Today is the beginning of a very important month of earnings. We’ll hear from a number of big-named companies that have the potential to move the market — and your portfolio.
That’s why I’m posting this special Market 360 earnings series (Note: Never miss an update by signing up for the free email series here). If you sign up, throughout October, you’ll hear from me at least twice a week when I’ll help you look beyond the headlines and focus on the facts. I’ll help you separate the tailwinds from the headwinds, opportunity from disaster and fact from speculation. You’ll know exactly what’s coming, which stocks to avoid and which ones are excellent choices for new money.
Q3 Earnings Overview
After a red-hot Q2 earnings season with a string of better-than-expected results, look for earnings and sales growth to slow down in the third quarter. That expectation may come as a surprise to you, given that U.S. economic growth heated up to a 4.2% annual pace in the second quarter, but the reality is that global economic growth is slowing — and it will impact third-quarter earnings.
In addition, the recent strength of the U.S. dollar will also influence earnings and sales. The U.S. dollar has gotten its “mojo” back and is now at one-year high against major currencies. The only problem with a strong U.S. dollar is that it pinches corporate profits for companies with international sales — and what successful company today doesn’t operate in the global marketplace?
In this type of an environment, it’s more important than ever to know which companies are going to buck the trend and post better-than-expected earnings and sales — and which companies are going to disappoint. And that’s my goal with this special Market 360 earnings series.
Alcoa Kicks Off Earnings Season
For better or worse, Alcoa (AA) is the grand master of earnings season. When Alcoa reports, it signals the official start of the season and sets the tone…
If Alcoa disappoints, many will be wary of earnings — which could actually set up powerful moves for strong companies that beat the consensus estimate. These stocks will suddenly become even more attractive to risk-averse investors, and their share prices can quickly rise.
On the other hand, if Alcoa has a stunning quarterly report, it can lift expectations for other companies. As a result, weak companies that fail to beat these new expectations are harshly punished.
Now, these are generalities and there is no specific action you should take based on whether AA has a good report or a bad one. You should always ditch companies that fail to grow sales and earnings and stick with only the most fundamentally sound companies in the market. So this is just something to keep in mind as we separate the good stocks from the bad following Alcoa’s report today.
Expectations for Alcoa Earnings
Alcoa is set to report third-quarter financial results after the market’s closing bell today. The consensus estimate is for the company to report earnings per share of 23 cents on $5.85 billion in sales. This would represent 109% annual earnings growth, and 1.5% annual sales growth.
In the past two quarters, Alcoa has produced a positive earnings surprise, 80% and 50% respectively. I look for this trend to continue with third-quarter earnings: Analysts have revised their estimates 53.3% higher in the past three months, and positive analyst revisions typically precede an earnings surprise.
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Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
