02 November 2008

Flood of Quarterly Earnings Reports to Crest

The flood of earnings reports for the July-August-September quarter is about to crest, and much new data to digest will be published during the coming week. We will also start to see reports from companies having fiscal quarter extending into October.

Well-known companies scheduled to report earnings during the week of 3 November include:

Anheuser-Busch (NYSE: BUD), Archer-Daniels Midland (NYSE: ADM), Automatic Data Processing, Inc. (NYSE: ADP) look-ahead, Blackstone Group (NYSE: BX), Broadridge Financial Solutions, Inc. (NYSE: BR) look-ahead, Cisco Systems, Inc. (NASDAQ: CSCO) look-ahead, DirecTV (NYSE: DTV), Duke Energy (NYSE: DUK), Edison International (NYSE: EIX) look-ahead, Ford Motor (NYSE: F), Foster Wheeler (NASDAQ: FWLT), General Motors (NYSE: GM), Goodyear Tire & Rubber (NYSE: GT), Healthsouth (NYSE: HLS), King Pharmaceuticals, Inc. (NYSE: KG) look-ahead, MasterCard (NYSE: MA), NVIDIA (NASDAQ: NVDA), PG&E (NYSE: PCG), Sunoco (NYSE: SUN), Time Warner (NYSE: TWX), Transocean (NYSE: RIG), Qualcomm (NASDAQ: QCOM), Viacom (NYSE: VIA.B), and Walt Disney (NYSE: DIS).

We previously posted third-quarter earnings "look-aheads" for the five companies highlighted above. When these firms release actual earnings, we will compare each Income Statement with our baseline and update the GCFR gauges.

It will probably take us a couple of weeks to complete these evaluations, and we're hoping to make time for examinations of Anheuser-Busch and NVIDIA.


We have already posted evaluations of the financial statements issued by:


The following is an update to the scorecard we use to look for trends in the tiny, unscientific selection of earnings reports we are able to analyze.

Company
Net Income Compared to Q/E Sept 2007
Net Income Compared to GCFR Estimate
Overall Gauge Score (100 = max)
 Gauge Increasing the Most
 Gauge Decreasing the Most
BP
+83%
-2.2%
78
Value
None
ConocoPhillips
+41%
+0.6%
48
 Value
 Profitability
Intel
+12.5%
+0.9%
62
 Value
 Growth
Microsoft
+2.0%
-0.4%
57
 Cash Mgt
 Growth
Nokia
-30%
+15%
51
 Value
 Profitability
PepsiCo
-9.6%
-9.8%
30
 None
 Value
Tidewater
+10.4%
-1.0%
34
Value
Profitability
Watson
+105% (*)
+39% (*)53
Profitability
Cash Mgt
(*) includes income was related to the sale of the Somerset joint venture to Mylan Labs (NYSE: MYL).


Net Income was down at the two companies that interact most directly with consumers. We suspect the fourth-quarter version of this table will show a greater number of companies reporting earning declines.

The fact that four of our earnings estimates were within 1 percent of the actual figures is mostly due to dumb luck, but it also suggests these companies hadn't yet suffered significant discontinuities in their operations from the credit crisis and consequent slump in economic activity. The fourth quarter might be very different.

With stocks battered so brutally, it's no surprise that the contrarian Value Gauge is the one moving up, while Growth and Profitability are suffering.

The GCFR standard practice is to compute the Value gauge using the share price at the end of the subject quarter. As everyone knows, share prices dropped substantially for almost every company traded during October. We recomputed a few Value gauge scores using October's closing prices and saw significant score increases. Overall scores would rise by 5 to 15 points using the latest, weaker prices.

This tells us the shares are inexpensive, in some cases significantly so, by historic (admittedly backward-looking) measures. Alas, cheap stocks can certainly become cheaper.
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