This is the official kick-off of earnings season.  Many stocks are at 52-week highs and we are coming off a stellar market performance over the last 13 months.  There are 5 of the 30 Dow Jones Industrial Average components reporting this week. The 5 DJIA stocks reporting this week are Alcoa, Inc. (NYSE: AA), Intel Corporation (NASDAQ: INTC), JP Morgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC), and General Electric Co. (NYSE: GE).

We have of course shown the Thomson Reuters consensus targets, but we have also added in valuation and performance analysis and added in color on each expected reaction where applicable.  Also disclosed today is a bias on each, showing an opinion of what the companies need to say or report to keep the bulls happy after these have all seen significant recoveries in their share prices.

Alcoa, Inc. (NYSE: AA) starts the Q1-2009 reporting period earnings season today after the closing bell. Thomson Reuters estimates are $0.10 EPS on $5.24 billion in revenue, down from $0.11 EPS estimates just on Friday on slightly higher revenue estimates.  This will compare to a loss of -$0.59 EPS a year ago.  If it gives guidance, the estimates are $0.23 EPS and $5.69 billion in revenue for next quarter and $0.75 EPS on $21.61 billion in revenues for fiscal 2010.  As of Friday traded around 18-times forward earnings and its 52-week range is $8.10 to $17.60.  There seems to be a neutral bias here on how the stock will react to earnings, meaning it would seem to rise with good news or fall with bad news more than other quarters.  In mid-day trading, Alcoa is up 2% at $14.68.

Intel Corporation (NASDAQ: INTC) reports on Tuesday afternoon and Thomson Reuters consensus estimates are $0.38 EPS on $9.82 billion in revenues.  We would caution that some analysts’ estimates are $0.40 and even $0.41 EPS and some expect revenue above $10 billion.  Intel was at $20.79 before the last earnings report in January.  With shares at $22.50, the 52-week range is $14.96 to $22.75.  The 2010 estimate of $1.67 EPS gives this a multiple 13.4-times forward earnings.  The issue is that Intel has jumped from the March 2009 lows, yet its stock on an earnings multiple is cheap for a near-monopoly.  For big tech companies, our take ahead of earnings season is that there is already a lot of good news baked into the cake that will require more good news ahead to keep the bears from at least trying to come out of hibernation.  Intel has a tax rate of only 12% last quarter versus a prior target of 20% expected, and its gross margin was up 12 points from a year earlier to a record of 65%.

Jamie Dimon and friends over at JP Morgan Chase & Co. (NYSE: JPM) will be reporting earnings on Wednesday morning.  Thomson Reuters has estimates of $0.64 EPS and $26.47 billion in revenues.  With earnings estimates of $2.98 EPS as the consensus target for 2010, the current year multiple is roughly 15-times earnings, which sounds expensive for a bank in the new normal even if it is the best bank in America.  Looking out a year, JP Morgan trades closer to 9.75-times the 2011 estimate of $4.68 EPS. With shares at $46.40, the 52-week trading range is $28.87 to $47.47.  Meeting estimates and giving caution that the credit metrics are slowly improving probably won’t satisfy the bulls.  We expect the credit quality metrics should be the biggest key indicator here and that will be the number-one basis for how we interpret Jamie Dimon’s presentation.  Banks have been urged to hold back on raising their dividends to build up capital, but Jamie Dimon has on more than one occasion indicated that the bank could raise its payout off the floor.

Bank of America Corporation (NYSE: BAC) is on deck Friday morning as the second of the huge money center banks reporting earnings this week.  Thomson Reuters has estimates of $0.09 EPS and $27.73 billion in revenues. At $18.75 today, the 52-week range is something key to watch as that is $7.00 to $19.10.  Just like in JP Morgan, we expect to hear upside to the individual credit metrics.  We also expect that it will take a blowout quarter on the earnings  side to keep the bulls from taking at least some profits here rather than just meeting estimates and staying conservative.  This is the first real quarter under Brian Moynihan as its new CEO, so this unfortunately may still have a lot of of the “getting to know you” pleasantries and the notion of continuing to execute on its strategy rather than anything exceptionally new or enlightening.

General Electric Co. (NYSE: GE) is the Big Kahuna this week and we are going to get an opinion on many aspects of the economy based upon what we hear.  Thomson Reuters has estimates of $0.16 EPS and $37.08 billion in revenues.  Estimates next quarter are $0.25 EPS and $38.83 billion in revenue.  GE has recovered from its financial woes and the stock has risen well over 100% from the March 2009 lows.  With its earnings estimates of $1.02 EPS for 2010 and then $1.24 EPS for 2011, the translation is that the stock is no longer dirt cheap nor one where near-term downside could not be seen.  Unless there is a significant beat on earnings and a raised guidance bias, then it seems that GE will probably take a breather.  The good news there is that investors may get one more shot at getting in this while it is still trading in the teens.  Morningstar gave a $25 fair value target recently over the long haul.  Be on the lookout for the dividend to go up either with earnings or at the annual meeting later this month.  Our take is that GE is still likely to begin raising its dividend before the already-telegraphed time period of 2011 as the year that dividends will grow.

As a reminder, all estimates are from Thomson Reuters and these estimates are subject to change at any time before the earnings report on each.  After peers report earnings, estimates are far more likely to change.

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JON C. OGG

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