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Earnings Season Report Cards


The pace is picking up so let's take a look at some of the key companies reporting this week.

Get ready everyone! It is time to separate the men and women from the boys and girls. The earnings season has arrived so big macro and political themes take a back seat to what is really going on in the markets. The report cards are in the mail and just like parents nervous about the progress of their children in school, investors will be waking up every morning deluged with reports on the health of their favorite stocks. The pace is picking up so let's take a look at some of the key companies reporting this week.


Citigroup (C) has reported but of course the numbers don't really matter given all their troubles. The upside for Citi investors was a complete overhaul of management including a new CEO. With lots of speculation that Prince may be shown the exit expect C to trade higher. If that does happen use it as an opportunity to unload this stock. Nothing short of breaking the company up will give investors a sustained return. The faithful who have been in Citi because of the dividend and the low PE have been disappointed time and time again.

Tuesday Before the Open

Many of the key banks like Wells Fargo (WFC) and Keycorp (KEY) will be reporting Tuesday morning. Most of the news should be bad but of course financial stocks are already discounting some of it. Bank of America's Glen Novvaro feels Johnson & Johnson (JNJ) will deliver a positive surprise due to cost cutting and improved margins. For the most part JNJ has been a market performer so I am not expecting much in the way of fireworks.

Tuesday After the Close

Intel (INTC), the world's largest semiconductor manufacturer reports after the close Tuesday and of course will be a focal point for tech investors. While earnings and revenue will be important, investor attention will be focused on margins. When margins are rising at INTC stock gains generally follow. There have been recent high profile downgrades in INTC based on the perception that margins have peaked.

Wednesday Before the Open

Key reports from Coca Cola (KO), JP Morgan (JPM) and United Technologies (UTX) should dominate the morning. Investors will be looking for continued performance on the international front from KO and UTX. Any slip here could have larger implications for the broad market. Much of the market's recent strength has been based on the global growth theme so it is important that this leg of the stool is still showing strength.

Wednesday After the Close

Washington Mutual (WM) has already pre-announced a very weak quarter. We already know sub-prime is on the critical list but commentary on its spread toward prime could drive volatility. Expect continued bad news from WM in coming months.

Thursday Before the Open

Nokia (NOK) reports Thursday before the market open. It is imperative Nokia delivers a strong top and bottom line performance. The stock has been on a tear this year and deservedly so. The only blemish is the upcoming dilution from its purchase of Navteq which will prove to be a brilliant acquisition positioning them for continued growth in years to come. McDonald's (MCD) has been the gift that keeps on giving. This company has transformed itself from the ranks of the un-loved to one of the most respected companies in the world. It has been exceeding expectations for so long that we all have become too complacent.

Thursday After the Close

Regardless of the numbers Google (GOOG) will dominate the headlines Thursday night. On the surface the shares seem expensive with a mid 30's forward PE multiple but when compared to its +30% growth rate the valuation doesn't seem excessive. Most of the negative commentary comes from the frustrated who weren't there for the ride. IBM (IBM) will be important but has relinquished its throne to the new high tech titans like GOOG and Apple (AAPL). I just can't get excited about a company with low single digit revenue growth. How long can you keep delivering double digit earnings when revenue continues to grow at a snails pace.


We finish off the week with a bang. Reports from 3M (MMM), Caterpillar (CAT), Honeywell (HON) and Schlumberger (SLB) will give us more evidence on how the global growth theme is playing out. Schlumberger, one of the more expensive plays in the oil service sector should continue its strong run given the strength in crude. You can't leave oil in the ground when it is trading over $80. I still think stocks like Transocean (RIG) offer better growth and a more reasonable valuation but I can't argue against owning it.

Sounds like a lot but of course this is only the beginning.
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Positions in INTC, JNJ, KO, NOK, MCD, AAPL, RIG
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