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Strong Dollar's Sting, Revenue Results Dominate Earnings Chatter

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April 23, 2015

Early stock market action tips lower. Barely. Still, it’s a sign that few participants may be willing to stick their necks out as big-name technology stocks feature in this evening’s earnings parade. Among them:  Google (GOOG, GOOGL), Microsoft (MSFT), and Amazon.com (AMZN). Their news hits in the wake of a revenue miss by Facebook (FB)—more on it below.

So, it could be anything goes in the post-market flurry as traders hone in on the all-important revenue figure, plus any strong-dollar impact on overseas profit ambitions. Wall Street consensus pegs GOOGL’s Q1 earnings at $0.61 per share, while MSFT is expected to report earnings of $0.51 a share for its Q1. AMZN, typically closely watched for its spending as it continues to expand its empire, is likely to post a loss of $0.16 per share in the latest reporting period, industry analysts believe.

And to fuel the techies? Starbucks (SBUX). The coffee retailer is expected to post fiscal Q2 EPS of $0.33 per share in its post-market report today, according to an industry analyst consensus.

FIGURE 1: 2100 IS YO-YO NUMBER. The S&P 500 (SPX) continues to bounce on either side of the closely watched 2100 line as a mixed batch of earnings reports influenced a wait-and-see attitude to Wall Street.  Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Bulls UnLike Facebook (For Now). FB flashed red early Thursday after the social-media company late Wednesday said currency effects nicked its Q1 revenue, which came in below Street analyst expectations. Now there’s a glass-half-full way to look at that. It means FB is expanding its footprint overseas. Last year, Facebook derived 54% of its revenue from outside the U.S. and this year the company expects that number to rise. For investors, international market and currency exposure should factor into their FB due diligence.

CAT Finds its Purr. Caterpillar (CAT) shares are clawing higher early Thursday after heavy equipment- maker reported Q1 profit and sales that were well above Street expectations. Now, the Street had lowered its expectations significantly. But importantly, CAT affirmed its full-year revenue outlook of $50 billion, but raised its EPS view to a range of $4.70 to $5 from $4.60 to $4.75. "Our focus on operational improvement, including lean manufacturing and cost management, is helping in what is a tough time for some of our important cyclical businesses," said CEO Doug Oberhelman in his conference call. The stock had dropped just over 7% year to date through Wednesday.

What’s Up with the Housing Market? More housing numbers are due on Thursday, with new-home sales for March on tap mid-morning. Economists surveyed by MarketWatch expect the annual rate to drop to 504,000 after jumping to a seven-year high in February. But could new home stats defy the consensus. The report will follow stronger-than-expected home price and existing-home sales data issued earlier this week. Those results contributed to waning demand this week for U.S. government debt. And you know what that means, higher market interest rates. The yield on a benchmark 10-year note rose Wednesday for a third straight day, hitting 1.972%, and marking the largest three-day yield gain since the middle of February.

Coming Next Week: More earnings as the latest reporting season continues, including Apple (AAPL) after the close Monday. It remains a leading volume draw among TD Ameritrade’s retail clients. Several drug companies are also on the earnings slate. Reminder:  Friday, May 1 will not have the monthly employment report; we’ll have to wait until May 8 for the latest job-market snapshot.

Good trading,
JJ
@TDAJJKinahan

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