Watch Earnings News This Week
With fourth-quarter earnings seasons hitting its stride, investors are returning to the familiar comfort of cold, hard numbers — the press releases, conference calls and spreadsheets that provide a real view of corporate America’s performance.
Trading has been dominated for months by speculation about news events: Washington’s perpetual state of gridlock, the impact of Superstorm Sandy, the international economic slowdown. Earnings give professional market-watchers something tangible to analyze.
This week will bring answers to questions that have hung over the market for months: Will slower growth in China put a dent in big U.S. companies’ income? Will new housing numbers come in strong enough to keep homebuilders flying high? How much did Superstorm Sandy cost big insurers?
Here’s a guide to some of the big stories that professional investors will be watching as the earnings news arrives:
∎ The China Question: Big U.S. companies are increasingly reliant on sales to China, and growth there appears to be slowing. This round of earnings will shed light on how hard the slowdown is hitting American companies.
The messages so far are mixed. When Alcoa announced its results on Jan. 8, executives said they expect sales to grow by 7 to 10 percent in 2013, thanks to “the wealthier middle class” and “the general uptick in the Chinese economy.”
Announcing its fiscal second quarter results last month, however, Nike said China was the only region where revenue declined. Executives said they expect lower income from China in the coming quarters as they work to build a strategy around Chinese consumers.
∎ Housing Rally: How Long? The government said Thursday that U.S. builders started work on homes in December at the fastest pace in 4½ years, and that last year was the best year for residential construction since the early stages of the housing crisis.
This week brings more data on sales of new and existing homes in December. If the numbers look weak, analysts say, homebuilder stocks may appear overbid and the rally may pause until earnings results arrive from big players like D.R. Horton Inc. (Jan. 29) and PulteGroup Inc. (Jan. 31).
∎ How Super, Storm Sandy? Superstorm Sandy had broad, negative economic effects, like keeping holiday shoppers home and wiping out disposable income. But its most direct impact was on insurers. Risk modeling firm AIR Worldwide says storm-related losses covered by insurers could total $16 billion to $22 billion.
This quarter’s earnings will give traders their first look at how hard Sandy hit the major property and casualty insurance companies. Analysts have been reducing their expectations for the financial industry’s performance mainly because of insurers, Butters said.
∎ Tech Trouble: Tech companies have been vocal about the challenges they face. Of the 32 tech companies that gave earlier guidance about their fourth-quarter performance, more than 90 percent were negative, Butters says. The usual number is closer to 50 percent, he said.
One troubling sign Thursday was Intel Corp.’s announcement that weak demand for personal computers caused its fourth-quarter net income to fall 27 percent and its revenue to decline 3 percent.