By Wallace Witkowski, MarketWatch
Projected S&P 500 earnings improve, but still facing decline
Media and consumer-staples companies face a big week of earnings reports, after an improvement in projected earnings for the S&P 500 Index did little to stop a selloff in stocks.
Stocks took a dive last week, with tech stocks taking the biggest hit, (http://www.marketwatch.com/story/wall-street-gets-the-jitters-ahead-of-key-jobs-data-2016-02-05) as the Dow Jones Industrial Average declined 1.6%, the S&P 500 Index fell 3.1%, and the Nasdaq Composite Index dropped 5.4%.
Of the more than 60 S&P 500 companies reporting this week, three are Dow components: Coca-Cola Co.(>> The Coca-Cola Co) and Walt Disney Co.(>> Walt Disney Co) on Tuesday, and Cisco Systems Inc.(>> Cisco Systems, Inc.) on Wednesday.
In addition to Disney, it's a big week for media companies with reports from 21st Century Fox Inc.(>> 21st Century Fox) , (>> 21st Century Fox), Time Warner Inc.(>> Time Warner Inc), CBS Corp. (CBSA) and Viacom Inc.(>> Viacom, Inc.) (>> Viacom, Inc.)
Other notable consumer-reliant earnings this week include PepsiCo.(>> PepsiCo, Inc.), CVS Health Corp.(>> CVS Health Corp) and Reynolds American Inc.(>> Reynolds American, Inc.), with notable reports from Tesla Motors Inc (http://www.marketwatch.com/story/tesla-earnings-model-3-spending-model-x-sales-in-focus-2016-02-05).(>> Tesla Motors Inc) and Twitter Inc.(>> Twitter Inc).
Expect earnings to remain weaker than those of the year-ago period as not much is expected to change this week, said Paul Nolte, portfolio manager at Kingsview Asset Management. Besides, given that record corporate stock buybacks have been propping up earnings-per-share, Nolte is more concerned with growth in revenue, or the noted lack of it.
While unemployment fell below 5% and wages rose sharply (http://www.marketwatch.com/story/us-jobs-growth-slows-to-151000-as-jobless-rate-hits-eight-year-low-2016-02-05)in Friday's jobs report, that could pose further problems to future earnings reports, Nolte said. If corporate revenues remain flat as they have been for the past few years, those higher wages will just be a further headwind on earnings that are becoming immune to the benefit of billions of dollars of share buybacks (http://www.marketwatch.com/story/share-buyback-machine-remains-in-overdrive-and-experts-warn-it-will-end-badly-2016-02-04), he said.
"If wages are increasing, that will work to erode corporate margins and EPS," Nolte said.
Over the past week, projected earnings for the S&P 500 improved while projected revenue saw little improvement.
For the December-ending quarter, the S&P 500 is on track for an earnings decline of 3.8%, an improvement from last week's projected decline of 5.8%, but revenue is on track for a 3.4% decline, compared with last week projected decline of 3.5%, according to John Butters, senior earnings analyst at FactSet.
Notable earnings reports this week
Report date Company/ticker (FactSet EPS / revenue estimate)
Mon., Feb. 8 21st Century Fox (44 cents / $7.53 billion) Hasbro Inc. US:HAS ($1.30 / $1.37 billion) Cognizant Technology Solutions Co. US:CTSH (78 cents / $3.24 billion)
Tues., Feb. 9 Disney ($1.45 / $14.79 billion) Coca-Cola (37 cents / $9.9 billion) CVS ($1.53 / $41.13 billion) Viacom ($1.18 / $3.26 billion)
Weds., Feb. 10 Cisco Systems (54 cents / $11.77 billion) Time Warner ($1 / $7.54 billion) Tesla Motors (16 cents / $1.85 billion) Twitter (12 cents / $710 million) Whole Foods Market Inc. US:WFM (40 cents / $4.81 billion) Expedia Inc. US:EXPE ($1.01 / $1.71 billion) Prudential Financial Inc. US:PRU ($2.30 / $11.53 billion)
Thurs., Feb. 11 PepsiCo ($1.06 / $18.59 billion) Reynolds American (50 cents / $3.05 billion) CBS (92 cents / $3.81 billion) Molson Coors Brewing Co. US:TAP (52 cents / $845.5 million) Activision Blizzard Inc. US:ATVI (86 cents / $2.2 billion) TripAdvisor Inc. US:TRIP (33 cents / $298.3 million) American International Group Inc. US:AIG (per-share loss of 91 cents / $13.58 billion)
Fri., Feb. 12 Interpublic Group of Cos. US:IPG (62 cents / $2.19 billion)
Stocks mentioned in the article : The Coca-Cola Co
, Reynolds American, Inc.
, Tesla Motors Inc
, Viacom, Inc.
, Time Warner Inc
, Twitter Inc
, PepsiCo, Inc.
, Walt Disney Co
, CVS Health Corp
, Cisco Systems, Inc.
, 21st Century Fox