Earnings season kicks into full swing next week with many
companies expected to report. Also, some key economic data and
another two speeches from Fed Chairman Ben Bernanke will be closely
In the coming weak, earnings from key banks Citigroup (NYSE:
) and Goldman Sachs (NYSE:
) as well as a quarterly update from Yahoo! (NASDAQ:
) will be in focus.
Citigroup is expected to report second quarter EPS Monday before
the bell. The bank is expected to report second quarter EPS of
$1.18 vs. $1.00 a year ago. Revenues are expected to rise 6.1
percent to $19.79 billion from $18.64 billion.
The analysts weighed in on the stock ahead of the report. They
have a neutral rating and a $48 price target on the stock.
"The recent Emerging Market (EM) bond market sell-off and
currency weakness raises questions about impact on investment
banking/capital markets revenues, but we are not concerned about
impact on capital ratios. The largest impact is likely on Citi
among our banks due to its large presence in many markets (trading
desks in about 75 markets). CDS spreads have widened sharply in
Mexico and Brazil (each +60 bp) as well as in Asia but by lesser
"We are not concerned about F/X translation impact - there may
be slight impact on earnings and capital. We expect Citi to build
capital sharply further which should increase capital return in
'14. One concern from this would be a harsher stress test scenario
for non-US next year."
J.P. Morgan sees EPS for the quarter at $1.12 on revenues of
Meanwhile, Stern Agee is more bullish on the stock. They
currently have a buy rating and a $54.00 price target.
However, it is important to note that two other large banks,
J.P. Morgan Chase (NYSE:
) and Wells Fargo (NYSE:
) both reported mixed results after adjusting for reductions in
loan loss reserves, which could also be a theme to watch with
Goldman Sachs is expected to report second quarter results
Tuesday before the bell. The company is expected to report second
quarter EPS of $2.82 vs. $1.78 a year ago on revenues of $7.98
billion vs. $6.63 billion a year ago.
Bank of America weighed in ahead of earnings. The bank has a
neutral rating on the stock and a $170 price target but is bullish
on the stock long-term.
"We expect GS to report a slightly weaker quarter in 2Q, driven
by weaker investing & lending results (given some market
pressures), a seasonal decline in trading and investment banking,
and decent results in investment management. Within institutional
client services, we expect core FICC trading revenues to decline
~15% q/q (though up 20%+ y/y from a challenging 2Q12), driven by
seasonality, some slowdown in activity (particularly in June), as
well as a more challenging hedging backdrop given the recent spike
"On the equity side, we expect core trading revenues (excluding
the spin-out of the re-insurance business for comparison) to be
down 5-10% q/q (up ~10% y/y) driven by seasonality, weaker
derivatives, and fewer client risk trades, partially offset by
decent volume/commission and seasonal security services trends.
Investment banking revenues are likely to moderate ~15% q/q from a
strong 1Q (up ~10% y/y), driven by more moderation in ECM and
M&A, while DCM held up relatively well."
"Total investing & lending revenue is likely to moderate as
well given the recent weakness in equity and fixed income markets
as well as the exit of the ICBC stake. Finally, we expect somewhat
better revenues in investment management, given higher markets and
incentive fee seasonality."
"On the expense side, we expect a comp ratio of ~43% (flat q/q
and slightly lower y/y), and non-comp expenses to be up slightly
q/q given some given higher activity (
) and other/legal expenses. Finally, we expect management to
continue to be active with buybacks, but in light of lingering
macro issues and regulatory uncertainty, we expect the firm to
maintain conservative capital ratios and liquidity levels."
Yahoo! is expected to report second quarter results Tuesday
after the bell. The company is expected to report second quarter
EPS of $0.30 vs. $0.27 a year ago on revenue of $1.08 billion, flat
from a year ago. Yahoo! in April guided revenues between $1.06
billion and $1.09 billion.
Goldman Sachs sees an inflection point in user engagement in the
quarter and is optimistic heading into earnings. They have a buy
rating and a $30 price target on the stock and expect EPS of
"Yahoo! will report 2Q results on Tuesday, July 16 after the
close. We expect revenues to be largely in-line with the company's
guidance range and consensus, with modestly higher adjusted EBITDA
as we believe cost reductions continue while the more profitable
search business outperforms. With a more focused product strategy,
improving traffic trends and monetization of Asian assets, we
believe the core business (currently trading at 2.7X our 2014E
EV/EBITDA) remains undervalued."
