Worried About Earnings? These Companies Are Telling You What to Expect

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This upcoming earnings season has been long feared by both analysts and retail investors, as companies limited their spending due to the fiscal cliff. Therefore, the markets have sold off in fear of earnings. But on Tuesday, there were several companies that either gave guidance or announced earnings that may provide a peek into how the season may play out.

Rail Gets a Sudden Boost

The Greenbrier Companies (NYSE: GBX) is by no means a large company, but is vital to gauging the strength of railcars and other rail. A strong earnings report from this company may indicate a rise in transportation, expansion, and increased earnings for the chemical and manufactured goods that are transported by railcars.

Greenbrier is a $470 million company with revenue of more than $1.8 billion that saw a 6.5% rise in valuation on Tuesday.  The company reported strong demand for railcars, posting over $430 million in new business for various types of railcars since the start of September. These orders have totaled 4,200 units and may be a good indication that we see strength for the companies that Greenbrier serves and in transportation for this upcoming quarter.

AT&T Watched Closely for the Leaders in Smartphones and Tablets

Analysts, retail investors, fund managers, etc. are always trying to determine and estimate the number of units for smartphones and tablets. It seems like every day someone else comes out with a prediction based on “channel checks” that ultimately moves the value of a stock. However, there is no company that is watched closer than AT&T (NYSE: T), and more importantly, its impact on the largest company in the world, Apple (NASDAQ: AAPL).

On Tuesday shares of AT&T fell by more than 2.5% after it announced that it sold more than 10 million smartphones in Q4. This news is both good and bad. It's bad for AT&T because it will depress AT&T’s margins, but it’s good for companies such as Apple, because it’s a good indication of strong iPhone 5 sales. If the number is correct then AT&T sold 600,000 more phones than last year, and according to analyst Jay Yarow, 7million-8 million would be iPhones. This may be a good indication that Apple will rally in preparation of earnings.

Is it Just KFC or Is it Industry Wide?

We all knew that poultry contamination issues would weaken KFC’s sales, and Yum Brands' (NYSE: YUM) fundamentals. However, the issue with chicken has lingered much longer than expected and a 6% decline in same store sales in China was a big surprise. Therefore, investors must wonder if the rapid decline could stretch into other fast food and restaurant companies who operate in China and other areas of the world where contamination has been an issue. This will be an issue to monitor, and because of the weakness I’m not sure that I’d take the risk on restaurant stocks this earnings season.

Expect Weak Retail Sales and More Discounting

The retail space itself is so competitive that all major companies tend to follow a similar trend, and operate under the same assumptions. Therefore, Sears Holdings Corp. (NASDAQ: SHLD) might have given us the best guidance for what to expect in the space. The stock fell nearly 6.5% after the company said that sales fell 0.2% and it guided Q4 EPS higher. Furthermore, online sales increased 20% due to new initiatives.

Sears returns $40 billion in annual sales, therefore it has a good grasp on the industry. As a result, I think it’s the poster child for what to expect from large retailers this upcoming earnings season. We can anticipate weak sales due to a struggling economy; strong margins due to cost cutting; and strong online sales, which offset the discounting. I would use this information as a guide when assessing companies such as J.C. Penney, Macy’s, and Kohl's. Furthermore, the strong online presence may bode well for companies such as Amazon and eBay, as consumers continue to order their goods online.

Conclusion

No two companies are created equally, as all companies have a certain edge or lack thereof that makes them unique. Therefore, we can not assume that just because a competitor beats or misses expectations that all in the space will experience a similar fate. Instead we can look for certain trends and try to determine if company strengths impact an industry. In regards to the companies discussed, I think all should give us some clue into the trends that we will see. 


BrianNichols owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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