US Earnings Preview: Companies That Could Issue Positive Earnings Surprises

Second-quarter earnings season “officially” starts on Wednesday afternoon with Alcoa’s (AA) report. The aluminum producer is expected to have lost 34 cents per share.

Joining AA will be 19 other companies, including Family Dollar (FDO) and Pepsi Bottling Group (PBG).

Analysts are forecasting a 21% drop in median S&P 500 earnings. The actual decline could be far smaller, especially given that 18 of the 23 companies to report so far have topped expectations.

The economic calendar is pretty light this week. The most notable reports will be the ISM services index and the preliminary University of Michigan July consumer confidence survey.

• Monday: June ISM services index
• Wednesday: May Consumer credit, weekly crude inventories
• Thursday: May wholesale inventories, initial jobless claims
• Friday: July University of Michigan consumer confidence survey (preliminary), June import and export prices, May trade balance

Federal Reserve Governor Elizabeth Duke will speak at the FDIC’s Interagency Minority Depository Institutions National Conference on Thursday morning.

We won’t see the bulk of earnings news until the latter half of the month. Therefore, I expect another light volume week with more range-bound trading.

Companies That Could Issue Positive Earnings Surprises

3Com (COMS) has topped expectations for 4 consecutive quarters. The average margin of surprise has been 3 cents per share. Though the fiscal fourth-quarter consensus earnings estimate is unchanged at 4 cents per share, there have been several signs of improving conditions for the tech sector. 3Com is scheduled to report on Thursday, Jul 9, before the start of trading.

Early last month, Pepsi Bottling Group (PBG) raised its second-quarter guidance by 5 cents to between 70 and 74 cents per share. The company credited improved sales of carbonated beverages and a more stable dollar. Most of the covering analysts promptly raised their forecasts soon after, though 1 analyst adjusted his forecast within the past few days. Cumulatively, these revisions have pushed the consensus earnings estimate 4 cents higher to 73 cents per share. PBG has topped expectations during 3 out of the last 4 quarters. Pepsi Bottling Group is scheduled to report on Wednesday, Jul 8, before the start of trading.

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