"According to comScore, there has been a positive inflection in
Yahoo!'s traffic in 2Q. Total worldwide page views were up 0.7% yoy
in May and +2.1% in April, marking the second straight month of yoy
improvement after four continuous quarters of declines. Unique
visitors were up 6.2% yoy in May vs. +6.5% in April, also
accelerating from low single digit growth over the preceding 12
Meanwhile, J.P. Morgan showed some reticence on the stock
heading into earnings. They reiterated a neutral rating and $26.00
price target. They forecast EPS of $0.25 on revenue of $1.08
"Management remains focused on the user experience and daily
habits such as Yahoo.com (the homepage), search, communications,
and mobile. We are seeing improvement in engagement metrics per
comScore, but it is unclear how quickly better monetization will
follow, particularly as Yahoo! reduces some ad inventory. Heavy
focus remains on Yahoo!'s Asian assets, but we look for better
execution in the core business to consider becoming more
constructive on Yahoo! shares from current levels."
"What to look for: 1) whether engagement trends are picking up
as suggested by comScore data and if that's translating into ad $;
2) benefits and details around the renewed RPS guarantee w/ MSFT;
3) any insight into whether Display can grow in 2H13; 4) commentary
on how recent acquisitions fit into management's strategy, and a
Tumblr update; and 5) any commentary on Yahoo!'s Asian assets"
Cantor Fitzgerald maintained a bullish stance heading into
earnings though, reiterating a buy rating and a price target of
$30. They forecast EPS of $0.28 on revenue of $1.078 billion.
"We expect Yahoo!'s 2Q results to be in-line with muted
expectations on Tuesday, 7/16. Operationally, 2013 remains a year
of investments and acquisitions, setting the stage for what we
believe will be a resumption of growth in 2014. Meantime, the
prospects of an Alibaba IPO later this year and improvements in
Yahoo! Japan keep a positive momentum in the stock, in our
"Yahoo! remains a share loser in both Display and Search
advertising. Our estimates assume that Display revenue ex-TAC
declined 12.2% Y/Y to $415.8M (vs. -11.4% Y/Y last quarter) and
Search ex-TAC grew 8.5% Y/Y to $418.4M (picking up slightly from
last quarter's +6.5% Y/Y). These rates compare to global industry
estimates of roughly mid-teens percent growth."
"YHOO is trading at 1.2x revenue and 3.3x EBITDA on our FY:13
estimates (ex. Asian assets). Our $30 PT is based on a 5-year DCF
supplemented by a Sum-of-the-Parts. Risks include new initiatives'
failure to gain traction, monetization of Asian assets, and decline
in Media property usage."
Key Economics Releases
"The Beard" will be back on the podium as Chairman Ben Bernanke
is set to speak twice in the latter half of the week. Other than
that, the economic calendar is marked by the retail sales report
Monday and some regional manufacturing data throughout the
Earnings Expected From: B&G Foods (NYSE:
), Citigroup (NYSE:
), Gardner Denver (NYSE:
), and Wynn Resorts (NASDAQ:
).Economic Releases Expected: Retail sales, Empire State
Manufacturing Index, Business Inventories, and the weekly 3- and
6-month bill auctions.
Earnings Expected From: Charles Schwab (NYSE:
), Coca-Cola (NYSE:
), CSX Corp. (NYSE:
), Goldman Sachs (NYSE:
), Interactive Brokers (NASDAQ:
), Johnson and Johnson (NASDAQ:
), Mosaic (NYSE:
), and Yahoo! (NASDAQ:
).Economic Releases Expected: the German ZEW Economic Sentiment
Index, U.S. CPI, the weekly Redbook, TIC flows, industrial
production, the NAHB Housing Market Index, a speech from Fed
President Esther George, and the Bank of Japan minutes.
Earnings Expected From: Abbott Labs (NYSE:
), American Express (NYSE:
), Bank of America (NYSE:
), eBay (NASDAQ:
), Intel (NASDAQ:
), IBM (NYSE:
), Bank of New York Mellon (NYSE:
), and U.S. Bancorp (NYSE:
).Economic Releases Expected: British employment report, MBA
Purchase Applications, new home starts, a speech by Bernanke, and
the Beige Book as well as the Bank of Canada interest rate
Earnings Expected From: Blackrock (NYSE:
), Blackstone (NYSE:
), Chipotle Mexican Grill (NYSE:
), Google (NASDAQ:
), Microsoft (NASDAQ:
), Morgan Stanley (NYSE:
), Nokia (NYSE:
), Union Pacific (NYSE:
), and Verizon (NYSE:
).Economic Releases Expected: initial jobless claims, a speech by
Bernanke, the philly Fed Manufacturing Index, and leading
Earnings Expected From: General Electric (NYSE:
), Honeywell (NYSE:
), and Schlumberger (NYSE:
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advice. All rights reserved.
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