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The Only Seven Earnings Reports That Really Matter

Douglas A. McIntyre

The general investing public will spend much of its energy waiting for earnings from famous companies such as Facebook Inc. (FB) and J.C. Penney Co. Inc. (JCP). These are nothing more than entertainment. There in no reason to look beyond the earnings of seven companies to get a fix on how well the major sectors within the American economy are doing.

First among these is Wal-Mart Stores Inc. (WMT) because its retail sales eclipse those of any other bricks-and-mortar retailers. Its performance has lagged that of most other big-box store chains. And its growth has been thrashed by Amazon.com Inc. (AMZN). However, with quarterly sales of more than $115 billion, of which two-thirds are in the United States, Walmart is a reasonable proxy for the consumer spending habits of much of the middle class and most of the people who have individual earnings below those. With more than one million employees, the fate of Walmart ripples beyond its customers into its workforce.

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Google Inc. (GOOG) is the single most important bellwether for media spending, which in turn measures the outlook of those who advertise. Hundreds of thousands of marketers run messages through Google Adwords. The search company also has a massive network of affiliated sites that span virtually the entire Internet. No print properties, television properties, cable networks or huge Internet media can match that breadth or even approach it.

Exxon Mobil Corp. (XOM) has been the largest energy company in the United States for years, and it has often been the world's largest company by the yardstick of revenue. It remains a dominant force in both exploration and refining. As other oil firms have shed some of their upstream or downstream assets, Exxon continues to be a global factor in both businesses. Exxon may not be a perfect measure of the effects of the price and demand for oil, but with sales of $120 billion, it represents an outsized part of its industry.

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In the financial sector, Bank of America Corp. (BAC) has large enough businesses across the consumer, corporation and institutional finance markets to be a strong marker for itself and its peers. J.P. Morgan Chase & Co. (JPM) held this place for the past two years, but its legal problems distort its numbers. Wells Fargo & Co. (WFC) earnings rely disproportionately on consumers, and Goldman Sachs Group Inc.'s (GS) on the institutional part of the sector. The fact that Bank of America is in the midst of its own recovery does not mask its underlying numbers and their importance to taking stock of the financial industry.

Several companies could be taken as yardsticks for personal computers (PCs) and consumer electronics. But results from Intel Corp. (INTC) measure the entire PC ecosystem, and its numbers should tell almost everything about those of Microsoft Corp. (MSFT), PC manufacturers and suppliers to the industrial giants.

Despite its recent failures, Apple Inc. (AAPL) still holds an important enough place to measure the new device markets of tablets and smartphones, which ripple to large public corporations that make chips and components for portable devices. Apple's numbers also stretch to the results of the largest telecom companies -- AT&T Inc. (NYSE: T) and Verizon Communications Inc. (VZ), which rely heavily on their wireless results as their wireline businesses disintegrate.

Finally, the slow death of General Electric Co. (GE) does not keep it from representing much of the national economy. It is still the world's largest conglomerate, with results that give insight into the medical, finance, infrastructure and transportation manufacturing sectors.

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The most notable point about the companies that are most important to evaluating the American economy is that so many of them have struggled with earnings results this year. With the exception of Google, they are in some state of decline, even if it is only a brief one. That may say something about the economy as a whole. In terms of how the gross domestic product will be the rest of the year, and into 2014, the results, together, should drive optimism or pessimism about the next several quarters.

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