Some key earnings reports that came in stronger than expected pushed markets higher Friday, to end the week with a gain.
Google Inc. (Nasdaq: GOOG) had its best profit growth in more than a year. The 12% jump in revenue helped push shares over the $1,000 mark Friday. Morgan Stanley (NYSE: MS) hit a 52-week high Friday after reporting it swung to a profit thanks to strong revenue from its retail brokerage arm. And General Electric Co. (NYSE: GE) soared to a five-year high Friday on solid Q3 results and Chief Executive Officer (CEO) Jeffery Immelt's statement that the company is "ready for a really strong fourth quarter."
Now with one of the busiest Q3 reporting weeks under way, here are the key earnings reports investors can't miss this week:
- McDonald's Corp. (NYSE: MCD) reported Q3 earnings per share (EPS) of $1.52, narrowly beating estimates of $1.51 a share. Revenue rose 2% year over year to $7.32 billion, below the $7.33 billion expected. Comparable stores sales were up 0.7% in the United States and 0.2% in Europe. For Q4, McDonald's expects global comparable sales to be relatively flat.
"Our results reflect McDonald's ability to grow amid the broad-based challenges of the current environment by focusing on those areas of the business within our control," CEO Don Thompson said in a news release.
Late last year, the company saw monthly sales figures drop for the time in almost a decade. The Oak Brook, IL-based company has been struggling to boost sales as competition grows and eating habits change - all while global economic conditions remain challenging.
With its global presence, McDonald's provides valuable insight into consumer behavior worldwide. Shares traded as low as $93.24 Monday, off more than 1%.
Upcoming Earnings This Week
- Netflix Inc. (Nasdaq: NFLX) is expected to report fiscal third-quarter EPS of $0.49 on revenue of $1.10 billion after the close Monday. That compares to EPS of $0.13 on revenue of $905.09 million in the same quarter a year ago.
Shares hit a new 52-week high of $352.63 intraday Monday. The stock is up nearly 200% this year, making it one 2013's biggest winners so far.
With shares priced for perfection, even a slight miss could send the stock tumbling.
- Defense firms are firmly in focus this week with reports from Lockheed Martin Corp. (NYSE: LMT) on Tuesday, Northrop Grumman Corp. (NYSE: NOC) and The Boeing Co. (NYSE: BA) on Wednesday, and Rockwell Collins Inc. (NYSE: COL) on Friday.
The sector is up some 40% year to date thanks to previously agreed funding, which offset sequester cuts. Now, defense executives must outline to shareholders what the next several quarters will look like amid a flat or slightly declining government budget environment.
- A number of healthcare companies are on this week's earnings calendar. Of particular note is Amgen Inc. (Nasdaq: AMGN) on Tuesday. In August, the world's largest biotech company bought Onyx Pharmaceutical for $10.4 billion, giving it full rights to a blood cancer drug with multibillion dollar sales potential. While it's too early to see results from the deal, investors will be listening for future projections.
Eli Lilly & Co. (NYSE: LLY), which reports Wednesday, has been under pressure for several years as some blockbuster drugs came off patent and others failed to win Food and Drug Administration approval. The company continues to spend on research. Its research and development (R&D) budget has swelled 20+% since 2009, to $5.3 billion in 2012. While LLY has kept its pipeline full through acquisitions and partnerships (not new drugs), it has 13 products in late-stage development or awaiting approval.
- Caterpillar Inc. (NYSE: CAT) is expected to post third-quarter EPS of $1.67 down from $2.26 in the year ago quarter. In Q2, the Peoria, IL-based company saw earnings drop 43% on weaker demand for mining equipment.
A reliable bellwether of global economic activity, what's bad for Caterpillar is good for almost no one.
- Tech takes center stage Thursday with earnings from Amazon.com Inc. (Nasdaq: AMZN) and Microsoft Corp. (Nasdaq: MSFT).
Amazon is expected to report a loss per share of $0.09, compared to a $0.23 per share loss in the same quarter a year ago. But investors don't pay much attention to Amazon's numbers; they invest in its future. Since 2003, the first year in which the world's largest online retailer earned a profit, through the end of 2011, total earnings amounted to just $5 billion. Investors pay more attention to its new products and new growth areas, like movie streaming.
Meanwhile, Microsoft investors want to see solid financial results. The company is expected to report EPS of $0.54, a penny better than the same quarter a year ago. Last quarter was a big disappointment. The company posted a 21% loss, largely due to a dismal performance in its Windows 8 segment. The extent of the decline in the Window's segment last quarter is likely to weigh on the next few quarters. However, recent restructuring and refocus on things like cloud computing could help Microsoft improve earnings down the road.
In fact, our Money Morning experts see potential in Microsoft stock - take a look.
- Markets also get a read on the health of the auto market Thursday with numbers from Ford Motor Co. (NYSE: F).
The U.S. auto industry has enjoyed a smooth ride over the last several months. Latest tallies show new car buyers have been snapping up autos at a pace not seen since before the financial crisis. And, Ford led the pack in September.
The big three automakers are much leaner since 2008. They've slashed headcount, reduced overhead expenses, and closed a number of plants. However, worries have surfaced that some auto parts may be in short supply thanks to demand and cutbacks.
Ford is expected to report Q3 EPS of $0.37 compared to $0.40 a year ago.
- On Friday we hear from United Parcel Service Inc. (NYSE: UPS). The global shipper, an economic bellwether, is forecast to EPS $1.15, up from $1.06 in the same quarter a year ago.
The company missed estimates last quarter and guided lower, citing increasing customer preference for lower-cost shipping methods and a slowing U.S. economic environment. UPS said it expected the trend to persist. Investors will be listening for any change in sentiment.
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