Not even the shrewdest of investors and Wall Street mavens can look into their crystal balls and tell you what type of returns stocks will produce. But they might have a hunch about what blue-chip companies and small cap firms are going to be top performers or biggest underperformers over the next fiscal year.
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What makes the financial results of bellwether companies so meaningful - particularly, in the manufacturing, banking and retail sectors - is what the numbers signal about the health of the stock market and the broader U.S. economy. So as earnings season gears up and the economy continues to heal, here are a few of the companies that financial experts think are worth watching.
1. Alcoa (NYSE:AA)
The aluminum giant, Alcoa, tops the list of investment analyst and media commentator, David Sterman. After the global demand for aluminum turned south with the start of the Great Recession, he's predicting a turn-around for Alcoa to become evident in 2010 and more so in 2011.
Demand for aluminum is wavering below 2008 levels, but he notes that supply is too. And prices have steadily been rising. The average price per ton of aluminum has already climbed from $1,900 to $2,365 in October.
"So there's no reason that prices can't move back toward the $3,000 mark, as long as the industry maintains its current discipline level," Sterman writes on the site, streetauthority.com. "As the world's biggest supplier of aluminum, Alcoa can set the tone for supply - and pricing."
Alcoa kicked off the earnings season October seventh.
2. Qualcomm, Inc. (Nasdaq:QCOM)
The cell phone-chip manufacturer Qualcomm is positioned to gain as companies jumping in to create a product that competes with Apple's iPad drive up demand for cell chips, according to The Wall Street Journal. According to reports, the company is also a candidate to provide the technology for the next generation of Apple's iPhone. In the fourth-quarter, analysts expect earnings of 59 cents per share on revenue of $2.84 billion. This is up from 48 cents per share on revenue of $2.69 billion a year ago.
Qualcomm will release quarter-end results November third.
3. JPMorgan Chase & Co. (NYSE:JPM)
A rebounding banking sector will be yet another sign that the big-picture economy is on the mend. However, according to The Wall Street Journal, dipping volume of U.S. stock trades over the summer, the impact of new financial regulations and the expired home tax credit are all factors holding back the nation's economic recovery. All eyes will be on JPMorgan Chase because people are looking for a sign of the state of the banking industry. JPMorgan Chase is the first of the big U.S. banks to report.
Analysts polled by Thomson Reuters forecast a profit of 88 cents per share on revenue of $24.49 billion compared to 82 cents per share on revenue of $26.62 billion a year ago. JPMorgan Chase chief Jamie Dimon is keeping expectations realistic, saying a couple of weeks ago at a conference that, though manageable, there are "massive issues facing the company."
J.P. Morgan will post its earnings October 13.
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4. Starbucks (NYSE:SBUX)
Retail companies such as the coffee king, Starbucks, can lend insight to how the American consumer is responding to the current economic climate.
According to Kiplinger's "The Smart Investor's Guide to Profiting from Earnings Season," analysts predict that Starbuck's earnings per share will climb 52% from the same quarter a year ago. But investors will also be looking at other criteria, including sales, customer counts and outlook projections, to wage how the company - and consumer sentiment - is doing.
Starbucks releases its quarterly earnings on November fourth.
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Ahead of earnings releases, Wall Street analysts try to predict how much companies will increase their profits for the fiscal quarter. Often, a company with better-than-expected results - usually in terms of profit - will see their stock share price spike the day the information is made public. Investors are interested in whether the company will beat or fall short of analyst expectations, whether the company will change their financial projections and whether any stock-moving changes are on the horizon for the company.
This information gives investors insight into how the company is going to do in the future and whether it's a sound investment. Also, earnings season gives some clues about the big-picture economy, such as how key sectors - banking, construction and retail - are faring. (We go over the concepts behind the excitement over the most important figure in the stock market. For more information, check out Everything Investors Need To Know About Earnings.)
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