Earnings season for the second quarter of the year kicked off last week with Alcoa’s (AA) beat. But while Alcoa is often touted as the earnings-season bellwether, its Q2 wasn’t one of the key earnings announcements worth keeping tabs on.
Instead, there are five other names with quarterly numbers due soon that are either going to make a bigger impression on the market, or that investors can just expect to be followed up by some big post-report fireworks.
Here’s a closer look at those five, why they’re important, and what to expect.
What to Expect: The pros are expecting a profit of 30 cents per share, which is a tad stronger than the year-ago earnings of 27 cents.
Why It Matters: It’s almost been one year to the day that Marissa Mayer was named CEO of Yahoo (YHOO). While one year might be too soon to write the final chapter on a new company chief, it’s not too soon to expect measurable results above and beyond what the company could have mustered with its prior chief executive.
Of particular interest will be the impact of all the young startups Mayer has acquired. Of the 17 companies Yahoo has bought in the past 12 months, six of them materialized before the beginning of Q2. That’s enough to at least start judging whether the new Yahoo is truly redefining the way people view and consume digital content, or if it’s simply buying a bunch of smaller companies and incorporating them into Yahoo’s web pages.
International Business Machines
What to Expect: Forecasters say earnings of $3.77 per share are in the cards, compared to $3.51 for the year-ago quarter.
Why It Matters: Last quarter, International Business Machines (IBM) did the unthinkable. After nine straight years of topping each and every quarter’s estimates, Big Blue missed Q1’s earnings forecast of $3.05 by only turning in $3. It should be noted that IBM still grew revenue on a year-over-year basis; it just missed estimates.
Part of that shortfall stemmed from IBM spending more and earning less on its relatively new cloud-oriented ventures. Though traders protested the results with a knee-jerk selloff, shares started to recover a few days later. Over the past month, however, IBM shares have tanked again, pricing in another disappointment on the earnings front.
What to Expect: The pros believe the railroad operator is on pace to improve on the year-ago second quarter profit of $2.10 to $2.35 this year.
Why It Matters: It might be a relic of a cliché, but it doesn’t make it not true — transportation stocks really do reflect the economy’s underlying health. If that’s the case, then Union Pacific (UNP) is saying North America’s economy is at least still improving somewhat. The company is in its fourth-consecutive year of rising earnings, and if the railroad company really does earn $2.35 for the latest quarter, it’s going to be the corporation’s best Q2 ever.
UNP continues to be one of the economic recovery’s best but most obscured leaders.
Capital One Financial
What to Expect: Analysts are looking for $1.69 per share, which will leave Q2 2012’s 16-cent EPS in the dust. Don’t get too excited about the improvement, though. The year-ago figure was the outlier … the result of setting aside a whopping (and unusually high) $1.2 billion for losses.
Why It Matters: Incredibly, total credit card debt for U.S. cardholders is only about 15% below its 2008 peak, when consumers were far less fearful of debt than they say they are now. Capital One Financial (COF) caters to the segment of consumers that are most apt to take on new and relatively greater credit card balances: lower-end consumers.
Not only will Capital One’s revenue growth be of interest to shareholders; it also might be a glimmer of the state of the nation’s credit-usage mentality.
What to Expect: Forecasters are looking for a bottom line of 40 cents, which would trounce the year-ago bottom line of 11 cents.
Why It Matters: To give credit where it’s due, it really does look like Netflix (NFLX) has reached its critical mass — revenue growth is finally exceeding expense growth on the income statement. On the other hand, the goofy (yet still GAAP-compliant) way Netflix books its content expenses can make the income statement misleading. Last quarter, the company’s cash flow statement actually went negative, as all the recent, big content spending came home to roost.
It might have been a one-quarter fluke. Or, it might have been the beginning of a trend that could plague the company for years to come as it books the costs of its Disney (DIS) and Marvel content deals. Thing is, it might never show up on the income statement in a meaningful way. Check the cash flow statement for Netflix’s true health.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.