Stocks to watch for Monday, Oct. 20, 2014: Earnings are again in focus this week as a number of key industry players post Q3 results.
Q3 estimates have come down slightly in recent weeks reflecting an economic slowdown abroad that's weighing on exporters, a rising U.S. dollar, and falling commodity prices.
Still, the U.S. economic backdrop remains solid as reflected in robust Q3 manufacturing output data and recent job growth.
Monday's hot stocks to watch include a leading smartphone maker, a tech titan, and a boutique burrito chain. Results are expected to be solid and could goose markets.
7 Hot Stocks to Watch on Monday
Hot Stocks to Watch No. 1: Apple Inc. (Nasdaq: AAPL) reports fiscal Q4 results after Monday's close. Expectations are for earnings per share (EPS) of $1.31, up from $1.18 year over year (YOY). Whisper numbers are for EPS of $1.40. Revenue is seen as rising to $39.83 billion from $37.47 billion. Investors' expectations are running high as this quarter will reflect sales of the latest iPhone 6 and 6 Plus, which have been strong. Goldman Sachs said investors will particularly focus on gross margin guidance for December quarter. The investment bank expects September, as well as December, quarter gross margins to remain at 37.9%, but are likely to improve in coming quarters. That's because Apple decided not to put the expensive sapphire display in its iPhone 6. Apple's iPad business, however, is likely to show continuing signs of stuggles. iPad sales slipped YOY in both March and June quarters. And the iPhone 6 debut (with larger screens) is likely to have hampered iPad sales. Yet there are plenty of reasons why Apple will impress. Chief Executive Officer Tim Cook said Thursday more than 500 banks will support its new payments system available Monday on the iPhone 6 and forthcoming Apple Watch.
Hot Stocks to Watch No. 2: International Business Machines (NYSE: IBM) posts Q3 results after Monday's closing bell. Analysts expect the tech titan to report EPS of $4.31 on revenue of $23.38 billion. Whisper numbers are for EPS of $4.33. IBM had a busy Q3. In August, IBM announced that the agreement to sell its lower-end server business for $2.3 billion to Chinese computer maker Lenova Group Ltd. was cleared by regulatory officials. Also in August, IBM launched Watson Discovery advisor, a tool for scientists. In September, the Watson tool became available for business clients. Earlier this month, IBM announced a collaboration with SAP on the cloud to push IBM's expanding network of data centers. Shares are down 3.23% year to date.
Hot Stocks to Watch No. 3 Chipotle Mexican Grill Inc. (NYSE: CMG) is expected to post EPS of $3.84 after the close on Monday. Whisper numbers are for EPS of $3.88. The upscale burrito chain trumped Q2 EPS expectations by $0.41, sending shares surging 15%. Same-store sales for restaurants open at least a year - a key measure of growth - climbed 17% last quarter. That marked one of the strongest quarterly sales rates in Chipotle's history as a public company, according to CEO Steve Ellis. "These extraordinary results are made possible by our special food culture, innovative people culture, and strong business model," Ellis said in a statement. Analysts say Chipotle has benefited from increased demand for fast food that is healthier and less expensive than what's available at traditional sit-down restaurants. In a trying year for equities, CMG shares are up a hearty 22% year to date.
Hot Stocks to Watch No. 4: Gannet Co. Inc. (NYSE: GCI) is on tap to post Q3 results before the open Monday. Analysts are looking for the parent company of USA Today to report EPS of $0.55. Second-quarter earnings, reported in late July, rose 84% YOY, boosted in large part by a massive increase in revenue from its broadcasting division. GCI shares popped in August after announcing it is splitting into two publicly traded companies. The media giant will separate its broadcasting and digital business from its publishing division. Gannett's strategic move is one that has become increasingly popular among media competitors in attempts to shield their more lucrative business lines from waning print advertising. "We are creating two companies that will be among the largest and strongest in their peer groups," the company said. The mean analyst rating on GCI is a "Strong Buy," according to Zacks Research.
Hot Stocks to Watch No. 5: Halliburton Co. (NYSE: HAL) will release Q3 results before markets open Monday. Expectations are for the oil giant to post EPS of $1.10 on revenue of $8.52 billion. Whisper numbers are for EPS of $1.12. With oil prices at four-year lows, worries are mounting oil companies' margins will be squeezed. Market participants, however, are betting that beaten-down Halliburton is heading higher. After HAL shares plunged last week, option traders stepped in and bought about 4,000 November 62.50 strike calls. At last check, HAL was changing hands at around $54.
Hot Stocks to Watch No. 6: Hasbro Inc. (NYSE: HAS) will report Q3 numbers before Monday's open. Analysts expect the toy giant to report EPS of $1.45. Whisper numbers are for EPS of $1.47. Hasbro announced late last month it inked a new deal with Walt Disney Co. (NYSE: DIS), giving it the global rights (with the exception of Japan) to develop dolls based on Disney's blockbuster film "Frozen." The Pawtucket, R.I.- based toy company will also make dolls based on Disney Princess stories and characters including Cinderella, Beauty and The Beast, and The Little Mermaid. The rights for the "Frozen" dolls will shift from Mattel to Hasbro in the spring of 2016. HAS shares are little changed year to date.
Hot Stocks to Watch No. 7 Valeant Pharmaceuticals International Inc. (NYSE: VRX) will post Q3 results before Monday's opening bell. The Canadian serial acquirer of companies is expected to report EPS of $0.61, but upward versions have increased heading into the release, suggesting a healthy beat. Valeant made headlines this year for teaming up with activist investor Bill Ackman to takeover Botox maker Allergan Inc. (NYSE: AGN). The hostile takeover is still brewing, with Allergan vehemently opposed to any deal.
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