Week in Preview: Here Comes Second-Quarter Earnings Season
The new earnings season kicks off this week when Alcoa (AA) releases its second-quarter results Monday. Analysts surveyed by Thomson Reuters on average expect Alcoa to report that it returned to profit from a net loss a year earlier.
Intel (INTC) is likewise forecast to swing to positive results, while Google (GOOG) and JPMorgan Chase (JPM) are expected to be among the week's biggest earnings gainers.
Intel and Friends
In the three months that ended in June, Intelannounced plans for future high-performance computing products. Analysts expect the Santa Clara, Calif.-based semiconductor giant to report that second-quarter earnings came to 43 cents a share, compared to a net loss of 7 cents a year earlier.
Revenue for the period is expected to rise 27.7% to $10.3 billion. And so far the consensus forecast is for sequential and year-over-year earnings per share (EPS) and revenue growth in the third quarter. Intel earnings beat consensus estimates in the past three quarters, by as much as 10 cents a share.
Intel's long-term EPS growth forecast of 11.5% beats that of rivals Advanced Micro Devices (AMD) and Texas Instruments (TXN). Intel's earnings multiple of 10x is less than the industry average and the trailing price-earnings ratio (PE) of 18.4. This dividend payer has been accumulating cash on hand in recent quarters, and the First Call analysts' recommendation to buy Intel has been in place for more than 90 days.
The analysts' mean price target is $27.05 a share, but Oppenheimer downgraded Intel recently because it sees a slowdown in the semiconductor industry. The shares closed Friday at $20.24, having fallen 16.4% from the 52-week high back in April.
Analysts are looking for Advanced Micro Devices and Novellus Systems (NVLS) to report this week that they returned to profit as well.
Google
Analysts anticipate that Googlewill report that its second-quarter earnings came to $6.53 per share, up 17.9% from a year earlier. During the quarter ended in June, Google's Android mobile operating system proved popular but privacy concerns continue unabated over its Street View cars cruising through residential neighborhoods worldwide, capturing not only street-level photographic views but also personal WiFi data.
Revenue for that period is expected to rise 22.5% to $5.0 billion. So far, analysts anticipate sequential and year-over-year growth of both EPS and revenue in the third quarter. Google's earnings have topped analysts' expectations in the past five quarters, by as much as 8.6%.
Google's long-term EPS growth forecast of 16.8% exceeds that of Yahoo! (YHOO), but even the earnings multiple of 22x is below the industry average. The consensus recommendation remains to buy Google, and the mean price target is $649.70. Henry Blodget says Google made a mistake on its stance with China, but the Motley Fool likes some of Google's other recent moves. The shares closed the week at $467.49, which is down 17.44% from three months ago.
JPMorgan Chase
New York-based financial services giant JPMorgan announced management changes during its second quarter. Earnings for that period are expected to total 71 cents per share, an increase of 60.6% from the same period of the previous year. But revenue for the three months ended in June is expected to have fallen 6.3% to $25.9 billion. While analysts so far expect to see sequential growth in earnings in the third quarter, they are looking for revenue to drop year-over-year again.
JPMorgan's per-share earnings have beat consensus estimates in the past five quarters, by as much as 30 cents a share.
JPMorgan's long-term EPS growth forecast is just 8%, still better than rivals Bank of America (BAC) and Citigroup (C). Its earnings multiple is 11x, compared to the trailing PE of 14.9. Short interest rose in June, but analysts on average recommend buying JPM and have for more than 90 days. Their mean price target is $54.57. Note that Barclays recently lowered its EPS estimate because of lower trading revenues. At $38.85, JPMorgan shares are 15.5% lower than three months ago.
Also This Week
Bank of America and Citigroup are scheduled to report this week as well and are expected to post lower earnings than a year ago.
Other companies expected to post earnings growth this week include CSX (CSX), Gannett (GCI), Marriott International (MAR), Mattel (MAT) and Yum! Brands (YUM). Per-share earnings from General Electric (GE) are expected to be about the same as this time last year.
Also on this week's economic calendar:
Tuesday: TIPP Economic Optimism Index, U.S. Treasury budget for June, trade balance for May
Wednesday: business inventories for May, retail sales for June, Import Price Index for June
Thursday: Producer Price Index for June, Philly Fed Survey, Empire State Manufacturing Index, jobless claims for last week
Friday: preliminary Consumer Sentiment Index for July, Consumer Price Index for June
