Earnings season kicks off in earnest today with the first round of earnings being reported by financial services companies. Citicorp (C) already reported better than expected earnings and a $7 billion mortgage settlement with the US Justice Department. Tomorrow Goldman Sachs (GS) and JP Morgan Chase (JPM) will report. Bank of America (BAC), Blackrock (BLK) and US Bancorp (USB) report on Wednesday. Finally, Morgan Stanley (MS) will pick up the rear on Thursday.
Interspersed between all of those financial service companies will be several other meaningful earnings reports such as Whirlpool (WHR) today; Intel (INTC), Johnson & Johnson (JNJ) and Yahoo (YHOO) on Tuesday; eBay (EBAY), Las Vegas Sands (LVS), San Disk (SNDK), United Rentals (URI) and Yum Brands (YUM) on Wednesday; Auto Nation (AN), Google (GOOG / GOOGL), International Business Machines (IBM) and Schlumberger (SLB) on Thursday; and, Johnson Controls (JCI) on Friday. So, we will have our hands full in the middle part of the week.
Earnings Season Themes
I am expecting that some common themes will be woven across corporate America during earnings season such as:
- A visible pick-up in the second quarter after the first quarter’s winter related slowdown
- Sluggish behavior by consumers on small ticket items at the retail level with strong expenditures by consumers for big ticket items – i.e. automobiles, houses and appliances
- Companies will play the UPOD (under promise and over deliver) game as it does not benefit management to do otherwise
- Another strong round of corporate buybacks thanks to continuing low interest rates will be announced
Waiting For Opportunities in Financial Services and Retail
I am conspicuously not invested in any financial services companies. Furthermore, we hold only a single non-restaurant retail company. I expect that come the end of the summer, as we approach the third quarter, to allocate assets back into those laggard sectors.
Today, other than the positive reaction to Citigroup’s results, a failure to follow through on the Portuguese banking “crisis” has buyers stepping back into stocks. Oil and gold look lower while stocks are headed higher at the open.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long JNJ, YHOO, LVS, URI, GOOG, GOOGL &SLB and short YUM — although positions can change at any time.
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