Week in Preview: The Earnings Crunch Continues
Oct 24th 2010 7:25PM
Updated Oct 25th 2010 6:40AM
For example, year-over-year earnings growth from Big Oil's Chevron (CVX), ConocoPhillips (COP), ExxonMobil (XOM) and Royal Dutch Shell (RDS.A) are expected to be in double digits, as are the those of many other energy and mining concerns reporting this week: Allegheny Technologies (ATI), Alliant Energy (LNT), Arch Coal (ACI), Cliffs Natural Resources (CLF), CMS Energy (CMS), CONSOL Energy (CNX), DPL (DPL), Hess Corp. (HES), Minerals Technologies (MTX), Pioneer Natural Resources (PXD), PPL Corp. (PPL), Southwestern Energy (SWN), Total (TOT), Whiting Petroleum (WLL), Williams Companies (WMB) and Wisconsin Energy (WEC).
Analysts anticipate that Houston-based ConocoPhillips will report that its third-quarter earnings per share (EPS) grew 31% year-over0year to $1.45 per share. During the three months that ended in September, ConocoPhillips announced refinery upgrades, and revenue for that period is predicted to have risen 10.4% to $45.6 billion. Analysts also expect sequential and year-over-year growth of revenue in the fourth quarter. Earnings results have been better than expected in recent quarters, by as much as a 12 cents per share.
The long-term EPS growth forecast for Conoco is 17.5%, which tops that of BP (BP) and ExxonMobil. The forward P/E ratio is 10.4, which is less than the industry average. The PEG ratio is 0.6, and the dividend yield is 3.5%. The First Call consensus recommendation is to buy Conoco. The Motley Fool likes the dividend. But the mean price target is $62, and the stock hit a 52-week high of $61.67 Friday.
Microsoft and Other Tech Companies
Microsoft's (MSFT) fiscal first-quarter report is the most prominent of those from tech companies reporting this week. Microsoft brought in a new research chief and increased its quarterly dividend in that period, and the world's largest software company is expected to post EPS of 55 cents. That's up from a year-ago profit of 40 cents per share. And revenue for the three months that ended in September is expected to have jumped 22.5% to $15.8 billion. Looking ahead, analysts foresee sequential and year-over-year EPS growth in the second quarter. The per-share earnings results have topped analysts' expectations in the past five quarters, by as much as 14 cents.
Microsoft's long-term EPS growth forecast is 10.3%, and the forward PE ratio is 10.7. The dividend yield is 2.2%, and the ROE is 44%. The consensus recommendation remains to buy Microsoft, and the Motley Fool included it among is top 20 values in software. The mean price target is $32.12. Shares have traded mostly between $24 and $26 since early August and ended last week at $25.38.
Other tech companies expected to post earnings growth in their reports this week include Broadcom (BRCM), Harris (HRS), KLA-Tencor (KLAC), Lexmark International (LXK), McAfee (MFE), Molex (MOLX), Motorola (MOT), Novellus Systems (NVLS), Open Text (OTEX), Rovi (ROVI), Teradyne (TER) and Texas Instruments (TXN).
Visa and Other Anticipated Earnings Gainers
During the three months that ended in September, Visa (V) changed the way its board is elected and launched an online shopping tool. The operator of the world's largest consumer payment system is expected to report that EPS for that period came to 95 cents, compared to 74 cents per share a year earlier. And the fiscal fourth-quarter revenue is expected to have increased 11.3% to $2.1 billion. Analysts predict full-year EPS of $3.90 (+25.1%) on revenue of $8.0 billion (+16.1%). Note that earnings results have beat consensus estimates in the past five quarters, by as much as a dime per share.
Visa's long-term EPS growth forecast of 19.6% is better than competitors American Express (AXP) and MasterCard (MA). Its forward PE ratio is 17.9, which is less than the industry average. This dividend-payer keeps more than enough cash on hand to cover long-term debt, and its PEG ratio is 0.9. Analysts on average recommend buying Visa, and their mean price target on shares is $100.52. The stock was recently called a long-term winner on Bloggingstocks. Shares have climbed from a recent 52-week low of $64.90 to $79.29, rising above the 100-day moving average for the first time since May.
Other companies expected to post strong earnings growth this week include Aflac (AFL), Avon (AVP), Bristol-Myers Squibb (BMY), Canadian Pacific Railway (CP), Coach (COH), DeVry (DV), Dow Chemical (DOW), Dr Pepper Snapple (DPS), Expedia (EXPE), Ford (F), MetLife (MET), O'Reilly Automotive (ORLY), Oshkosh (OSK), Panera Bread (PNRA), Rockwell Collins (COL), Sherwin-Williams (SHW), Starwood Hotels (HOT) and Whirlpool (WHR). Analysts anticipate more moderate earnings growth from Chicago Mercantile Exchange (CME), Colgate-Palmolive (CL), Dominion Resources (D), General Dynamics (GD), McGraw Hill (MHP), Moody's (MCO), Newell Rubbermaid (NWL), 3M (MMM), Torchmark (TMK), Waste Management (WM) and Wyndham Worldwide (WYN).
Low Earnings Expectations and Other Economic Data
But they can't all be winners at the earnings game. Companies expected to post lower year-over-year earnings this week include Allstate (ALL), ArcelorMittal (MT), Automatic Data Processing (ADP), Boston Properties (BXP), CIGNA (CI), Comcast (CMCSA), DuPont (DD), Estée Lauder (EL), Fortune Brands (FO), Kimberly-Clark (KMB), Merck (MRK), Northrop Grumman (NOC), Procter & Gamble (PG), Raytheon (RTN), Revlon (REV) and TD Ameritrade (AMTD). And anticipated to post losses are Eastman Kodak (EK), Office Depot (ODP) and Sprint Nextel (S).
Housing numbers are due this week as well. The National Association of Realtors' existing-home sales numbers for September come out Monday, followed by the S&P/Case Shiller Home Price Index for August on Tuesday. Data for new housing sales and home starts for September are scheduled for Wednesday. Both sales and prices of homes are widely expected to remain low.