Q4 Earnings This Week
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The markets closed at five-year highs on Friday thanks to the Fiscal Cliff deal and economic data that fueled investor confidence. This week, we're likely to see corporate earnings play more of a role as fourth quarter results begin being reported.
As usual, Alcoa (NYSE: AA) unofficially kicks things off after the bell on Tuesday. The aluminum producer reported a loss for the third quarter as the sluggish global economy helped keep prices and demand for its products low. Two weeks ago, Moody's warned of a possible downgrade, although Alcoa has said it's taking steps to reduce its debt and protect its investment-grade rating. Analysts expect earnings of 6 cents a share on revenue of $5.58 billion compared to a loss of 18 cents a share in the fourth quarter of last year.
Also reporting on Tuesday are Apollo Group (NASDAQ: APOL), owner of several for-profit educational institutions, which has beaten estimates for the last four quarters, and Monsanto (NYSE: MON). Monsanto, the world's largest seed company, is trading near its 52-week high, although investors are watching to see whether the growing pushback against genetically modified foods may impact its future growth.
On Wednesday, we'll hear from Ruby Tuesday (NYSE: RT), which, along with competitor Darden Restaurants (NYSE: DRI), has struggled a bit to hold onto both growth and market share as diners have held onto more of their discretionary income. No such worries for adult beverage-maker Constellation Brands (NYSE: STZ) which reports Wednesday, as well, with analysts expecting earnings of 55 cents a share, up 5.8% from a year ago.
The all-important banking sector begins its run of reports with Wells Fargo (NYSE: WFC) on Friday. Goldman Sachs downgraded the stock from "buy" to "neutral" this past Friday stating it believes recent returns are already reflected in current prices. Of course, we'll continue to watch the yield for U.S. Treasury Notes, which, while still a low 1.93%, is the highest its been since May of 2012 ... a possible indication of higher interest rates ahead. Wells Fargo is also trying to put the foreclosure crisis behind it; it's among the ten banks agreeing to an $8.5 billion settlement to borrowers for foreclosure abuses in 2009 and 2010.
In general, look for fairly lackluster results for Q4 earnings. Analysts lowered expectations as the quarter went on and worries over the Fiscal Cliff kept money in investors' and consumers' pockets instead of on the table.