The Earnings Season Crunch Is On

Wall Street
Wall Street

For better or worse, earnings season hits high gear this week, with many companies scheduled to report their second-quarter 2010 results. Here's a quick rundown of what analysts surveyed by Thomson Reuters are expecting to see this week, as well as a closer look at three of the biggest anticipated earnings gainers: American Express (AXP), Texas Instruments (TXN) and Apple (AAPL).

Analysts expect the following companies to have more than doubled their earnings per share from a year ago.

  • Altera (ALTR): to 53 cents per share

  • Eaton (ETN): to $1.17 per share

  • Harley-Davidson (HOG): to 41 cents per share

  • Illinois Tool Works (ITW): to 84 cents per share

  • Johnson Controls (JCI): to 55 cents per share

  • Linear Technology (LLTC): to 51 cents per share

  • PNC Financial Services Group (PNC): to $1.27 per share

  • SanDisk (SNDK): to 89 cents per share

  • Whirlpoo (WHR): to $2.13 per share

Fitch's outlook for American Express was raised to stable during New York-based credit card giant's second quarter, and the company also introduced a customizable charge card. Earnings for that period are expected to total 77 cents per share, an increase of 88.3% from the same period last year. Revenue for the three months ended in June is expected to have risen 12.2% from a year ago to $6.8 billion. So far, analysts expect to see similar earnings and revenue results for the third quarter. But American Express's per-share earnings have beat consensus estimates in the past three quarters, by as much as 16 cents a share.

American Express's long-term EPS growth forecast is 9.6%, and its earnings multiple is 13x, less than the industry average and the trailing PE of 21.4. Short interest reversed its downward trend in June, but the First Call recommendation remains to buy AXP. The mean price target on the shares is $49.48. American Express was featured on CNBC recently for its strength despite uncertainty surrounding financial regulatory reform. At $41.38, shares are 8.3% lower than three months ago.

In the three months that ended in June, Texas Instruments released its latest corporate citizenship report and also declared a quarterly dividend. Analysts expect the Dallas-based semiconductor giant to report that second-quarter earnings came to 62 cents a share, a 67.7% rise from a year earlier. Revenue for the period is expected to have grown 43.2% to $3.5 billion. Thus far, the consensus forecast is for sequential and year-over-year EPS and revenue growth in the third quarter. Earnings results were better than expected in the past five quarters.

The long-term EPS growth forecast is 10%, and the earnings multiple of 10x is less than the industry average, as well as the trailing PE of 14.9. Texas Instruments reports no long-term debt, and the consensus recommendation has been to buy TXN for more than 90 days. The mean price target is currently $29.96 a share. A Barclays analyst sees Texas Instruments benefiting from the growing popularity of tablet computers. Shares have traded mostly between $23 and $26 for the past year, and they closed July 16 at $24.77.

Analysts anticipate that Apple will post second-quarter earnings of $3.10 per share, up from $2.01 a year ago. During the three months that ended in June, Apple released the iPad and the iPhone 4. Revenue for that period is expected to have risen 76.8% to $14.7 billion. And analysts anticipate sequential and year-over-year growth of both EPS and revenue in the third quarter. Apple's earnings have topped analysts' expectations in the past five quarters, by as much as 76%.

Apple's long-term EPS growth forecast of 16.6% exceeds that of rival Dell (DELL). Though the earnings multiple is 16x, that's below the industry average. Analysts on average recommend buying AAPL, and their mean price target is $321.63. The so-called antennagate issues aren't expected to affect Apple shares in the long run. Shares closed the week at $249.90, which is about the same as three months ago.

Others expected to post double-digit earnings growth this week include the following:

  • Abbott Labs (ABT): $1 per share

  • Amazon (AMZN): 55 cents per share

  • Caterpillar (CAT): 85 cents per share

  • Halliburton (HAL): 37 cents per share

  • IBM (IBM): $2.58 per share

  • Kimberly-Clark (KMB): $1.14 per share

  • McDonald's (MCD): $1.12 per share

  • Microsoft (MSFT): 46 cents per share

  • Netflix (NFLX): 70 cents per share

  • Philip Morris International (PM): 97 cents per share

  • Sherwin-Williams (SHW): $1.64 per share

  • St. Jude Medical (STJ): 73 cents per share

  • 3M (MMM): $1.47 per share

  • Travelers Cos. (TRV): $1.51 per share

  • Union Pacific (UNP): $1.21 per share

  • United Parcel Service (UPS): 76 cents per share

  • Yahoo (YHOO): 14 cents per share

AT&T (T), Bank of New York Mellon (BK), Bristol-Myers Squibb (BMY), Coca-Cola (KO), eBay (EBAY), Hershey (HSY) Johnson & Johnson (JNJ), McGraw-Hill Cos. (MHP), PepsiCo (PEP), Starbucks (SBUX) and United Technologies (UTX) are forecast to report modest earnings gains. Capital One Financial (COF), Delta Air Lines (DAL), Ford Motor (F), Morgan Stanley (MS) and US Airways Group (LCC) are expected to report a quarterly profit from year-ago losses.

And the consensus is that the following companies will report reduced earnings this week:

  • Eli Lilly & Co. (LLY): $1.14 per share

  • Goldman Sachs Group (GS): $2.04 per share

  • Hasbro. (HAS): 24 cents per share

  • Honeywell International (HON): 57 cents per share

  • Northern Trust (NTRS): 74 cents per share

  • Safeway (SWY): 37 cents per share

  • Verizon Communications (VZ): 56 cents per share

  • Wells Fargo & Co. (WFC): 48 cents per share