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Nine Key Earnings This Week Set the Tone for Earnings Season

Jon C. Ogg

We already have warned that investors and traders alike are now unlikely to see five key economic reports this week due to the government shutdown. Industry economic reports still will be released. This also coincides with the start of a new earnings season, and that should make for some interesting news.

24/7 Wall St. has identified nine key earnings reports to watch for this week. We have provided estimates from Thomson Reuters and added color on what we expect from the companies and how their stocks have done.

Be advised that, with a government shutdown and an impending debt ceiling debate not yet being resolved, it seems more than possible that companies will use this as an excuse not to offer any guidance for the fourth quarter and for the full year.

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Alcoa Inc. (AA) is due to report Tuesday after the market close, and estimates are $0.05 to $0.06 earnings per share (EPS), depending on which sources are being used. We see that Thomson Reuters has an estimate of $5.66 billion in sales. We would quickly point out that Alcoa was just booted out of the Dow Jones Industrial Average, so its importance to the DJIA stocks may be winding down. For years, Alcoa was always the first DJIA stock to report earnings each quarter, and investors liked using it as a benchmark for earnings season each quarter. At $7.90, shares are only about 3% above Alcoa's 52-week low.

Yum! Brands Inc. (YUM) is due on Tuesday after the close. Estimates are $0.93 EPS. Sales in America are one thing, but investors still likely will have all eyes on what is happening in its turnaround in China.

ADTRAN Inc. (ADTN) is set to report before the open on Wednesday. ADTRAN is not exactly the most significant hardware player in communications network solutions technology, but it is the first earnings report for the sector each earnings season. Shares have almost doubled from the 52-week low as well. Estimates are $0.22 EPS and $175.1 million in sales.

Costco Wholesale Corp. (COST) is due on Wednesday before the open, and the estimate is $1.46 EPS and $32.85 billion in sales. Costco has pulled back almost 5% from its peak, and 5% pullbacks historically have been a gift or bargain in the bull market. We have seen analysts defending the stock ahead of earnings, but we have not seen any major pre-earnings price target adjustments higher before the report. Investors also know that Costco is not a cheap stock, with an earnings multiple of 25 times this year's expected earnings.

Family Dollar Stores Inc. (FDO) results are due Wednesday before the market opens, and we would use this perhaps as a bogey for the dollar stores sector. Estimates are $0.84 EPS and $2.56 billion in sales. Shares are currently around $72, and the 52-week range is $54.06 to $75.29.

Micron Technology Inc. (MU) is due after the close on Thursday. We have seen analysts chasing up expectations here due to problems with a competitor being out of the market for weeks. The consensus estimates have moved up to $0.25 EPS and $2.7 billion in sales. This would be sales growth of more than 37%, but we would caution that Micron is close to multiyear highs. Shares even hit a new year-high of $18.83 on Monday ahead of the report.

Safeway Inc. (SWY) is due to report after the close of trading on Thursday, and estimates are $0.16 EPS and $8.53 billion. With this stock in restructuring mode, shares actually now have doubled off their lows for the year. We expect that the moves might make earnings more difficult to evaluate solely on its numbers.

Wells Fargo & Co. (WFC) is due Friday morning as one of the first major banking stock to report earnings. The estimates are $0.97 EPS and $21 billion, and we expect that Wells Fargo, along with J.P. Morgan, will set the tone for the rest of the banks this earnings season. Its layoffs in the mortgage unit were announced before quarter end, and with shares around $41, its 52-week trading range is $31.25 to $44.79.

J.P. Morgan Chase & Co. (JPM) also is due to report on Friday before the markets open. Estimates are $1.24 EPS and $24.11 billion in revenue. The earnings may be dominated by settlements and charges. Shares were recently around $52.50, against a 52-week range of $38.83 to $56.93.

We would like to remind our readers that some of these earnings estimates have changed since late last week, and we expect some adjustments could be seen before the reports. Some estimates already may have changed slightly.

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