revenue to $24.4 billion.

As for the full year, analysts foresee earnings of $3.84 per share (up 41.7%) and revenue of $102.6 billion (down 5.5%). JPMorgan earnings have easily topped consensus estimates in the past five quarters, by as much as 41 cents per share.

JPMorgan's 7.5% long-term EPS growth forecast is less than those of rivals Citigroup (C) and Bank of America (BAC), but its forward P/E of 10.1 is also less than those rivals. The PEG ratio is 1.4 and the dividend yield is 0.5%. Analysts on average still recommend buying JPMorgan, and their mean price target is $52.74. Shares faced resistance around $41 for much of the latter half of 2010, but finally broke through in the final weeks of December and are now trading near $44.

Earnings season ramps up next week with reports due from Apple (AAPL), Citigroup, Bank of America, eBay (EBAY), General Electric, (GE), Goldman Sachs (GS), Schlumberger (SLB), Southwest Airlines (LUV), Wells Fargo (WFC) and many others.

Economic Data

On the heels of last week's mixed employment numbers, economic releases due out this week include:
  • Tuesday: November wholesale trade numbers and chain-store sales for last week.
  • Wednesday: Import price index for December and the Fed's Beige Book report.
  • Thursday:Producer price index for December and initial jobless claims for last week.
  • Friday: December industrial production data, the consumer price index for December, December retail sales and November business inventories.
The various reports are expected to show that inflation remained in check at the end of the year, despite pressure from commodities prices. Little change is anticipated in the Beige Book, but layoffs may be higher as jobs for holiday season workers come to an end.

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