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Earnings That Will Keep The Market Guessing
As U.S. companies begin reporting their Q2 earnings this week, investors will be hoping for positive surprises to continue to drive the market upwards. Some of the names who will be reporting, and their subsequent reception by the market, may give investors a preview of what to expect as earnings season hits full throttle.
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Commodity Recovery
On Wednesday, analysts will be looking for Pittsburgh-based Alcoa (NYSE: AA) to check in with a net loss of $0.34 per share. The aluminum manufacturer reported a profit of $0.66 per share for its year-ago Q2, but missed analysts expectations in Q1 when it reported a loss of $0.59 per share excluding one-time charges.
In Q1, Alcoa was hampered by weakened demand and a 60% drop in aluminum prices since last summer. Although shares of Alcoa have rebounded 16.9% since the company reported its Q1 results, expectations are not overwhelming for Q2.
Shares of Alcoa fell 6.1% on Monday and are down 74% from a 52-week high that was set…well about 52 weeks ago. Even a slight earnings beat, or marginal improvements on the cost-cutting front could do wonders for investors who recently purchased this stock.
Crude Improvements
Shares of Chevron (NYSE: CVX) have suffered a beating of their own since the commodity bubble burst last summer. Analysts are expecting the company to report earnings of $1.22 per share after the market closes on Thursday. Chevron announced EPS of $2.90 in its 2008 Q2.
On the plus side, Chevron will benefit from the improvement in crude prices over the course of the past few months. The United States Oil Fund (NYSE: USO), which aims to track the spot price of crude oil, now trades 50% above its 52-week low from February. Chevron could also see slightly higher margins in its downstream business versus its year-ago quarter, as was the case during Q1.
The Russians Are Coming
Pepsi Bottling Group (NYSE: PBG) will also be reporting its earnings this week. Last month the company upped its Q2 guidance as it stands to gain from declines in commodity costs. The stock is presently trading near a 52-week high and is up 51% so far in 2009.
In April, Pepsi Bottling Group and PepsiAmericas (NYSE: PAS) were the targets of a $6 billion takeover offer from PepsiCo (NYSE: PEP) that was ultimately rejected as undervaluing the bottlers. More recently, Pepsi Bottling Group and PepsiCo announced plans to sink $1 billion into their operations in Russia over the next three years in an effort to expand their emerging market presence.
The Bottom Line
Generally speaking, investors can expect Q2 earnings to be down for most U.S. companies when compared to last year. The previous two quarters put a lot of negative information out on the table and stocks have since bounced off of the bottom. This week, quarterly results from Alcoa, Chevron and Pepsi Bottling Group could give investors a slight indication of how much work remains to be done before the markets can expect to fully recover to previous multi-year highs. How investors will react to any such progress is a completely different story. (To learn more, check out Earnings Forecasts: A Primer.)
IN PICTURES: Learn To Invest In 10 Steps
Commodity Recovery
On Wednesday, analysts will be looking for Pittsburgh-based Alcoa (NYSE: AA) to check in with a net loss of $0.34 per share. The aluminum manufacturer reported a profit of $0.66 per share for its year-ago Q2, but missed analysts expectations in Q1 when it reported a loss of $0.59 per share excluding one-time charges.
In Q1, Alcoa was hampered by weakened demand and a 60% drop in aluminum prices since last summer. Although shares of Alcoa have rebounded 16.9% since the company reported its Q1 results, expectations are not overwhelming for Q2.
Shares of Alcoa fell 6.1% on Monday and are down 74% from a 52-week high that was set…well about 52 weeks ago. Even a slight earnings beat, or marginal improvements on the cost-cutting front could do wonders for investors who recently purchased this stock.
Shares of Chevron (NYSE: CVX) have suffered a beating of their own since the commodity bubble burst last summer. Analysts are expecting the company to report earnings of $1.22 per share after the market closes on Thursday. Chevron announced EPS of $2.90 in its 2008 Q2.
On the plus side, Chevron will benefit from the improvement in crude prices over the course of the past few months. The United States Oil Fund (NYSE: USO), which aims to track the spot price of crude oil, now trades 50% above its 52-week low from February. Chevron could also see slightly higher margins in its downstream business versus its year-ago quarter, as was the case during Q1.
The Russians Are Coming
Pepsi Bottling Group (NYSE: PBG) will also be reporting its earnings this week. Last month the company upped its Q2 guidance as it stands to gain from declines in commodity costs. The stock is presently trading near a 52-week high and is up 51% so far in 2009.
In April, Pepsi Bottling Group and PepsiAmericas (NYSE: PAS) were the targets of a $6 billion takeover offer from PepsiCo (NYSE: PEP) that was ultimately rejected as undervaluing the bottlers. More recently, Pepsi Bottling Group and PepsiCo announced plans to sink $1 billion into their operations in Russia over the next three years in an effort to expand their emerging market presence.
The Bottom Line
Generally speaking, investors can expect Q2 earnings to be down for most U.S. companies when compared to last year. The previous two quarters put a lot of negative information out on the table and stocks have since bounced off of the bottom. This week, quarterly results from Alcoa, Chevron and Pepsi Bottling Group could give investors a slight indication of how much work remains to be done before the markets can expect to fully recover to previous multi-year highs. How investors will react to any such progress is a completely different story. (To learn more, check out Earnings Forecasts: A Primer.)
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