Third-quarter earnings season has picked up, with a number of companies posting earnings today before the opening bell and two tech giants set to report after the close.
When Q3 earnings kicked off a week ago, analysts estimated third-quarter earnings would come in 6.5% higher than the same quarter a year ago.
That estimate is now is a lackluster 0.8%, and a slowdown from Q1's growth of 3.4% and Q2's growth of 2.3%.
Expectations have been trimmed a number of times for Q3 earnings growth. Some 91 companies in the Standard & Poor's 500 Index have cut their earnings guidance, while just 19 have raised them, according to FactSet. Both are record numbers, the data research firm says, since it began keeping such count in 2006.
That's a bad sign for stocks, as earnings expectations are a key driver of stock prices. As Barron's notes, when analysts raise estimates for a company, shares typically rise right away. Moreover, studies show stocks also tend to gradually outperform in the months following earnings estimates increases.
Here's what to watch in earnings today as more big-name companies and stocks post results.
Key Earnings Today: Citigroup
Citigroup Inc. (NYSE: C) reported that third-quarter profit rose to $3.26 billion, or $1 a share, up from $468 million, or $0.15 a share, in the same period a year ago. That was 4 cents short of analysts' forecasts.
"We performed relatively well in this challenging, uneven macro environment," Chief Executive Officer (CEO) Michael Corbat said in a statement. Corbat added he aims to get the bank back to industry-average levels of profitably by about 2015.
Other Citigroup earnings details to note:
- Revenue rose 31% to $17.9 billion, but also missed estimates of $18.73 billion.
- Total overhead expenses were $11.7 billion, moving closer to Citi's goal to push spending below $11 billion per quarter. Slashing headcount by 11,000 over the past year helped.
- Expense cuts and reduced losses from Citi Holdings, a division set up to manage underwater mortgage securities and other troubled assets, eked out a 0.69% return on assets, a near sevenfold increase from the same quarter a year ago.
- Credit quality at the bank also continued to improve.
- Its loan-loss reserve release, a buffer against losses, was $675 million, 55% less than Q3 of 2012.
- Revenue from bond market trading fell 26%.
The third-largest U.S. bank is still recovering from the 2008 financial meltdown. Shares were up a nickel in early afternoon trading.
Key Earnings Today: Coca-Cola
The Coca-Cola Co. (NYSE: KO) reported earnings per share (EPS) of $0.54 on revenue of $12.03 billion, up from $0.50 on revenue of $12.02 billion a year ago.The results beat the consensus estimates for EPS of $0.53 and $12.05 billion in revenue.
"We delivered sound third quarter results in the confines of an ongoing challenged macroeconomic environment driven by increasing volatility across emerging markets... While we saw sequential improvement in the business compared to the second quarter, together with our global bottling partners, we remain constructively discontent and resolutely focused on further advancing our growth trajectory," Chairman and CEO Muhtar Kent said in a statement.
Other Coca-Cola earnings details to note:
- Operating income slipped 12% in Q3 and 6% year to date.
- Currency was a 2% headwind on comparable net revenue and a 5% headwind on comparable operating income in the quarter.
- While the company didn't provide guidance, consensus estimates for Q4 call for EPS of $0.47 on revenue of $11.37 billion. Full-year EPS are estimated at $2.10 on revenue of $47.34 billion.
- Since the beverage behemoth reported Q2 earnings in July, both quarterly and full-year estimates have dropped.
Coca-Cola remains a favorite among income investors, however, having raised its dividend for 51 consecutive years.
Additionally, as The Wall Street Journal pointed out, a $40 investment in KO in 1919 would be worth about $10 million today. Shares were up 0.18% in afternoon trading.
Key Earnings Today: Johnson & Johnson
Johnson & Johnson (NYSE: JNJ) posted sales of $17.6 billion for Q3, an increase of 3.1% compared to the same quarter a year ago.
Helped by healthy gains from new prescription drugs that are replacing older blockbuster drugs that have come off patent protection, net earnings were $3.9 billion and diluted EPS were $1.36, representing increases of 11.3% and 8.8% respectively compared to the year earlier quarter. Results beat EPS expectations of $1.32.
JNJ also raised EPS estimates for the full year to $5.49, up from $5.44, citing particularly strong results in its Tylenol and Motrin brands, as well as its Aveeno skin care line. Shares were up 0.64%.
After the close, we get numbers from Intel Corp. (Nasdaq: INTC) and Yahoo! Inc. (Nasdaq: YHOO). Intel is expected to post EPS of $0.53, down from $0.58 a year ago. Analysts are looking for Yahoo to report $0.33 per share, 2 cents less than the same quarter a year ago.
The Wall Street Journal:
Stocks to Watch: Citigroup, Coca-Cola, Johnson & Johnson
The Coca-Cola Company Reports Third Quarter and Year-to-Date 2013 Results
The New York Times:
Citi's Quarterly Profit Misses Estimates