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Apple, Comcast, AT&T: Key Factors That Will Drive Earnings Reports of Media, Communication Companies


Earnings season begins amid a stock market rally and improved recent economic data. The setup could be good news for media and communications companies.

Another quarterly earnings season kicks into high gear this week with reports from eBay (NASDAQ:EBAY), Google (NASDAQ:GOOG), and Microsoft (NASDAQ:MSFT). Next week things really pick up for media and communications investors when we hear from Yahoo (NASDAQ:YHOO), AT&T (NYSE:T), Apple (NASDAQ:AAPL), and Comcast (NASDAQ:CMCSA).

The market enters this earnings season just a couple of percent off recently attained multi-year highs. Despite the steady rise in the market since early June there is a lot of worry and concern heading into this earnings season. In fact, current estimates for the S&P 500 (INDEXSP:.INX) call for the first quarter of negative year-over-year growth since 2009. Estimates have fallen sharply as the year has gone on, reflecting the slowdown in the economic recovery that seemed to accelerate in late spring and early summer.

More recent economic data has been better, however. 2012 may mark the third straight year that the economy had disappointing performance in the first half of the year and picked up in the second half of the year. This pickup could be important as it may lead to guidance commentary that is better than the reported earnings.

Wall Street looks forward, not backward, so guidance is always critical. In a quarter when reported numbers could be disappointing, any positive guidance could provide the relief that pushes the market back to and above recent highs.

The more recent, better data has been driven by segments of the economy tied into consumer discretionary spending. Housing seems to be in a durable recovery. Auto sales remained strong most of the year and picked up recently and might be accelerating. This week's report on retail sales showed surprising strength, well above economist expectations. This might provide a nice backdrop for media investor and communications investors as advertising and consumer spending trends are closely related. Even communications benefits as households might add new smartphones and tablets and TVs and stick with current TV and broadband packages or at least stop cutting back to save money.

Let's move beyond the market overview and take a look at some key factors that will drive the earnings reports and Wall Street's reception of the numbers.
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No positions in stocks mentioned.
Entermedia is a long/short equity hedge fund focused on media, communic= ations, and related technologies. Steve Birenberg is co-portfolio manager o= f Entermedia, owns a stake in the Funds' investment management compan= y, and has personal monies invested in the Funds. CBS and Discovery Communi= cations are widely held by Northlake Capital Management, LLC, including in = Steve Birenberg's personal accounts. Steve is sole proprietor of Nort= hlake, a long only registered investment advisor.

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