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Second Quarter Earnings Season In Focus

Traditionally, the unofficial start of earnings season began with an early-week report after the closing bell of aluminum giant Alcoa AA, whose ticker symbol fit in well with a “Yellow Pages mentality” that showed initial companies reporting could be found the same way one looks up a plumber. But when Alcoa split in two, taking its refined engineering business for airplane jets and truck chassis, etc. to Arconic ARNC, this took AA’s relevance away from the start of earnings season. (The company had also been taken out as a Dow component a few quarters before the company split.)

Should we be looking for a global company with a household name to mark the start of earnings season, might we suggest Pepsico PEP? It’s the second-largest food & beverage company in the world, and owns brands as familiar as Pepsi, Frito-Lay and Gatorade. The company also posted $1.50 per share, a dime and a penny higher than the $1.39 expected in the Zacks consensus. Revenues also topped expectations at $15.71 billion, compared to the $15.64 billion expected.

Pepsi has beaten estimates every quarter for at least the past 5 in a row. The 7.85% positive earnings surprise is higher than the trailing 4-quarter average of roughly 5%. Shares of PEP are up in today’s pre-market, as fiscal 2017 guidance was raised in today’s earnings report, as well as revenue growth up 3% quarter over quarter. The company is currently a Zacks Rank #3 (Hold) with a Style Score of D.

Otherwise, we expect earnings reports from some of the biggest Wall Street banks on Friday: JPMorgan JPM, Citigroup C and Wells Fargo WFC all release Q2 earnings before the opening bell that day. And while earnings season overall is expected to retain some of the strength witnessed in Q1, all three of these banking majors have seen earnings estimates fall noticeably over the past month. So expectations are being muted currently, perhaps guarding against any headline disappointments at the end of the week.

Is this something we should be concerned about? Or perhaps this is merely the tried-and-true method of lowering expectations in order to demonstrate a stronger upside. This might be one of those things that — depending on what actually takes place — we see momentum for Q2 earnings season kick the markets into high gear next week and beyond, or poorly performing bank stocks set a more somber tone for the rest of the reporting season.


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J P Morgan Chase & Co (JPM): Free Stock Analysis Report
 
Wells Fargo & Company (WFC): Free Stock Analysis Report
 
Citigroup Inc. (C): Free Stock Analysis Report
 
Pepsico, Inc. (PEP): Free Stock Analysis Report
 
Alcoa Corp. (AA): Free Stock Analysis Report
 
Arconic Inc. (ARNC): Free Stock Analysis Report
 
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