THIS WEEK IN EARNINGS 11 - 15 October 1999 OVERVIEW
Fasten your seatbelts! This week is the first big week of the 3Q99 earnings report season. And it
should be a good one. Earnings growth for the S&P500 should be the best since at least the
beginning of 1995. But savor this earnings report season because it probably won't get any better
than this for some time. Earnings growth is likely to taper off in the next few quarters, although only
to levels that will still be well above the long term average of 7%.
Last week two of the DJIA components reported, and an additional five report this week. As
usual, the area attracting greatest interest in this first week will be the early technology sector
reporters such as Intel, Motorola, Apple Computer, and Sun Microsystems. Another area in the
spotlight is consumer durables since one of the biggest auto makers, GM, and the two biggest
home appliance makers, Whirlpool and Maytag, are reporting this week. Other industries that have
a high proportion of their companies reporting in this first week include paper, regional banks,
trucking, brokers, diversified financial services, newspapers, electric utilities, and oil service.
Monday
On Monday, Abbott Labs leads off the first big week of the 3Q99 reporting season. Also on
Monday is Rite Aid, the drug retailer much in the news of late, and Harley Davidson.
Tuesday
The focus on Tuesday earnings reports is technology, with Intel and Motorola leading the parade.
The brokers with September ending quarters begin reporting this week with Merrill Lynch and
PaineWebber on Tuesday. Among the other financial services companies reporting Tuesday is
Associates First Capital. Another headliner on Tuesday is DJIA component International Paper.
Other paper companies reporting the same day are Weyerhaeuser and Willamette Industries. The
first of the two big home appliance makers, Whirlpool, reports on Tuesday. Among the multitude
of regional banks reporting this week are SunTrust Banks, BB&T, and Firstar on Tuesday. The
much in the news copper producer Phelps Dodge is on Tuesday. Others reporting on Tuesday
include restaurateur Tricon Global and Dow Jones.
An analyst meeting on Tuesday gives Intel a chance to amplify on the outlook following its earnings
report. A Tuesday analyst meeting at Staples should provide info on the crowded office supply
retailing industry. Given the ongoing problems with overseas earnings at many of the multinational
consumer staples companies, Procter & Gamble's annual shareholders meeting on Tuesday takes
on added importance.
Wednesday
Another of the DJIA companies, Boeing, reports on Wednesday. Rowan, the first of the oil service
companies to report, is on Wednesday. While the oil producers are expected to report very
positive comparisons to last year after falling short earlier this year, the oil service and equipment
companies lag by several quarters, so the positive comparisons will not show until 2000. Leading
the way in technology sector earnings reports on Wednesday are Apple Computer, Earthlink
Network, and DoubleClick. Others of note reporting on Wednesday include Delphi Automotive
Systems, GM Hughes, Best Foods, and Tribune.
Thursday
The other of the two big auto and home appliance makers, General Motors and Maytag, report on
Thursday. In addition to GM, another DJIA component reporting on Thursday is Allied Signal.
Technology is still much in the picture, with Sun Microsystems, Broadcom, and Unisys amond
those reporting on Thursday. Others reporting on Thursday include New York Times and medical
device maker Guidant.
Another multinational consumer staples company meeting of interest this week is the Pepsico
analyst meeting on Thursday.
Friday
Caterpillar's earnings report on Friday brings the number of DJIA components reported by the end
of this week to seven. Another of the oil service companies, Diamond Offshore, reports on Friday.
Likely One Day This Week
Pfizer never gives out a date, but based on prior reporting patterns, is likely to report this week.
MARKET EARNINGS
All signs continue to point to a great quarter for earnings. The industry analysts have only trimmed
expectations for S&P500 3Q99 earnings growth from 21.5% at the beginning of the quarter on 1
July to 19.4% at the threshold of the reporting season. It would seem that our estimate of final
results coming in at 22% may if anything prove to be slightly conservative. Just beating the
estimates by the 2.7% average of the last six years would put the results at about 22%, so anything
above the average in beating the estimates would push those results even higher. This will be the
best earnings growth for the S&P500 since the beginning of 1995, and if the final results come in
above 23.3%, which is a long shot possibility, then it would be the best since 1993.
Remember, however, that this is as good as it gets for a while in terms of earnings growth. Earnings
growth will likely taper off to somewhat lower values in the next few quarters, but only to levels
that would still be well above the long-term average earnings growth of 7% for the S&P500. It is
not a case of earnings starting to slow, but rather that the easy comparisons in some important
areas are disappearing.
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