Earnings Preview For July 14 - 18

It is likely to be a very volatile week for the equity markets, with earnings announcements from 6 Dow components, inflation data, Fed minutes, option expiration and testimony from Fed Chairman Ben Bernanke.

Dow components Citigroup (C), Coca-Cola (KO), Intel (INTC), JPMorgan Chase (JPM), Johnson & Johnson (JNJ) and Microsoft (MSFT) releasing results. Overall, we have confirmed reports from 179 companies, including 58 S&P 500 members.

Financial companies will be taking center stage, accounting for slightly less than half of all reports. The amount of the write-downs and condition of balance sheets could attract as much attention as the actual earnings results themselves.

The economic calendar will include the minutes from last month’s Fed meeting and both the CPI and PPI indexes. Here is a list of the forthcoming data:

• Tuesday: June producer price index (PPI), June retail sales, July Empire State manufacturing survey, May business inventories
• Wednesday: June consumer price index (CPI), June industrial production and utilization, weekly crude inventories, minutes from the June 25 Fed meeting
• Thursday: June housing starts and building permits, July Phili Fed survey, weekly initial jobless claims
• Friday: Nothing scheduled

July stock options expire on Friday. This could create additional volatility as positions are rolled over.

Fed Chairman Ben Bernanke will give his semi-annual Monetary Policy Report (aka “Humphrey-Hawkins”) on Tuesday (House of Representatives) and Wednesday (Senate).

Last week, I expressed pessimism about the very short-term outlook for the markets. I’m not seeing anything on the calendar for the third-week of July that would cause me to change my opinion. In about 10 days, however, we will see earnings reports from a broader mix of companies, which could provide some light at the end of the tunnel.

Keep an eye on oil, as it will remain a wildcard.

Companies That Could Issue Positive Earnings Surprises during the Week of July 14 - 18

Steel manufacturers Nucor (NUE) and Reliance Steel (RS) raised their second-quarter guidance. A bullish market for steel has allowed both companies to exert pricing power and widen their margins.

Nucor said in early June that profits should be in a range of $1.75 to $1.80 per share; previously the company had forecast profits between $1.55 and $1.60 per share. The covering brokerage analysts raised their projections in response, initially pushing the consensus estimate up to $1.78 per share.

A recent positive revision, however, boosted the consensus estimate to its current level of $1.79 per share. The most accurate estimate is more bullish at $1.82 per share. NUE has topped expectations for three consecutive quarters. Nucor is scheduled to report on Thursday, July 17, before the start of trading.

Reliant Steel anticipates between $2 and $2.10 per share in the second quarter, instead of its previous guidance of $1.50 to $1.60 per share. All of the covering brokerage analysts raised their projections, pushing the consensus estimate 45 cents higher to $2.10 per share. RS has issued positive earnings surprises in three out of the past four quarters. Reliant Steel is scheduled to report on Thursday, July 17, before the start of trading.

Brokerage analysts are becoming more optimistic about apparel maker VF Corporation’s (VFC) second-quarter results. During the past few weeks, nearly all of the covering analysts have raised their profit projections. The revisions have pushed the consensus estimate 10% higher to 88 cents per share. The most accurate estimate is more bullish at 89 cents per share. VFC has topped expectations for five consecutive quarters. VF Corporation is scheduled to report on Tuesday, July 15, after the close of trading.

Companies That Could Issue Negative Earnings Surprises during the Week of July 14 - 18

During the past 30 days, the second-quarter consensus estimate for Citigroup (C) has dropped to a projected loss of 23 cents per share from an expected profit of 37 cents per share. The most accurate estimate is even more bearish at a loss of 51 cents per share. The beleaguered financial conglomerate has missed expectations for two consecutive quarters. Citigroup is scheduled to report on Friday, July 18, before the start of trading.

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