Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Three U.S. Stocks to Keep an Eye on as Corporate Earnings Season Unfolds

Companies / Corporate Earnings Jul 13, 2012 - 08:11 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticleDon Miller writes: It's a proven fact -- stock prices eventually follow earnings.

So as we enter second-quarter earnings season, an avalanche of corporate reports will likely set the tone for the stock market for the next six weeks.


If companies report healthy profits, stock prices are destined to charge higher. If earnings are flat or even begin show losses -- look out below. U.S. stocks could tumble.

Either way, investors can expect increased volatility as earnings season kicked into high gear today with JPMorgan Chase (NYSE: JPM).

That's especially true when certain bellwether stocks report results. A bellwether stock, is loosely defined as company that tends to create, influence or set trends.

With that in mind, let's take a look at how earnings season is shaping up along with three stocks that will provide early clues about what might be coming for the rest of the market.

Predicting a Down Quarter for U.S. Stocks
Typically, earnings season is good for stocks.

Historically, the S&P 500 has rallied 67% of the time during earnings season, posting positive returns of roughly 3%. By comparison, stocks have dropped by 1.46% in between earnings seasons.

But we may not have much reason to cheer this time around.

Wall Street analysts project a 1% decline in second-quarter 2012 S&P 500 operating earnings, according to Capital IQ consensus earnings expectations.

The last time companies were this negative coming into an earnings season was the fourth quarter of 2008, when the financial crisis was wreaking havoc on the U.S economy.

Here's why...

Economic growth is slowing and hobbling economies around the planet, including the U.S., Europe and China. The Eurozone debt crisis just won't go away either, stifling credit flows.

And the U.S. dollar has been climbing against the euro and other currencies -- crimping profits from international sales for U.S. companies.

As a result, companies have reacted by issuing downbeat quarterly forecasts. In fact, firms issuing negative guidance have outnumbered those with positive preannouncements by more than three to one, according to Thomson Reuters.

Multinationals like Procter & Gamble Co. (NYSE: PG), Ford Motor Co. (NYSE: F), and McDonald's Corp. (NYSE: MCD) have all recently cut their earnings guidance.

Ironically, the overwhelming bearishness could set the stage for a major rally.

Wall Street analysts have essentially set the bar so low that many companies could post upside earnings surprises.

Investors Should Follow "Beat Rates" & Earnings Guidance
So how can you tell whether the market will trend up or down as earnings are reported?

The two numbers that impact the market dramatically are the earnings "beat rate" and company guidance.

The earnings beat rate is simply the percentage of companies beating earnings projections. Guidance is information or an estimate that the company provides about future earnings.

"Earnings and guidance, if they are really good or really bad, will win out," Peter Tuz, portfolio manager at Chase Investment Council told thestreet.com.

That's because they give a broad snapshot of the financial health of the companies in the S&P 500 and whether the Index is likely to head higher - or lower.

For earnings, the percentage of companies that beat expectations versus the prior quarter is what counts the most.

A reading above 65% is particularly bullish. Anything below 50% is likely to disappoint traders and would be bearish.

Surprisingly, guidance from the companies themselves is often seen as more important than the actual earnings.

"A company can have an excellent quarter but then express caution with guidance, and the guidance will be listened to more than the actual number," said Tuz.

If more companies raise rather than lower guidance it would be a good sign for stocks.

Tuz expects the guidance will be exceptionally cautious because "you have just so much uncertainty out there."

Three U.S. Stocks to Watch
There are certain bellwether companies that because of their sheer size or leadership position are especially worth watching.

Here are three reporting early that may set the tone for the rest of earnings season.

July 17 - Johnson & Johnson (NYSE: JNJ)
Results from this consumer products juggernaut should give investors a clue on how Main Street spending is holding up. The company offers everything from baby care to Band-Aids to over-the-counter drugs, reflecting a broad spectrum of consumer demand.

July 18 - International Business Machines Corp. (NYSE: IBM)
Earnings for this technology giant will reveal spending trends in the world's major economies including Europe, the U.S., China and other emerging markets. IBM will have its finger on the pulse of key company officers who decide whether to open the company coffers for information technology (IT) systems. Its guidance is likely to clearly spell out whether companies are budgeting for upgrades or are canceling spending plans.

July 20 - General Electric Co. (NYSE: GE)
Because this conglomerate has its fingers in so many pies, its guidance always has market-moving potential. The company has dominant businesses in a wide range of industries including medical equipment, electric turbines, locomotives and high finance, to name a few. Its sheer size means GE will set the bar for many important industries.
With U.S. stocks seemingly at a make-or-break moment, what happens over the course of the next few weeks promises to be critical.

Source :http://moneymorning.com/2012/07/13/three-u-s-stocks-to-keep-an-eye-on-as-earnings-season-unfolds/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in