Get in Shape for Earnings Season: Wal-Mart

AT&T, Boeing, McDonald's and Merck

From T Preview: Earnings Likely to Get Flattened:

Guidance will play a big role in how the stock reacts immediately after the report and whether my [Steve Birenberg] thesis that the shares should finally show defensive characteristics has merit.

Enterprise spending, access line losses, wireless subscribers, voice average revenue per user (ARPU), data ARPU and growth, DSL additions, and U-Verse broadband and TV subscriber growth will be the key measures on which to focus.

Specific to AT&T, the iPhone numbers will be important.

Read the full version of T Preview: Earnings Likely to Get Flattened (RealMoney access required).

Plus, don't miss AT&T, Verizon Cope With Wireless World.

Update: AT&T's Net Falls Short.

Plus, to listen to AT&T's conference call, click here.

BA Preview: Few Positives to Look Forward to

Unfortunately, the only events occurring for BA [Boeing] have been to the company's detriment. BA's struggles to deliver the 787 Dreamliner have been further exacerbated by a prolonged strike. To add insult to injury, there is a high likelihood that an Obama presidency could cut defense spending, thus impacting future guidance.

Read the full version of BA Preview: Few Positives to Look Forward to (RealMoney access required).

Plus, don't miss AMR Bets Big With Boeing Order.

Update: Boeing Earnings Slide Amid Strike.

Plus, to listen to Boeing's conference call, click here.

MCD Preview: Comps Could Be Key

While the comps are likely to be about 7% for the quarter (5% for the U.S., 8% for Europe and 6% for the rest of world), which overcomes cost pressures, investors are looking down the road to an economic slowdown in the U.S., Europe and possibly in the developing world as well.

Margins are lower for McDonald's in developing countries, and earnings are heavily weighted to the U.S. and Europe, but growth in revenue and earnings would slow enough to make me wary on the valuation for now.

So I [Ron Thomas] will be looking for evidence that September comps are slowing much from the quarterly trend and anything else that management can tell us about the likely future outlook.

Read the full version of MCD Preview: Comps Could Be Key (RealMoney access required).

Updates: McDonald's Profit Sizzles and Tim Brown: Chew on McDonald's.

Plus, to listen to McDonald's conference call, click here.

MRK Preview: Solid Cash Flow

Revenue growth is flat for the foreseeable future (the next three to five years), as the company [Merck] struggles with patent expirations, a dearth of pipeline drugs and challenges with Vytorin, Zetia and Gardasil.

The cash flow is rock solid. With a $65 billion market cap, one analyst model expects Merck to generate $9 billion to $10 billion in cash from operations for the next several years, leaving the stock trading at 6 times to 7 times cash flow.

Read the full version of MRK Preview: Solid Cash Flow (RealMoney Access required).

Update: Merck Hits Targets, Plans Job Cuts.

Plus, to listen to Merck's conference call, click here.

Microsoft

From MSFT Preview: Expect Another Solid Quarter:

In the prior quarter, Microsoft reported revenue of $14.457 billion (flat year over year and down 12% quarter over quarter)... Excluding a one-time revenue deferral in the prior year's quarter, revenue growth would have been 14%.

The balance sheet remains among the strongest of any company. Cash from operations was $7.1 billion, which was comparable to last year's $7.30 billion. The cash account increased more than $4.0 billion, to $25.3 billion.

I've [Bob Faulkner] noted in the past that the bulk of Microsoft's revenue comes from corporate customers and much of that is on a subscription basis. Consequently, it comes directly off the balance sheet each quarter from the deferred revenue account. That creates a certain degree of predictability from one quarter to the next.

The real wild cards each quarter come from consumer PC demand, the online business and the entertainment operations.

Read the full version of MSFT Preview: Expect Another Solid Quarter (RealMoney access required).

Plus, don't miss Ballmer Needs to Live Up to the Hype and Microsoft Tests Its Mettle.

Update: Microsoft Tops Profit Estimates.

Bank of America

From BofA Selling Stock, Cutting Dividend:

Bank of America (BAC Quote) said Monday [Oct. 6] it's cutting its quarterly dividend in half and aiming to raise $10 billion in order to shore up its capital base.

The announcement came as the company revealed its quarterly earnings roughly two weeks before it was scheduled to do so. Charlotte-based Bank of America said it earned $1.18 billion, or 15 cents a share, in the third quarter, down from $3.70 billion and 82 cents a share in the same period a year earlier.

"These are the most difficult times for financial institutions that I have experienced in my 39 years in banking," said Kenneth Lewis, chairman and chief executive of Bank of America, in a press release. "We believe it is prudent to raise capital to very substantial levels in this uncertain environment."

Retail deposits grew by $56 billion to $586 billion from June 30 to Sept. 30, including the addition of $35 billion from Countrywide.

Read the full version BofA Selling Stock, Cutting Dividend.

