Stocks to Watch July 21, 2014: The week of July 21 is the peak of second-quarter earnings season.
So far, the season is shaping up to be a good one. Companies are not only beating on earnings per share (EPS), they're also trumping revenue forecasts. Plus, profitability levels are coming in healthy, with margins in several sectors (banks and semiconductors in particular) surprising to the upside.
This week's earnings parade brings reports from some key players across several sectors. Following are six stocks you'll want to watch as they give us a look at tech sector activity.
Six Stocks to Watch: AAPL, FB, and More
Netflix Inc. (Nasdaq: NFLX) will release earnings for the three months ending June 30 after the close on Monday. The video streaming giant is expected to post strong results thanks to its original lineup of programs that continue to attract new subscribers. The second season of "Orange is the New Black" is expected to have had a positive material effect on subscriber count. Analysts are looking for EPS of $1.13 on revenue of $1.3 billion. That would be up from EPS of $0.49 on revenue of $1.1 billion in the same quarter a year ago.
Apple Inc. (Nasdaq: AAPL) is on tap to post fiscal Q3 numbers Tuesday after the close. Expectations are running high with most analysts expecting the iPhone maker to handily beat its Q3 revenue guidance of $36 billion to $38 billion. Wells Fargo said in a research note earlier in the month that Apple's aggressive promotional activity, along with new carrier partners (16 added since the end of April for a total of 332) should boost sales. Consensus forecasts have Apple reporting EPS of $1.23 on revenue of $37.92 billion. Goldman Sachs predicts Apple sold 32.7 million iPhones during the June quarter, up 4.7% year over year (YOY), but down 25.2% quarter over quarter. A sequential decline is expected as Apple gears up to launch the iPhone 6 this fall. Shipments of iPads are expected to jump 5.3% YOY to 15.4 million units. Looking forward, Apple is expected to release the iPhone 6 in September. While the launch would affect revenues for just a couple of weeks, it would give Q4 numbers a notable boost. For all our Apple stock coverage, go here.
Microsoft Corp. (Nasdaq: MSFT) is also scheduled to post results after Tuesday's close. Estimates have the tech giant earning $0.60 per share in its fiscal fourth quarter. That's down from $0.67 three months ago. Earnings of $2.68 per share are expected for the full fiscal year. Revenue is projected to be 16% above the year-earlier total of $19.90 billion at $23 billion for the quarter. For FY2014, revenue is expected to come in at $86.45 billion. For three straight quarters, MSFT's revenue has been rising. In the last quarter, revenue rose 3% to $20.40 billion. In Q2, revenue jumped 14% YOY, while Q1 revenue was up 16% YOY. Last week, Chief Executive Officer Satya Nadella announced the company will lay off some 18,000 workers, a move expected to further hike revenue. Since Nadella took the helm, MSFT shares are up 22%, compared to a 9% gain over the same period for the Nasdaq.
Facebook Inc. (Nasdaq: FB) will report Q2 numbers after the close on Wednesday. The consensus estimate is for EPS of $0.32, up from $0.28 three months ago and $0.13 in the same quarter a year earlier. The usual suspects - revenue, mobile, user count, and engagement time - will be closely scrutinized. But most closely watched will likely be ad sales. This has been, and continues be, a bright growth spot for FB. According to research firm eMarketer, FB will deliver net ad sales of $10.9 billion this year, up 56% YOY.
General Motors Co. (NYSE: GM) will deliver Q2 earnings Thursday before the open. Expectations are for the automaker to post EPS of $0.67, down from $0.93 a month ago and $1.06 three months ago. GM has been plagued by recall after recall, but sales have remained robust. GM sold a total of 2,505,889 vehicles around the world during the Q2 2014, a 0.5% increase on a YOY basis. But the hits keep coming. U.S. senators are calling for immediate action regarding its ignition switch defect, allegedly responsible for at least 13 deaths. Furthermore, lawmakers are calling for GM's top lawyer, Michael Milliken, to be fired. Despite all of GM's woes, shares remain a favorite among analysts. Of the industry experts that cover the stock, 14 rate GM "Buy," four a "Hold," and just two maintain a "Sell," according to The Wall Street Journal.
Amazon.com Inc. (Nasdaq: AMZN) reports Q2 earnings after the close on Thursday. Revenue is expected to come in at $19.3 billion on EPS of $0.62. Bernstein analysts, however, are more bullish. The firm is looking for EPS of $0.86 on revenue of $19.44 billion. Bernstein believes the e-commerce behemoth's retail business is "doing well" and that Wall Street continues to undervalue it. They note that gross margins are still expanding, adding that Amazon's fulfillment expenses are growing more slowly than gross profits from the company's retail segment. AMZN just launched an e-book subscription service and is now taking its potentially lucrative TV show production very seriously.
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