Wrapping Up the Third Quarter Earnings Season

The flood of third-quarter earnings reports has crested, but the coming week will still provide some interesting data to digest.  Many of the reports will be issued by companies, such as retailers, that have fiscal quarters ending on 31 October.

Well-known companies scheduled to report earnings during the week of 10 November include:

Agilent Technologies (NYSE: A), American International Group (NYSE: AIG), Computer Sciences Corp. (NYSE: CSC), JC Penney (NYSE: JCP), Liz Claiborne (NYSE: LIZ), Macy's (NYSE: M), Nordstrom (NYSE: JWN), Nortel (NYSE: NT) [Look Ahead], Paragon Shipping (NASDAQ: PRGN), Sempra Energy (NYSE: SRE), Starbucks (NASDAQ: SBUX), Thomson Reuters (NYSE: TRI), Tyco International (NYSE: TYC), Wal-Mart  (NYSE: WMT) [Look Ahead]

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

GCFR evaluations are already available for the third-quarter financial statements issued by:

• Automatic Data Processing (NYSE: ADP) - GCFR analysis
  
• BP p.l.c. (NYSE: BP)  - GCFR analysis 
• Broadridge Financial Solutions (NYSE: BR)  - GCFR analysis
  
• ConocoPhillips (NYSE: COP) - GCFR analysis and update
  
• Cisco Systems (NASDAQ: CSCO) - GCFR analysis
  
• Edison International (NYSE: EIX)  - GCFR analysis
  
• Intel (NASDAQ: INTC) - GCFR analysis and update   
• King Pharmaceuticals (NYSE: KG) - GCFR analysis
  
• Microsoft (NASDAQ: MSFT) - GCFR analysis
• Nokia (NYSE: NOK) - GCFR analysis
• PepsiCo (NYSE: PEP) - GCFR analysis
• Tidewater Inc. (NYSE: TDW) - GCFR analysis
  
• Watson Pharmaceuticals (NYSE: WPI) - GCFR analysis and Update
  

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
ADP	+15.6%	+2.6%	63	Cash Mgt	None
BP	+83%	-2.2%	78	Value	None
Broadridge Financial	-1.1%	+5.0%	44	Value	Profitability
Cisco Systems	0%	+5.8%	64	Value	Growth
ConocoPhillips	+41%	+0.6%	48	Value	Profitability
Edison International	-6.9%	-17.5%	22	Value	Growth
Intel	+12.5%	+0.9%	62	Value	Growth
King Pharma	N/A	+60%	68	Value	Cash Mgt
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).


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.