From Bank Investors, This Is Going to Hurt:

Bank of America's sour third-quarter earnings results announced on Monday [Oct. 6] confirm what may already be obvious for many: Things are getting worse, not better, for banks as the credit crunch passes its one-year anniversary.

The collapse of several large banks exemplifies just how dire the situation has become for the sector, amid an increasingly dour economic environment. Analysts at Fox-Pitt Kelton Cochran Caronia Waller estimate that overall earnings for the bank sector will fall 28% compared to a year earlier.

"While the fundamental outlook for most banks remains negative due to falling real estate prices, limited balance sheet growth and funding pressures, the stocks are likely to trade more on technical factors, including the perceived benefit of [the federal bailout legislation] and the removal of the short-sale ban," the analysts wrote in an industry note Tuesday [Oct. 7].

Read the full version of Bank Investors, This Is Going to Hurt.

Plus, to listen Bank of America's conference call, click here.

Alcoa and General Electric

From AA Can't Shoot Straight:

Alcoa's (AA Quote) earnings really smelt (pun intended). Yesterday's [Tuesday, Oct. 7] earnings release and conference call are prima facie evidence of why I placed Alcoa into my inaugural list of the worst-run companies in the U.S.

Alcoa has managed to bear the brunt of slowing demand, rising commodity costs and increased levels of inventory -- lose, lose, lose. Looking ahead, with the closing of a smelter, the company will not be able to fully benefit from the decline in energy and commodity costs.

Read the full version of AA Can't Shoot Straight (RealMoney access required).

Plus, to listen to Alcoa's conference call, click here.

From GE Meets Revised Third-Quarter Estimates:

Third-quarter earnings from [General Electric's (GE Quote)] continuing operations of $4.5 billion fell 12% from $5.1 billion a year earlier. Net earnings in the quarter were $4.3 billion, or 43 cents a share, compared with $5.6 billion, or 54 cents a share, in the same period in 2007.

Read the full version of GE Meets Revised Third-Quarter Estimates. (Related: Energy Business Boosts GE; Solar Stocks Battered)

Plus, to listen to GE's conference call, click here.

Intel and Johnson & Johnson

From JNJ Preview: Looking Down the Pipeline:

Under most circumstances, investors could feel confident that the report is going to be good, but in this environment, who knows? Analysts are looking for $1.11 of EPS on $15.7 billion of sales. Analysts never had doubts -- the estimates have been rising steadily all autumn.

On the call, investors are going to focus on the earnings impact from generic competition in the near term, but the progress on the pipeline, which promises resurgent earnings a couple years out, will be scrutinized for longer-term trends.

Read the full version of JNJ Preview: Looking Down the Pipeline (RealMoney access required).

From Dividend.com: J&J a Good Play:

The world's largest health care company, Johnson & Johnson (JNJ Quote), just reported that revenue rose 6.4% over the past 12 months to $15.9 billion.

The company's consumer products division consumer products rose 13.1% to $4.1 billion. Some of that division's brands include Aveeno, Band-Aid, Carefree, Motrin IB, Neutrogena, Pepcid Ac, Rembrandt, Splenda, Tylenol, Listerine, Nicorette, and Sudafed.

Management raised its 2008 earnings forecast to $4.50 to $4.53 per share from its earlier outlook of $4.45 to $4.50 per share.

We reinitiated our "Recommendation" for the stock yesterday, as its dividend yield rose back to the 3% level. We felt that was a good point to get back into the shares, and 12 times 2008 earnings is not a bad entry point, either.

Read the full version of Dividend.com: J&J a Good Play.

Plus, to listen to Johnson & Johnson's conference call, click here.

From INTC Preview: Any Impact From Meltdown?:

There are only two questions on investor's minds going in to the Intel (INTC Quote) call:

1. What impact did the company see in the third quarter from the softening economy and financial services meltdown?

2. What impact will those same factors have on the fourth-quarter guidance?

Other than that, there will be some questions on the recent announcements by Advanced Micro Devices (AMD Quote), but the company will likely decline to answer those as they are probably being addressed by the legal department.

Read the full version of INTC Preview: Any Impact From Meltdown? (RealMoney access required).

From Intel Offers Tepid Outlook:

"As we look to Q4, it is hard to know what impact the financial crisis will have on end customer demand," CEO Paul Otellini said in a statement Tuesday.

The chipmaker boosted its gross profit margin to 58.9% from 55.4% in the third quarter, thanks to lower costs and a higher portion of microprocessor sales in its revenue.

While the average selling prices of its microprocessors were down sequentially on account of its new low-price Atom chip designed for inexpensive netbook PCs, Intel said it had record unit shipments of microprocessors and chipsets during the quarter.

Read the full version of Intel Offers Tepid Outlook.

Plus, to listen to Intel's conference call, click here.

