Week in Preview: Earnings Expectations for Intel, GE, Google and JPMorgan

Posted Oct 10th 2010 12:30PM by Trey Thoelcke
Filed under: Earnings Reports, Forecasts, Google (GOOG), General Electric (GE), Intel (INTC), JPMorgan Chase (JPM), Economic Data

earnings expectations The earnings season kicked off last week with better-than-expected results from Alcoa (AA) and Yum! Brands (YUM), while Marriott (MAR) and Pepsico (PEP) met consensus EPS estimates. This week, bellwether companies Intel (INTC), General Electric (GE), Google (GOOG) and JPMorgan Chase (JPM) are scheduled to report their third-quarter results, and analysts polled by Thomson Reuters are looking for earnings growth from all of them.

Santa Clara, Calif.-based Intel announced the acquisition of McAfee and joint ventures with General Electric and Nokia (NOK) during its third quarter. Analysts forecast earnings for that period to come to 50 cents per share, which is up 34.0% from the same period of last year. The number one semiconductor maker's revenue for the three months ended in September is expected to total $11.0 billion, or 17.1% more than a year earlier. Looking ahead to the full year, the forecast thus far is for earnings of $1.94 per share (+44.8%) and $43.3 billion in revenue (+23.4%). The per-share earnings topped analysts' expectations in the past four quarters, by as much as a dime per share.

Intel's long-term EPS growth forecast of 12.3% is better than that of competitor Texas Instruments (TXN). The 10.6 forward price-earnings (PE) ratio is less than the industry average. This cash-rich company has a dividend yield of 3.2% and reported a jump in net cash flow from operations in the previous quarter. The First Call recommendation has been to buy INTC for more than 90 days, and the mean price target is currently $23.62 per share. Options players seem to expect a move to the upside following the report. Shares sank below $18 about a month ago but ended the week at $19.52.

For a third quarter in which General Electric saw some management changes and increased its quarterly dividend, the Conn.-based conglomerate is expected to post earnings of 27 cents per share. That's up from a year-ago profit of 22 cents per share. But revenue for the three months that ended in September is expected to total $37.7 billion, marginally lower than in the same period of 2009. Looking ahead to the fourth quarter, analysts foresee sequential and year-over-year EPS growth, but another marginal annual decline in sales. The per-share earnings results have topped analysts' expectations in recent quarters by pennies.

GE's long-term EPS growth forecast of 13.1% is better than the industry average. The forward PE ratio of 14.5 is less than industry average and the trailing PE ratio of 17.0. The dividend yield is 2.5%. The consensus recommendation is to buy GE, and the mean price target is $20.23. Warren Buffett recommends dividend-payers like GE over bonds in the current environment. Shares peeked above $17 this week, rising well above the 200-day moving average, for the first time since May.

Analysts anticipate that Google, whose subsidiaries include YouTube and DoubleClick, will report that third-quarter earnings grew 11.7% year over year to $6.67 per share. During the three months that ended in September, Google launched Google Instant and reached an controversial accord with Verizon (VZ) on net neutrality, and analysts expect revenue for that period to to have jumped 19.8% to $5.3 billion. And the forecast is for sequential and year-over-year growth of both EPS and revenue in the fourth quarter. Google's earnings beat consensus estimates in recent quarters, but fell short in the second quarter by six cents per share.

The long-term EPS growth forecast for Google is 16.2%, which tops those of Aol (AOL) and Yahoo! (YHOO). The forward PE ratio is 18.4, but that's less than the industry average. Google reports no long-term debt, and its return on equity is 20.5%. The consensus recommendation remains to buy GOOG, of course, and the mean price target is $616.91. Goldman Sachs just raised its price target on shares. At $536.35, the share price is 17.5% higher than three months ago.

During the three months that ended in September, JPMorgan restructured its global trade practice and saw its Fitch rating reaffirmed. The New York-based financial services giant is expected to report that EPS came to 88 cents, compared to 82 cents per share a year earlier. Third-quarter revenue, however, is expected to have fallen 14.9% to $24.5 billion. So far, analysts predict full-year EPS of $3.63 (+38.3%) on revenue of $102.5 billion (-5.7%). Note that earnings results have topped consensus estimates in the past five quarters, by 62% in the second quarter.

JPMorgan's long-term EPS growth forecast is only 8.0%, less that that of competitors Bank of America (BAC) and Citigroup (C), and its forward PE ratio is 10.0. Short interest in JPM jumped in August and September, but analysts on average recommend buying JPM. Their mean price target on shares is $52.68. But the stock has traded mostly between $36 and $40 since May and ended last week at $39.31.

Other companies expected to report earnings growth this week include Advanced Micro Devices (AMD), Apollo Group (APOL), CSX (CSX), Fastenal (FAST), Gannett (GCI), Genuine Parts (GPC), Mattel (MAT) and W.W. Grainger (GWW).

Economic data on tap for this week include:

Tuesday: Minutes of Fed's Sept. 21 meeting, TIPP Economic Optimism Index
Wednesday: Import price index (Sept.)
Thursday: Producer price index (Sept.), report on exchange rates polices of foreign countries, trade balance (Aug.)
Friday: Michigan Consumer Sentiment Index, business inventories (Aug.), Consumer Price Index (Sept.), Empire Manufacturing Index, retail sales (Sept.)