What To Watch For This Week: International Markets Celebrating Holidays So The Focus Will Be On U.S. Earnings Led By McGraw-Hill, Cisco, & Michael Kors
Wall Street Investors will see earnings reports from the likes of American Financial (NYSE: AFG), Campbell Soup (NYSE: CPB), McGraw-Hill (NYSE: MHP), Michael Kors (NYSE: KORS), Goodyear Tire (NASDAQ: GT), Comcast (NASDAQ: CMCSA), Cisco (NASDAQ: CSCO), Zillow (NASDAQ: Z), Weight Watchers (NYSE: WTW), Cabela’s (NYSE: CAB), Pepsico (NYSE: PEP), Whole Foods (NASDAQ: WFM), Nielsen Holdings (NYSE: NLSN), and Goldcorp (NYSE: GG).
Monday is a rather lackluster day with nothing too exciting going on.
Tuesday we will see earnings from McGraw-Hill. In a typical quarter, the holding company generally wouldn’t attract much investor attention, however this isn’t a typical quarter. McGraw-Hill has become a hot stock over the past week, as it ‘s the parent company of the ratings agency Standard & Poor’s who is currently being sued by the Obama Administration.
That’s right, you heard correctly. Just last week, the Obama administration sued the S&P over its rating of CDOs and mortgage-backed securities, alleging that the fault ratings helped contribute to the worldwide financial crisis. The government is seeking close to $5 billion from McGraw Hill, a little less than one-third of the company’s market cap. Seems like a desperate measure for the government, who we all know is in such financial mess that they would look for any scapegoat or way collect more funds that they can waste. We don’t expect this lawsuit to hold up, if so it would cripple McGraw Hill.
Analysts recently upgraded their outlook on McGraw Hill to a Buy, holding a price target of $57 per share. Analysts are confident McGraw-Hill will report a strong quarter Tuesday, however they say that the market might not give them the credit they deserve. As for the lawsuit from the government, they claim it is totally politically motivated and claim the S&P has done nothing wrong, as ratings don’t predict bond prices. As a result, don’t be worried about the potential suit and focus more on the strong long-term prospects and outlook McGraw-Hill has going forward.
Tuesday will continue to be a busy day for another popular fashion designer and retailer, Michael Kors (NASDAQ: KORS). Analysts currently expect the company to post earnings per share of $0.41 on revenue of $540.30 million. Michael Kors has performed exceptionally well since their IPO in 2011 as shares are up well over 130%. In the last three months alone, shares are up over 13%. Michael Kors receives exceptional analysts coverage with all 13 analysts currently covering the stock issuing a Buy rating or higher. As a result analysts continue to be Bullish and have set out a price target of $71 per share. Going into earnings, KORS is a top pick as they are a leading retail growth story with high estimate achievability and strong growth prospects going forward.
Wednesday’s big earnings come from the networking giant, Cisco. Shares are up well over 25% the past three months. Analysts expect the company to report earnings per share figure of $0.48 on revenue of $12.06 billion.
67% of analysts covering Cisco have a Buy rating or higher. Analysts remain positive going forward and have issued at price target of $24 per share. We agree with their assessment and believe revenues will be right in line with management’s guidance. Also, we expect sequential growth in switching and routing. By geography, we expect to see relative strength from North America and potential for Europe to beat very low expectations.
Don’t expect much from the international markets this week. From the Chinese celebrating Chinese New New Year, to Brazil celebrating carnival many of the banks will be closed much this week. Chinese banks will be closed all five days, Japan will also be closed on Monday for Founder’s Day and Brazil’s stock exchange will be closed Monday through Thursday due to Carnival.
So as you can see the international markets will be rather quiet. As a result, expect earnings reports to dominate the markets and signal which direction they will go. We expect the markets to continue to trade on fundamentals, as the risks associated with Asia are limited due to the holiday. Europe could be a threat to the bull markets but we still believe earnings will b e a bigger factor.
Reports: China, Japan, Hong Kong, Singapore and Brazil Markets Closed
Earnings from: American Financial (NYSE: AFG), Nielsen Holdings (NYSE: NLSN), Lowes (NYSE: L)
Reports: China, Hong Kong and Brazil Markets Closed; U.S. Federal Budget Balance (Expected -$2B); South Korean Unemployment Rate (Prior 3%)
Earnings from: Coca-Cola (NYSE: KO), McGraw-Hill, Western Union (NYSE:WU), Level 3 Communications (NYSE: LVLT), Rackspace Hosting (NYSE: RAX), Michael Kors, Goodyear Tire
Reports: China, Hong Kong and Brazil Markets Closed; U.S. Core Retail Sales (Expected 0.1%); Japanese GDP (Expected 0.1%)
Earnings from: Comcast (NASDAQ: CMCSA), CenturyLink (NYSE: CTL), Dean Foods (NYSE: DF), Whole Foods (NASDAQ: WFM), Zillow, Lorillard (NYSE: LO)
Reports: China and Brazil Markets Closed; German GDP Expected (Expected -0.5%); Eurozone GDP (Expected -0.4%)
Earnings from: Cabela’s, Pepsico, Goldcorp, Alpha Natural Resources (NYSE: ANR), Molson Coors (NYSE: TAP)
Reports: Chinese Market Closed; U.K. Retail Sales (Expected 0.8% Year-over-Year); U.S. Industrial Production (Expected 0.2% Month-over-Month); U.S. University of Michigan Consumer Sentiment (Expected 74.8)
Earnings from: JM Smucker (NYSE: SJM), Campbell Soup (NYSE: CPB)