Mighty Matt Nesto came back from vacation recharged and ready to discuss our setup for what matters this week. He started by noting that America's corporate juggernauts don't have an earnings problem, but rather a demand issue.
Case in point -- Whirlpool (WHR). The appliance giant reports Wednesday morning, and good numbers are expected, but that's less the issue than the attention that will be drawn to Whirlpool's taxes. Like General Electric (GE), Whirlpool gets nearly unconscionable tax credits for its greener appliances initiative. The government's Energy Star program results in Whirlpool getting $20-$50 per appliance. Naturally, or at least in theory, some of those benefits are passed along to the consumer. Even more naturally, Whirlpool's tax bill is much lower than it otherwise would be. In an environment where the rich are assumed to be paying less than their fair share in taxes, it remains to be seen if, like GE, Whirlpool's tax breaks will be largely ignored.
Nesto's also got an eye on Big Energy. A huge number of companies that arguably benefit from ramping crude prices are reporting this week. Among these are Chevron (CVX), ExxonMobil (XOM) and ConocoPhillips (COP), all of which bear watching for both earnings and discussion of what they're pursuing in terms of crude alternatives (yes, alternatives ... these are energy, not crude oil, companies, at least in part).
For my part, I'm eyeballing the consumer. America has the best consumers in the world, and we've been proving it again this earnings season. In the next 30-odd hours, we'll be able to see if the consumer-reliant companies reporting thus far (McDonald's (MCD), Apple (AAPL), etc.) have been outliers or part of a trend. My big three:
*Ford (F): The company should be taking share from Toyota (TM), which won't be making many cars from now until the end of the year, and General Motors (GM), which was a bad company before it was run by the government and is certainly no better now. Ford is up about 15% since the Japanese tsunami. We get to see if they've earned it tomorrow.
*Hershey (HSY): An earnings story based on the ramps in virtually all of the candy giant's input costs. Hershey raised costs to consumers by 10% on March 31. Tomorrow we get to see if the price increase stuck.
*Amazon.com (AMZN): The best retailer on earth is going to be perhaps our cleanest look at retail pricing power. Analysts are looking for $9.6 billion in revenue. Look for Amazon to beat slightly, and really pay attention to what Bezos & Co. say about shipping costs and shopping patterns.
What about the dozens of other companies reporting? Watch them if you like, but, for our money, you're not going to get a better view of the impact of spiking oil and just how weak the consumer is from companies other than the above. In other words, you have our permission to ignore everyone except Big Energy, Whirlpool, Ford, Amazon and Hershey. Naturally, Breakout will be parsing the numbers and delivering our take to you as the news merits.
Are you watching companies not on our list? Be sure to share them at email@example.com or, as always, in the comment section below.