All eyes on Apple, Facebook, Ford next week
NEW YORK (MarketWatch) — Investors will be looking to reports from Apple Inc., Ford Motor Co. and McDonald’s Corp. in the coming week, with U.S. companies under increasing pressure to shore up sales.
With 172 companies in the S&P 500 Index SPX -1.01% and a third of the Dow Jones Industrial Average DJIA -0.93% scheduled to post earnings, analysts will be parsing reports more closely than ever to look for hints of slowing growth domestically or overseas.
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U.S. week ahead: tech earnings
Apple and Facebook will report results, with analysts and consumers looking for indications of a new iPhone. Facebook will post its first earnings as a public company. MarketWatch’s Rex Crum and Laura Mandaro report.
Of the 104 companies that have reported earnings so far, 74% have beaten consensus estimates, but just 45% — versus 56% on average — have reported sales above forecasts. This is the lowest percentage of companies beating sales estimates since the first quarter of 2009, according to an analysis by FactSet.
The No. 1 reason for the declining number of companies beating estimates “is the dollar is stronger against the euro,” said Jharonne Martis-Olivo, director of consumer research at Thomson Reuters. “Companies with big exposure to Europe are struggling because the revenue that’s now generated abroad is worth less on the balance sheet.”
Doug Sandler, chief equity officer at RiverFront Investment Group, added that Wall Street does a good job of “not overreacting to a miss” that’s brought on by currency exchange rates.
The industrials and health-care sectors have the least number of companies reporting sales above estimates, while technology boasts the second-highest sales growth rate at 5.7%. Much of it, however, is due to Apple AAPL -1.63% . Excluding the tech giant, the sales growth rate for the sector falls to 2.5%.
The week opens with a bang as McDonald’s MCD -1.27% reports second-quarter earnings before the markets open Monday. The world’s largest fast-food chain is expected to give investors a good look at how economic weakness around the globe, and the slowdown in China in particular, is impacting U.S. companies. China recently announced that its economy grew 7.6% in the second quarter, its weakest reading in three years.
In June, the company warned that currency-exchange rates will hurt its earnings by 7 cents to 9 cents. Read more on McDonald’s earnings preview.
“It’s interesting, because in the past these companies were so dependent on emerging markets when the U.S. was slowing down, but now the growth is coming from the U.S., and the stronger dollar is now hurting them,” according to Martis-Olivo.
On Tuesday, Apple releases its much-anticipated fiscal third-quarter results after the market closes — an event many analysts agree will be the one guaranteed bright spot in the week.
“When you look at Apple, you’re looking at a company that’s delivered 86% annual EPS growth over the last seven years, and this year alone it’s gone up 71%,” said Brian White, managing director at Topeka Capital Markets. “It’s poised to be the most profitable company ever.”
White expects Apple to have sold 30.9 million units of its latest iPhone model, the 4S, as well as 15.9 million iPads.
Analysts polled by FactSet have an average forecast of $10.37 in earnings per share on revenue of $37.47 billion. Many of them, though, expect the company’s popular smartphone to see a decline in sales in the coming quarters.
While investors eagerly await Apple’s results, Wall Street will also be training its sights on United Parcel Service Inc. UPS -1.90% and Dow component AT&T Inc. T -0.54% , both due to report before the open Tuesday. Analysts also will be parsing the carrier’s results to assess iPhone subscription numbers.
Meanwhile, Netflix Inc. NFLX -1.56% reports after the close Tuesday, with many analysts predicting that the video-streaming service won't be able to hit its goal of adding 7 million subscribers this year.
Wednesday looks to be eventful as a bevy of companies including Boeing Co. BA -1.30% , Caterpillar Inc. CAT -2.03% , Ford Motor Co. F -1.50% and PepsiCo Inc. PEP -0.66% present their second-quarter results.
In June, Ford warned that deepening losses overseas, particularly in Europe and South America, could shave as much as $570 million from the balance sheet. The auto maker, which recently earned a rating of overweight from J.P. Morgan, is projected to earn 29 cents a share on revenue of $32.9 billion.
Last week, the Michigan-based company said it would recall about 11,500 Ford Escape units from its 2013 line to replace an engine compartment malfunction that could cause a fire.
After making headlines last week for a historic antitrust settlement, Visa Inc. V +0.29% will look to put all the negative press behind the company as it releases fiscal third-quarter results after the market closes Wednesday.
Facebook Inc. FB -0.83% , which has been under scrutiny over its ability to grow its subscriber base, will report its first results as a public company Thursday. “The most important metric for the company in our opinion will be ad revenue,” Goldman Sachs analysts wrote in a research note.
Consensus estimates for the social-networking giant hover around earnings of 12 cents a share on revenue of $1.16 billion, according to FactSet.
Friday is light on earnings reports, but will see the release of U.S. GDP growth figure for the second quarter. The current forecast stands at 1.3%, down from 1.9% in the previous quarter.
“I think [GDP] will continue to reflect signs of slowing, but our view has been that we will avoid a double-dip [recession]. It may feel like it, but we’re not going into negative growth,” said Sandler of RiverFront Investment Group.
Investors can shelve speculation on further easing for a little while, as Federal Reserve officials refrain from public speeches ahead of the Federal Open Market Committee meeting July 31 to Aug. 1.
Other economic data that may sway the markets include new home sales on Wednesday and on Thursday come weekly jobless claims, durable-goods orders, and pending-home sales data.
Sandler added that investors should be on alert for movement on Spanish bond yields, which are at the critical 7% level. “The situation [in Spain] looks to be going down now again. We were all relieved when Germany agreed to the aid … now there are question marks again.”