Big Blue Investors Poised for Blowout Quarter
IBM, which releases its Q2 financial results Monday afternoon, is expected to report earnings of $3.03 per share, up from $2.61 per share a year ago. Shares of IBM have soared 20% since the beginning of the year. This compares with a modest 8% gain in the Dow Jones industrial average. Like most companies with high earnings growth rates, IBM benefits from a large presence in developing markets overseas. Its growth markets--including Brazil, Russia, India, and China--accounted for 21% revenue and grew 15% in 2010. Though IBM introduced the personal computer thirty years ago, 56% of its $100 billion in annual revenue is generated by services such as business process outsourcing and consulting.
Loss Expected for BofA, Gain for Wells Fargo
On Tuesday, when we hear from Bank of America and Wells Fargo, investors will be looking for loan growth and improving loan quality. Last week Citigroup and JPMorgan Chase raised that bar for the big banks by announcing better-than-expected Q2 earnings, which sent their shares higher. Bank of America is expected to report a net loss of 90 cents per share due to $20 billion of mortgage-related losses, including an $8.5 billion settlement for securities issued by Countrywide Financial. Analysts expect Wells Fargo to report earnings of 69 cents per share, up from 55 cents per share a year ago.
The Difference between Coke and Pepsi
The two beverage giants have more in common than similar tasting sodas. Coca-Cola’s earnings are expected to rise 9% to $1.16 per share. PepsiCo’s earnings are expected to rise 10% to $1.21 per share. Both struggle with the costs of raw materials, packaging, and energy. In an effort to preserve profit margins, Coca-Cola is raising prices by 3% to 4%. PepsiCo plans to raise prices by 3% to 5%. However, Pepsi-Cola’s sales trail both Coke’s and Diet Coke’s. A big reason is that while Coca-Cola focuses only on beverages, PepsiCo’s product portfolio also includes Frito-Lay and Quaker Foods.. In an effort to play catch up and lift its brand, PepsiCo is launching a whole new advertising campaign. Coca-Cola and PepsiCo are scheduled to announce results on Tuesday and Thursday, respectively.
Railroad to Recovery? What CSX Could Reveal
CSX operates 21,000 miles of railroads across the eastern U.S., and analysts are expecting earnings to grow to 44 cents per share, up from 36 cents per share a year ago, when it announces Q2 results on Tuesday. But CSX results could also deliver insights into the state of the economic recovery. Economists will carefully scrutinize CSX’s full financial report, which discloses exactly how many railcars were used to transport coal, chemicals, metals, agricultural products, automobiles, and forest products used in housing and construction.