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McDonald’s Misses on Earnings; Gross Predicts QE Through 2016; Glaxo Confession

Dan Berman
Hot Stock Minute
McDonald’s Misses on Earnings; Gross Predicts QE Through 2016; Glaxo Confession

While the world awaits the birth of a small fry in London, the big fry has reported earnings. We're talking McDonald's (MCD) which released quarterly earnings at 8am. We don't know whether Britain’s newest noble will be a boy or girl, but we can tell you McDonald's missed on both the top and bottom lines, reporting $1.38 a share when expectations were for $1.40. Revenue also missed at $7.08 billion when consensus was for more than $7.09 billion. The company is citing economic uncertainly for a decrease in customer spending. McDonald's stock is up about 13% over the past year and is up fractionally at this hour.

Also reporting this morning is Kimberly-Clark (KMB). Adjusted earnings were $1.41 a share when expectations were for $1.39, but revenue was short of consensus at $5.3 billion. Meanwhile Hasbro missed estimates on both the top and bottom lines. It posted profits of 29-cents a share, when expectations were for 34-cents. Revenue was almost 5% lower than predictions at $766.3 million.

Japan is willing and "Abe" to press ahead with its ambitious growth policy. Voters have given Prime Minster Shinzo Abe more power by giving his ruling coalition a landslide victory in elections held yesterday. The results allow Abe to continue with his stimulus plan. They will also make it easier for him to pass new legislation aimed at helping Japan's long-ailing economy.

Back here at home a Gross prediction on economic stimulus. Pimco's Bill Gross tweeted over the weekend, "So bonds come out of their coffin and it’s not even Halloween. Bernanke says follow policy rate and we agree. 2016 tightening at the earliest” Gross was reacting to the Fed Chair's testimony in DC last week, saying it now appears the central bank won't change its policy for years, not months. Treasuries have in fact enjoyed their biggest two-week gain in almost a year as investors bet quantitative easing will continue.

GlaxoSmithKline (GSK) is fessing up from afar. The company says some of its senior executives appear to have violated Chinese law. The government is accusing the company of widespread bribery including prostitution and travel agencies. The company says the executives were not acting on orders from the home base in Britain. Glaxo is set to report earnings on Wednesday. The stock was down about 1% last week on the allegations.


Netflix (NFLX) reports earnings at 4:05pm. In case you've been hiding under a rock, Netflix is up 231% over the past year. But it has been making-up for a bunch of missteps. Things like a plan to split up the company and to toy with fees actually have the stock down 4% over the past two years. Just last week Netflix made history nabbing 14 Emmy nominations for its original programming like House of Cards and Arrested Development, putting it in contention with the major networks. Netflix is expected to post earnings of 40-cents a share up from 11-cents a year ago on revenue that now tops $1 billion. As they say in the business, stay tuned.

Apple (AAPL) reports earnings tomorrow, but is dominating headlines today with a wide array of reports. The Wall Street Journal says Apple is now testing larger screens for its iPhones and iPads. Separately, the company has taken down its site for developers, saying it was hacked. Over the weekend, there were also reports that Apple has been in ongoing talks with Samsung to end their patent disputes. Finally, there are reports the company has bought mapping program HopStop in an effort to bolster its mapping tools. Of course it was Apple's own map program which helped precipitate a downward spiral in the stock. Also of concern are slowing sales and a lack of new devices. Apple stock is down almost 30% from last year and 40% from its peak last September. Apple earnings are expected to be $7.31 a share down from $9.32 a year ago, but on revenue that has dipped ever so slightly.

Facebook (FB) reports its earnings on Wednesday. The company announced last night that its “Facebook For Every Phone” app now has 100-million monthly users. That's a small fraction of its desktop users but highlights the growing shift to mobile. By the way The New York Times reports that Facebook is now working on an app for bare bones cell phones. Facebook revenue is expected to be up more than a third since last year to about $1.62 billion dollars for the quarter. Earnings are likely to be up 2-cents a share to 14-cents. The stock has been up more than 5% over the last month, but is still down 8% year-to-date.

Six Flags (SIX) is reporting earnings later this morning. The report may be overshadowed by a tragedy at Six Flags Over Texas on Friday. A woman fell from a 14 story roller coaster called the Texas Giant. It's not clear how she got loose from her restraints. The ride had undergone a $10-million renovation two years ago. Six Flags stock has been up 15% year-to-date. It's up 36% over the past year.