Q4 Earnings Season Gets Into High Gear

The fourth quarter reporting season gets into high gear this week, with 253 companies coming out with quarterly results, including 83 S&P 500 companies. The earnings season thus far has been relatively uneventful, but we will have a better idea by the end of this week; by then we will have seen 30% of the total fourth quarter reports.

While last week was all about banks, the focus this week is on the Technology sector, particularly Apple (AAPL) which reports after the close on Wednesday. The iPhone maker has lost some of its sizzle lately and is expected to see earnings decline from the same period last year. No company grows forever, but it may be premature to write Apple off.

Other major Tech companies reporting results this week include Google (GOOG) and IBM (IBM) on Tuesday and Microsoft (MSFT) on Thursday. While Google and IBM are expected to show earnings growth, Microsoft’s earnings are expected to be below the year-earlier level.

The overall earnings picture for the Tech sector doesn’t look very inspiring. Total earnings for the 13% of total Tech sector companies that have already come out are down -11%. This is mostly due to the 27% drop in Intel (INTC) earnings in the quarter, but there is no shortage of earnings declines among the sector players that have reported results.

For the 87% of the Tech sector companies still to report results, total earnings are expected to be down -3.5%. The composite earnings growth rate, where we combine the companies that have already reported with those still to come, for Tech is for a decline of -3.3% in the fourth quarter, which compares to the sector’s actual earnings growth of 0.2% in the third quarter and 7.9% in the second quarter.

Beyond Technology, we will see earnings reports this week from railroad operators CSC Corp (CSX) and Kansas City Southern (KSU) on Tuesday and Union Pacific (UNP) on Thursday. Other major reports include DuPont (DD), Johnson & Johnson (JNJ), Verizon (VZ), Coach (COH), McDonald’s (MCD), 3M (MMM), Starbucks (SBUX) and many others.

(For a detailed look on how the fourth quarter earnings season has fared thus far, please check out our weekly Earnings Trends Report)

Earnings will be the primary focus all week, as the economic calendar is on the thin side. Housing reports are the only notable economic readings this week, with Existing Home sales on Tuesday and New Home Sales on Friday.

Monday - 1/21

• No reports due to public holiday.

Tuesday - 1/22

• We will have the December Existing Home sales numbers in the morning, with expectations of a modest gain from the prior month’s level.
• We have a busy day on the earnings front, with DuPont (DD), Johnson & Johnson (JNJ), Verizon (VZ), Travelers (TRV) and Kansas City Southern reporting in the morning, while Google (GOOG) and IBM (IBM) reporting after the close.
• Zacks ESP, our proprietary leading indicator of earnings surprises, is showing DuPont and Travelers coming out with earnings beats.

Wednesday - 1/23

• Not much on the economic calendar, but a very busy day on the earnings front, with Apple’s (AAPL) release after the close as the highlight.
• Other major earnings reports include McDonald’s (MCD) and Coach (COH) in the morning and Netflix (NFLX) after the close.
• Zacks ESP is showing Apple coming out with a positive surprise, which will be welcome given the company’s miss in the previous quarter and the stock’s recent weakness.

Thursday - 1/24

• In addition to weekly Jobless Claims, we will get the December Leading Indicators data. It will be interesting to see if last week’s massive drop in initial Jobless Claims was a seasonal fluke or something reflecting improving ground realities.
• AT&T (T), Bristol Myers (BMY), 3M ((MMM), US Airways (LCC) report in the morning, while MSFT will report after the close.
• The ESP readings give us a lot of confidence that US Airways will come out ahead of expectations.

Friday - 1/25

• We will get the December New Home Sales data in the morning, with expectations of 388K sales level, up from November’s 377K level.
• Procter & Gamble (PG), Kimberly Clark (KMB) and Weyerhaeuser (WY) are the major reports today, all in the morning.

Here is a list of the 253 companies reporting this week, including 83 S&P 500 members: