Tech Heavyweights And Fast Food Giants Highlight End of Week Earnings

the Staff
October 18, 2012

Stocks tend to be most volatile around earnings season, when a good or bad report can make or break it. However, a good or even great earnings report doesn't necessarily translate into a huge pop for a stock.

During earnings season, publishes a comprehensive 20- to 30-page Earnings Preview report for the week ahead each Friday.

Over the past year, used the data it has collected to correctly predict investor reactions for approximately two-third of the stocks it's previewed.

In its latest earnings preview, looks at several popular stocks still set to report results this week including, Microsoft (MSFT), Chipotle Mexican Grill (CMG), McDonald's (MCD), and Google (GOOG).

Here is just a tiny sample of what wrote about McDonald's:

McDonald's has beaten EPS estimates five of the last eight quarters, missing estimates twice and meeting them once. Over that period, the stock has risen the next session five of eight quarters. Seasonally, the stock has risen three of the last four years.

Last quarter, the combination of slowing sales growth and a strong U.S. dollar resulted in McDonald's reporting a decline in net income.

The Oak Brook, Illinois hamburger giant said it earned $1.35 billion for the three months ended June 30th, which was equal to $1.32 per share. In the year-earlier period, it reported a profit of $1.4 billion, or $1.35 per share.

The strong dollar, the company said, shaved about -7 cents per share from its reported results. It expects currency translations to lop off another -8 to -10 cents from the current quarter's bottom line and -21 to -30 cents for the full year.

Total revenue of $6.92 billion was up slightly from $6.91 billion in Q2 2011.

Sales on a same-store basis grew by 3.7% globally, with increases reported for every region of the world. Comp sales growth for the core U.S. market increased by 3.6%, while in beleaguered Europe, which accounts for about 40% of McDonald's sales, the increase was 3.8%. The Asia, Middle East and Africa region reported same-store sales growth of 0.9%.

Wall Street was expecting the company to report a slight increase in earnings to $1.38 per share on sales of $6.94 billion. ...

Outside of earnings, despite McDonald's going through a bit of a rough patch given some of the global macro headwinds, we continue to view it as one of the best-run companies on the planet, and that shouldn't change under the leadership of new CEO Don Thompson, who has been cited as being integral to the development of its highly successful McCafe beverage program and menu innovations. McDonald's still has the scale and advertising budget to continue to grow and come out the winner if the fast-food environment starts getting overly promotional. ...

The full earnings analysis includes a look at historical earnings data and EPS trends for the companies above and more; examines past investor reactions to earnings in various contexts; gives options activity analysis; reviews previous-quarter earnings; and gives an opinion on both what earnings will look like and how investors will react based on the aforementioned data points.

Just a few of the correct calls made for Q3 so far were:

  • to be bullish on Cree (CREE) ahead of earnings.
  • to be bearish on Wells Fargo (WFC) ahead of earnings.
  • to be bearish on Intel (INTC) ahead of earnings.
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