Coca-Cola and JPMorgan Chase

From KO Preview: Very Undervalued:

Coke's (KO Quote) management has pointed to a long-term volume gain of 3% to 4%, which will likely be 1.5% in 2009 by Street consensus expectations, with the biggest weakness in the U.S. and Mexico but with increased worldwide economic weakness. The company will likely have a 5% concentrate price hike in the U.S., however, which is about 20% of earnings, and concentrate price hikes along with other bottlers' price hikes in many geographical regions to catch up with commodity costs. With private label not gaining share and having margin problems, too, I would expect these price increases to stick with volume declines being the only downside. That could allow a high-single-digit EPS increase in 2009.

Read the full version of KO Preview: Very Undervalued (RealMoney access required).

From Coca-Cola Earnings Rise 14% as Sales Jump:

Coca-Cola said Wednesday its international operations, particularly in emerging markets, continue to drive its growth offsetting challenges in North America. The company said it anticipates the operating environment, especially in North America, will continue to be challenging through 2008 and into 2009.

Unit case volume rose 5% in the third quarter, Coca-Cola said. International operations saw 7% unit case volume growth in the quarter. North America unit case volume declined 2%. Read the full version of Coca-Cola Earnings Rise 14% as Sales Jump.

Plus, to listen to Coca-Cola's conference call, click here.

From JPM Preview: Various Wild Cards in Play:

The analyst community expects JPMorgan (JPM Quote) to report a loss of 17 cents per share on net revenue of $16.01 billion. In the year-ago quarter, the company earned a profit of 97 cents per share on revenue of $16.11 billion.

Frankly, these estimates are not worth the paper they are written on.

Read the full version of JPM Preview: Various Wild Cards in Play (RealMoney access required).

From JPMorgan Tops Third-Quarter Estimates:

JPMorgan Chase reported third-quarter net income of $527 million, or 11 cents a share, above analysts' forecasts, compared with year-earlier earnings of $3.4 billion, or 97 cents a share.

The latest quarter includes an after-tax charge of $1.2 billion to conform loan loss reserves and an extraordinary gain of $581 million from the acquisition of Washington Mutual's banking operations, which closed on Sept. 25.

Read the full version of JPMorgan Tops Third-Quarter Estimates.

Plus, to listen to JPMorgan's conference call, click here.

Citigroup and IBM

From Citi Posts $2.8 Billion Third-Quarter Loss:

Citi (C Quote) said the loss from continuing operations in the quarter was $3.4 billion, or 71 cents a share, primarily because of fixed income writedowns and higher consumer credit costs. A year earlier, Citi reported net income of $2.2 billion, or 44 cents a share.

"While our third-quarter results reflect both a difficult environment as well as continued writedowns on our legacy assets, we are making excellent progress on the parts of our business we control, including expense reduction, headcount, and balance sheet and capital management," said Vikram Pandit, Citi's CEO.

Read the full version of Citi Posts $2.8 Billion Third-Quarter Loss.

From Citi: We'll Deal Another Day:

Citigroup, fresh off a defeat in its fight to acquire Wachovia (WB Quote), is in no rush to deploy the $25 billion capital injected this week by the U.S. Treasury in a new acquisition. [Don't miss "Equity Gives Feds More Bank for the Buck"]

Citi CFO Gary Crittenden said on a conference call to discuss the firm's third-quarter earnings that the bank felt good about its capital position before the government's equity investment. But as consumer credit conditions continue to materially decline, Citi plans to proceed cautiously.

"This represents in many ways something we had not counted on, something we hadn't planned for, and it does represent then the possibility of our taking advantage of opportunities that otherwise might have been foreclosed to us," Crittenden said.

"If it makes sense for us, if it grows our business ... furthers our strategic agenda in some way that's fundamental then we'll use it in that way," Crittenden continued. "But we're not going to treat this as a windfall and in some way back off of the other measures to get the company fit because we have this as an additional capital capacity."

Read the full version of Citi: We'll Deal Another Day.

Plus, to listen to Citigroup's conference call, click here.

From IBM Hangs Tough:

IBM (IBM Quote) financial chief Loughridge sought to dispel fears on the call [Oct. 16] that the company would lose revenue from troubled banking clients, face a credit crunch, or suffer a serious downturn due to an economic contraction.

Although financial institutions account for 28% of IBM's revenue, only 1% comes from the 21 financial institutions worldwide that have been identified as troubled, according to Loughridge.

And he reassured investors that the company won't run dry of working capital any time soon. "We have a strong liquidity position," including $10 billion in cash..."

As for a market slowdown, "we would have to have major markets fall off much more significantly, and we just don't see that in the data," Loughridge said. He pointed to higher short-term contract signings and a good pipeline.

"We'd have to see a dramatic slowdown in our emerging countries," where the company is still seeing high double-digit growth.

Read the full version of IBM Hangs Tough.

Plus, to listen to IBM's conference call, click here.

Continue to sharpen your earnings season skills on the next page:

The Finance Professor: Beginner's Guide to Earnings Calls

Five Missteps to Avoid in Earnings Season

Conference Calls: The Good, the Bad, the Misunderstood

To Guide or Not to Guide: A Look at Earnings Guidance