Earnings season is here, and that's not necessarily a good thing.
At least two market trackers -- Thomson Reuters and S&P Capital IQ -- have pointed out that the profitability of all of the S&P 500 companies is expected to post its first year-over-year decline in nearly three years.
Wait, there's more: Investors have assumed that technology has been a hotbed of growth, bucking the general malaise in some stodgier sectors. Well, that's not entirely true either.
FactSet published a report (link opens .pdf file) covering 10 different industries as we approach this grim wave of third-quarter reports. It showed that while the Information Technology niche was slated to post bottom-line growth of 3.3% for the period, it's actually a decline of 2.4% if you back out Apple (AAPL).
Wow. Where would we be without the iEverything company?
This doesn't mean that it's time to panic, but it's probably a good time to keep tabs on the stocks you own and the ones that you want to own. There will be hundreds of companies reporting their quarterly results this week alone. So avoid the ugly situations -- if you can.
Other Things Worth Watching
A company to watch this week is Chipotle Mexican Grill (CMG). The popular burrito roller came under fire earlier this month -- and not a chipotle pepper spicy kind of fire -- after billionaire hedge fund manager David Einhorn offered up his bearish thesis on the company. Einhorn argued that Chipotle was being threatened by Taco Bell's recent move to upgrade its menu with its more foodie-centric Cantina Bell items. We already know that Taco Bell -- a division of Yum! Brands (YUM) -- came through with strong 7% gain in same-store sales this past quarter. On Thursday investors will get to see if Chipotle was able to keep up or if it really was hurt by the move.
There will also be plenty of tech bellwethers reporting this week. Between IBM (IBM) on Tuesday, eBay (EBAY) on Wednesday, and Google (GOOG) and Microsoft (MSFT) reporting on Thursday, the market will have a clear snapshot of the state of tech. The good news with these companies is that Microsoft is the only one expected to post a dip in profitability. See, it's not just Apple carrying the load for tech.
Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of International Business Machines, Microsoft, Chipotle Mexican Grill, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Chipotle Mexican Grill, eBay, Google, and Apple. Motley Fool newsletter services have recommended creating a synthetic long position in International Business Machines, a synthetic covered call position in Microsoft and a bull call spread position in Apple.
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