What to Watch This Week: Trains, Baby Formula, iPhones, Netflix, and Lattes
There's never a dull moment on Wall Street, especially now that 2012 is tossing us into its first earnings season. Let's go over some of the items that will help shape the week that lies ahead.
1. I've been working on the railroad: It's hard to get investors excited about railway operators. Even in a friendly game of Monopoly, who gets excited about owning the four railroads?
However, the shortcomings of consumer rail aside, the railroads remain a cost effective way to move bulky goods around the country.
Investors will get a great snapshot of Dagny Taggart's throwback industry as CSX (CSX), Kansas City Southern (KSU), and Norfolk Southern (NSC) all report their latest quarterly results early in the week.
Don't laugh. There's a reason why Warren Buffett made a big bet on rail in acquiring Burlington Northern Santa Fe a couple of years ago. All three rail companies are expected to post healthy gains in profitability.
2. Raising a baby has no instant formula: Mead Johnson Nutrition (MJN) received the worst news possible for an infant formula maker last month: A 10-day-old baby had died from a bacterial infection, and the only thing that he had been ingesting was the company's Enfamil Premium Newborn formula.
Mead Johnson Nutrition's name was cleared a week later when tests conducted by the Food and Drug Administration showed that Enfamil did not cause the newborn's death.
This doesn't mean that it's return to business as usual for the company. Even though the stores that initially pulled the product from its shelves are back on board, consumers make take longer to be convinced.
We'll hear more from Mead Johnson Nutrition on the subject when the company reports on Thursday. Its actual numbers won't shed much light on the situation: The unfortunate event broke toward the end of the reporting period. However, the company should talk about how shipment trends are going so far this month.
3. Apple jacked: Three months ago, Apple (AAPL) stunned investors with a rare quarterly miss on the bottom line.
In its second quarterly report since Steve Jobs' untimely passing, the world's most valuable tech company will get a chance to prove that its fiscal fourth quarter slip was merely a fluke.
Analysts generally have been raising their iPhone targets, but lowering their iPad forecasts. The onslaught of $199 Kindle Fire tablets, as well as other manufacturers dumping their poor-selling tablets, has made Apple's once seemingly cheap $500 entry-level iPad one of the market's pricier offerings.
Apple's new digital textbook initiative may help spike iPad sales in 2012, but will that come at the expense of making the iconic tablet seem less cool?
4. Streaming our lives away: Netflix (NFLX) went from being one of Wall Street's biggest dogs two months ago to being one of the hottest investments.
Shares of Netflix have soared 55% since December, fueled primarily by the strong streaming trends that the video giant announced earlier this month. Rolling out in the U.K. and Ireland earlier this month also helped encourage skeptics into giving the company a second chance.
Sure, we all hated the Qwikster fiasco and the summertime price hike. Netflix has already braced investors to expect rocky, near-term results. Just three months ago, analysts figured that Netflix would earn $1.09 a share for its final quarter of 2011. Now those same pros see a profit of $0.55 a share. If you think that's bad, Netflix has warned of outright losses for all of 2012.
Wednesday's report will either help soothe or confirm investors' fears that Netflix will continue to shed subscribers, after losing 800,000 domestic subscribers during the hectic third quarter.
We have all of the prime plot elements that make many of the movies Netflix rents out so captivating. Now it's time to see where its most recent cliffhanger leaves us.
5. Java junkies on parade: Two of the country's busiest barista barons -- Starbucks (SBUX) and McDonald's (MCD) -- report this week.
Did somebody say McDonald's?
Yes. Starbucks loyalists may cringe at the iced caramel mocha that the Golden Arches offers for pocket change, but it's clear that the McCafe makeover at McDonald's has made it cheaper, and typically more convenient, to enjoy specialty coffee drinks.
Besides, Starbucks investors already know that McDonald's isn't killing Starbucks. Both companies have been sporting healthy growth on solid comps since the McCafe initiative took off two years ago. If anything, McDonald's may be educating future Starbucks customers on the joys of upgraded java.
Both caffeinated reports are coming, though McDonald's numbers will naturally come with a dipping cup of honey mustard for those McNuggets you ordered.
Longtime Motley Fool contributor Rick Munarriz does not owns shares in any of the stocks in this article, except for Netflix. The Motley Fool owns shares of Starbucks and Apple. Motley Fool newsletter services have recommended buying shares of Starbucks, Apple, Netflix, and McDonald's.