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Earnings For the Week of April 12

04/12/2010

"Now leading off for the Bull Market - ALCOA (AA)!"

Well, not exactly Derek Jeter or even Johnnie Damon (circa 2004 Bosox), but Alcoa (AA) it is.

Okay, earnings are here and the question is clearly how much "upside surprise" is left to keep the near term bull momentum in place. The markets have acknowledged significant positive EPS revisions over the past quarter. Let's also keep in mind the response to earnings back in January was unfavorable, despite excellent top-line growth. Technology lost its mojo back in January, as well as select financial "best in breed" companies - JP Morgan (JPM) and Goldman Sachs (GS).

So, for this quarter, I caution long term investors not to get overly concerned or irrationally exuberant after the results. Just view the results as providing insight toward how robust or moderate global and domestic growth could be. I opine that "go global" is still the theme; strictly holding a "domestic view" is clearly jeopardizing the portfolio to possible outperformance abroad.

In terms of "growth," the view that I align myself with most is that of Goldman Sachs, who forecast a declining 2010 GDP trend. Q1 2010 +2.5% Q2 2010 +2.0% Q3 2010 +1.5% Q4 2010 +1.5%, followed by a 2011 upward trend peaking at +3.5% in Q3 2011. 

Evidence of my cautious near-term outlook for the equity markets is 3 of the 4 top S&P 500 performers for the week of April 8 were Eastman Kodak (EK), Harley Davidson (HOG), and Wynn Resorts (WYNN).  We will need a "quality transition" to keep the equity index tortoise appreciation going.

This week's interesting releases & EPS estimates (all consensus estimates are based on Thomson Reuters survey):

Monday April 12 - Alcoa (AA) $0.11

Tuesday April 13 - Intel (INTC) $0.37

Wednesday April 14 - JP Morgan (JPM) $0.64

Thursday April 15 - Google (GOOG) $6.56

Friday April 16 - Bank of America (BAC) $0.09

Friday April 16 - General Electric (GE) $0.17

 

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