The first-quarter earnings season got off to a good start last week, as Alcoa led things off for the Dow Jones Industrials
Let's take a look at the expectations for the four Dow stocks that are reporting quarterly results today.
Expected Year-Over-Year Revenue Growth
Expected Earnings per Share
Last Year's Earnings Per Share
||Before market open||2.7%||$0.87||$0.86|
Johnson & Johnson
||Before market open||0.5%||$1.35||$1.35|
||After market close||0.7%||$2.65||$2.41|
||After market close||(0.1%)||$0.50||$0.59|
Sources: Thomson Reuters, Yahoo! Finance.
Few analysts expect any big surprises from Coca-Cola when it reports this morning. But as Fool analyst John Del Vecchio points out, a trend toward lower profit margins because of increased raw ingredient costs is somewhat troubling for longer-term investors. Moreover, rising accounts receivable have hampered cash flow recently, and the company has taken advantage of low interest rates to more than triple its long-term debt in just the past two years. Regardless of what Coke says this quarter, those are warning signs that investors should watch well into the future.
Johnson & Johnson, on the other hand, definitely has something to prove: that it can clamp down on reputation-damaging problems that have plagued the company for years. On top of numerous recalls, a judge ruled yesterday that J&J's Cordis subsidiary will have to pay Boston Scientific $40 million for patent infringement. With CEO Bill Weldon stepping down, the glimpse at J&J's outlook and future strategy will be far more important than the flat results that analysts are expecting from the health-care giant.
IBM has already gotten a huge boost from sales and earnings growth in the past, so expecting too much from the company this time around may be setting yourself up for disappointment. But as Fool tech analyst Eric Bleeker pointed out in his Rising Star buy recommendation for the company, IBM's breadth in offering hardware, higher-margin software, and highly profitable support services to help bring it all together gives the company a huge competitive advantage -- along with a big incentive for clients to stick with IBM rather than trying to take their business elsewhere. The earnings growth that's expected from IBM won't be nearly enough to reach its long-term goal of $20 per share in annual earnings three years early, but it should keep the tech giant on track to get there by 2015.
Finally, Intel is the only company of the four that's expected to see falling profits and a slight decline in revenue. Hewlett-Packard's positive PC sales announcement notwithstanding, Intel can't afford to rest on its laurels and expect its dominance in PC microprocessors to bring it continuing growth. Fortunately, the company knows that quite well, and as Fool contributor Sean Williams recently pointed out, Intel is pushing hard to penetrate the tablet and smartphone market. It's too early for its recent innovations to have a huge impact on its numbers, but you should still look closely at the line items behind the headline numbers to get glimpses of how Intel's efforts to diversify its chip offerings are doing.
Don't stop watching now
Earnings can have dramatic impacts on the stocks you own, so you need all the information you can get to give yourself an edge. Be sure to look at The Motley Fool's brand-new special report, which identifies five stocks that investors simply have to watch this earnings season. The report is free, so let me invite you to get the scoop before these companies report.
Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. You can follow him on Twitter. The Motley Fool owns shares of Johnson & Johnson, Intel, Coca-Cola, and IBM. Motley Fool newsletter services have recommended buying shares of Coca-Cola, Johnson & Johnson, and Intel, as well as creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.
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