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Big Picture Summary: What To Look For In Q3 Earnings

On Thursday, Alcoa (AA) unofficially kicked off earnings season, with hundreds of S&P 500 ETF (SPY) companies reporting over the next six weeks. This is one of my favorite times of the year, because the companies I hold stock in give me insight into how its businesses have done and what investors can expect going forward.

But I don't just look at how the companies that I own did in the most recent quarter, I look at a number of companies - roughly three dozen in total. I listen to these calls and read through the release to get a sense of the entire world, ranging from oil and gas production in Canada, to health care spending in China to rail shipments from Mexico.

The list goes on and on: Auto and mortgage loan growth from J.P. Morgan (JPM), Schlumberger's (SLB) outlook on oil prices, intra-Europe shipments from United Parcel Service (UPS), General Motors' (GM) SUV sales in China, 3M Company's (MMM) sale of painter's tape for a tell on homebuilding, and which products are selling well at Home Depot (HD) and Lowe's (LOW).

All of these companies (and many more) basically spell out how well (or poorly) certain industries, sectors and economies are doing, and where the growth, or lack thereof, is coming from.

China was one of the top, if not the top talking point last quarter. But there was a stark difference in how companies felt about it going forward.

Automakers like General Motors (NYSE:GM) and Ford Motor (F) acknowledged that the country is indeed seeing a slowdown in auto sales, as well as slight pricing pressure. However, it's not a broad sweep. For instance, GM saw record sales for its high-end Cadillac and Buick brands, and an astounding 83% growth in SUV sales.

Both companies remain profitable, in part because of savvy inventory management. It will be important to hear some commentary not just on whether these two can continue to operate at a high level in China, but how auto sales in general are doing there for insight on the consumer. It's noteworthy how the high-end - SUVs included - is still doing fine.

That was also highlighted in Apple (AAPL) CEO Tim Cook's email to Jim Cramer in August, saying iPhone sales in the country are still going strong. Others, like PVH Corp. (PVH) and VF Corp. (VFC), makers of brands like Calvin Klein, North Face, Timberland, Vans and Tommy Hilfiger, were seeing strength too.

These companies weren't talking about the second quarter, these comments came during the conference calls and were referring to the current quarter. So that's really good news if it continues.

Of course, Yum! Brands' (YUM) recent report doesn't give a great indication about the Chinese consumer, but I think we need to see more information. Especially as it directly clashes with Nike (NKE), which just reported stellar results in China.

Speaking in a recent conference in September, Starbucks (SBUX) management said they haven't seen a slow down either. (For a full breakdown on Starbucks in China and other catalysts mentioned at the conference, please read my notes, here).

While the consumer seems fine, not all is well in China. Mining is not doing well, as per comments from Joy Global (JOY) management. But perhaps more notable, infrastructure is starting...


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