Earnings season is here: AAPL should beat, watch BAC

Posted Jul 10th 2007 8:21AM by Georges Yared
Filed under: Forecasts, Google (GOOG), Microsoft (MSFT), Apple Inc (AAPL), Cisco Systems (CSCO), Bank of America (BAC), Costco Wholesale (COST), Wells Fargo (WFC)

The fourth of July fireworks may be now replaced by the fireworks of the upcoming earnings season.The good news is the pre-announcement season, where companies may warn and cut expectations, was at a minimum. Portfolio managers love to play the game of no-news, good-news. Meaning, if a company does not pre-announce an earnings shortfall but rather declares its conference call date, then the company has made its quarterly numbers.

The managers I speak to expect to see technology companies coming through with strong numbers and solid guidance for the rest of the year. The twelve I talk with often are all in agreement that Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG) should beat their numbers and guide even higher. The mainstays of Microsoft (NASDAQ: MSFT) and Cisco Systems (NASDAQ: CSCO) should meet or slightly exceed expectations. (Cisco finishes its quarter on July 31, but will report the second week of August). The rest of the tech stocks will follow suit.

The interesting sector to watch will be the financials. The large banks and mortgage issuers still feel the pressure of a tough mortgage environment. The big question will be if these massive institutions took enough of a "reserve" following the first quarter numbers or if those reserves need to be raised again for the year. If so, do yearly earnings expectations get re-set to the downside? Watch Bank of America (NYSE BAC) and Wells Fargo (NYSE: WFC) carefully for the tone of the mortgage industry.

Retailers, pharmaceuticals, medical devices, defense companies, and cyclicals appear to be inline for decent quarterly results. The retailer to watch carefully is Costco (NASDAQ: COST). I have heard from many sources this may be the beginning of breakout quarters for Costco. The stock has acted very well these past couple of weeks. Keep in mind that Costco has a July 31 quarter end, but the June same-store sales will be out later this week, giving a strong indication to the quarter's performance.

So readers, let's sit back and get ready to slice and dice the numbers from hundreds of America's leading companies these next 3 weeks.

Georges Yared is the Chief Investment strategist of Yared Investment Research.

Tags: aapl, apple, bac, bank of america, BankOfAmerica, cisco, cost, costco, csco, goog, google, microsoft, msft, wells fargo, WellsFargo, wfc