The Earnings to Look out for This Week
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It’s another big week for earnings as earnings season starts to wind down. I’m going to pick out some selected companies to focus on with a view on building up an overall picture of the global economy. So far I think it’s fair to say that the results have highlighted that there is some geographic dispersion in current prospects.
The US appears to be strengthening and Europe is stable while the risk to Asian and emerging market prospects appears to be on the downside. With regards to Europe, investors need to appreciate that the region has been weak for a while so comparables are easier. Moreover many companies have now had time to adjust to the two tier reality of the North outpacing the South
As ever Monday starts off quietly but there are some companies focused on very specific areas of the economy which will greatly interest their holders. For example, Cognex (NASDAQ: CGNX) will give results. It’s a company I discussed in an article linked here. I’m not expecting any great things from its outlook on semiconductor spending or manufacturing in the Far East. Nevertheless long term this company is very interesting and it’s worth watching closely if you are looking for an entry point. McDonald's gave weak results recently while Yum! Brands seemed to do better-albeit with slowing China growth- and all eyes will be on Burger King’s results to see how it is performing.
Vertex Pharmaceuticals is always interesting because it is developing sales for recently launched drugs and is a perennial takeover candidate. Lastly, I think Masco’s results should be looked at by those favoring a recovery in the housing market and as a play on a pick up in housing related spending.
This will be a pretty busy day for Healthcare as Pfizer (NYSE: PFE) and others give results. Investors will want to hear more color on the ongoing structural changes at the company as well as any commentary on the upcoming (November) FDA decision over its rheumatoid arthritis treatment tofacitinib. Similarly its anti-coagulant Eliquis has a decision due by March 2013. I’ve discussed some of the opportunities with Pfizer in a post linked here.
On the healthcare theme DaVita and Allergan (NYSE: AGN) will give results. The latter has great long term prospects with its Botox and breast implant treatments, but the stock is rarely cheap and investors will want to see expanding indications for Botox and increasing sales in its ophthalmic line of products. Skin care company Nu-Skin also reports. I’m not the biggest fan of multi level marketing companies but skin care is a fast growing category so it may convince more distributors to get involved.
Automatic Data Processing will also give results. I like the company and think it has a lot of operational leverage towards a recovering US economy. Another very interesting company reporting is data center service supplier Equinix (NASDAQ: EQIX). I love the sector and think that end demand will remain strong. The question is whether there is over capacity in the industry or not. You can best tell this by looking at gross margins so I would suggest investors keep an eye out for that in the results. For those interested there is an article linked here.
Wednesday sees industrial giant Eaton Corp give results and I confess after Alcoa’s results I’m not expecting too much here. Ralph Lauren will update in the state if mid-market clothing retail. Clorox is the sort of stock that the market has fallen in love with this year. It’s a high yielding consumer staple that seems to tick all the boxes. I don’t think the stock is good value but, hey, if the market wants this sort of thing then it has demonstrated the capacity to bid it up.
Speaking of boring high yield staples Kellogg gives results on Thursday. Amongst other things it needs to demonstrate that it can keep a handle on rising corn prices and keep its breakfast cereals competitive within a tough marketplace. Everyone’s favorite uber yield stock Annaly Capital Management will give results but my main interest will be in Estee Lauder (NYSE: EL). I’ve discussed the stock at length in this article. The key things to look out for are progress with its strategic modernization initiative and to see how it is performing within emerging markets. Brazil has been particularly good for them but other companies have been talking about weakness there.
Last but not least Starbucks reports and stockholders should be looking for information on how management’s initiatives are dropping into the bottom line.
SaintGermain has a position in Pfizer. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Cognex. 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.If you have questions about this post or the Fool’s blog network, click here for information.