Earnings Previews for 11 of 30 DJIA Components This Week (CAT, DD, MRK, KO, PFE, BA, MMM, AXP, T, MCD, MSFT, MO)

This week will mark the first crest of earnings season as we have 11 of the 30 DJIA components reporting earnings this week alone.  On Tuesday, we have earnings from Caterpillar Inc. (NYSE: CAT), DuPont (NYSE: DD), Merck & Co., Inc. (NYSE: MRK), The Coca-Cola Company (NYSE: KO).  On Wednesday, we have Pfizer Inc. (NYSE: PFE) and Boeing Co. (NYSE: BA) on deck.  On Thursday, we have 3M Company (NYSE: MMM), AT&T, Inc. (NYSE: T), McDonald’s Corporation (NYSE: MCD) and Microsoft Corp. (NYSE: MSFT).  Altria Group, Inc. (NYSE: MO), a fairly recent DJIA-booted also reports Wednesday.  We have detailed earnings estimates and additional preview data below:

On Tuesday, Caterpillar Inc. (NYSE: CAT) is expected to post $0.22 EPS on $8.86 billion in revenues.  The bar has been set extra-low here.  Earnings last quarter (Q1-2009) were $0.04 EPS and revenues were $9.225 billion.  A year ago those numbers were $1.54 billion and $13.624 billion.  To show battered this is, Caterpillar could double and still be short of a $75.87 high over the last 52-weeks.  It was even an $80 stock if you go back about a year ago.

On Tuesday, DuPont (NYSE: DD) is expected to post $0.53 EPS on $7.15 billion in revenues.  That compares to the Q1 report of $0.52 EPS and the year-ago similar report of $1.07 EPS.  DuPont is up considerably off of lows.  It still has upside if you consider the $30+ price seen in April and May.

On Tuesday, Merck & Co., Inc. (NYSE: MRK) is expected to post $0.77 EPS on $5.85 billion in revenues. EPS is expected to be flat sequentially to Q1’s $0.77 EPS, but would compare to $0.82 year-over-year.  This one has yet to shake its “dead money stock” image, and there is that pesky little political issue of how Big Pharma will be hit by a universal or opt-in healthcare system.

On Tuesday, The Coca-Cola Company (NYSE: KO) is expected to post $0.89 EPS on $8.66 billion in revenues.  This would compare to $0.65 in the Q1 report, and a Q2-2008 report of $0.96 EPS.  One detail to watch here will be the effects that soft drink sales did not hold up in the recession as well as many expected. Lastly, currencies are a huge issue at Coca-Cola.

On Wednesday, Pfizer Inc. (NYSE: PFE) is expected to post $0.48 EPS on $11.28 billion in revenues.  This would compare to $0.49 EPS in Q1 and would compare to $0.54 EPS a year ago.  Because of a current merger and because of the “dead money stock” attribution, this should boil down to mostly the numbers.

On Wednesday, Boeing Co. (NYSE: BA) is expected to post $1.21 EPS on $17.15 billion in revenues.  This would compare to $0.91 EPS in Q1, but would be down from $1.23 a year ago.  Because of the inherent volatility in the airline segment and because of the delays to the 787 Dreamliner, we won’t be endorsing these estimates and won’t be offering any color on Boeing other than the basics.

On Thursday, 3M Company (NYSE: MMM) is expected to post $0.94 EPS on $5.41 billion in revenues.  This would compare to $0.86 in Q1, but would be down from $1.35 EPS a year earlier.  3M was hard to draw any direct compare to GE, mainly because 3M does not have the same issues of a “Finance” unit as GE does.

On Thursday, AT&T, Inc. (NYSE: T) is expected to post $0.51 EPS on $30.69 billion in revenues.  This would compare to $0.48 EPS last quarter, but would be down from $0.71 a year ago.  With the decline in landline phones seen at major telecom operators, it is always a race to see if the iPhone subscribers keeps outpacing those losses.  Another metric to watch will be how many uVerse subscribers it has been able to steal from Comcast and Time Warner Cable.

On Thursday, McDonald’s Corporation (NYSE: MCD) is expected to post $0.97 EPS on $5.72 billion in revenues.  Mickey-D’s posted $0.82 EPS in Q1 and $0.86 in the same period a year ago.  As always, watch for the “currency impact” on this quarter’s report.  How much can McDonald’s keep growing?  This is a question that the company has been able to prove over and over as not being the case.  To show how it is expected to grow ahead, the estimates for fiscal 2009 are $3.87 EPS and $22.67 billion in revenues and the estimates for 2010 are $4.26 EPS and $23.67 billion in revenues.  As dismal as Yum!’s report was from organic sales and from currency, we’d expect the bar to be set fairly low here.

On Thursday, Microsoft Corp. (NYSE: MSFT) is expected to post $0.36 EPS on $14.37 billion in revenues.  This will compare to $0.39 EPS and $13.648 billion in revenues in the calendar Q1 period and to $0.47 EPS and $15.837 billion in revenues in the same year ago period. The bar has to be unofficially higher after the report from Intel.  The problem with that assumption is that estimates are lower than they were one and two months ago and we still have mixed data from technology giants and the benefits of Windows 7 is still another quarter out.

Lastly, Altria Group, Inc. (NYSE: MO) is on deck Wednesday.  It is out of the DJIA now, but is a recent enough move that many still think of it as a DJIA-30 component. Earnings are expected to be $0.47 EPS on $5.35 billion in revenues.

Be advised, that many of these estimates will have changed by the report dates.  All estimates are Thomson Reuters estimates.  Estimates change daily, particularly after competitor earnings have been released.  From what we have seen in S&P 500 components so far this earnings season, we have roughly 70% of companies beating earnings estimates as the estimates were set at very conservative levels.  We would argue that this was not conservative but artificially lower.  In short, we would not expect positive reactions in the companies that miss or that might have been given a “good enough considering the economy” reception we saw in last quarter’s earnings season.

JON C. OGG
JULY 20, 2009