Netflix: Soaring Stock, Hungry Rivals
Netflix (NFLX) has rocketed 57% since the beginning of the year, and analysts expect it to report Q2 earnings of $1.11 per share, up 39% from a year ago. For the full year, analysts see the company earning $4.52 per share. At a share price of $276, Netflix boasts a very pricey p-e ratio of 61. While prospects for long-term earnings growth appear attractive, the competitive landscape is intensifying rapidly. In fact, last week it was rumored that Apple might try to acquire Hulu, which offers a service that competes with Netflix’s online streaming video business. Netflix itself has made moves to preserve long-term profit growth. Two weeks ago, it rolled out new pricing plans that effectively raised the minimum subscription price by 60% for those wishing to receive both DVDs and unlimited streaming video. Management will surely field questions regarding the new pricing when it releases Q2 financial results on Monday.
Pass the Kleenex: Tears at Kimberly Clark
Kimberly-Clark (KMB), the maker of Kleenex tissues, Scott bathroom tissue, Huggies diapers, and Kotex feminine care products, is expected announce on Monday that Q2 earnings declined to $1.14 per share from $1.20 per share a year ago. The company faces high costs, which are more than offsetting the benefits yielded by cost cutting and restructuring. Investors will expect a progress report on these restructuring efforts, which are expected to conclude in 2012. With around 50% of sales generated outside of the U.S., Kimberly-Clark’s growth will largely be driven by emerging markets where rising standards of living are driving increasing demand for disposable hygiene products.
High-End Whole Foods Hangs Tough—for Now
Earnings at high-end grocer Whole Foods (WFM) are expected to grow to 48 cents per share from 38 cents per share a year ago when it reports on Wednesday. That’s respectable but not boffo. But with high unemployment stubbornly high and the consumer weakened, how long can Whole Foods’ performance remain relatively strong? While demand for groceries is non-cyclical, consumers can easily shop around as their incomes fluctuate, and cost-conscious consumers already plenty of options—from traditional grocers such as Kroger and Safeway to supercenters such as Wal-Mart and wholesale club stores such as Costco. On the plus side, Whole Foods continues to increase its appeal to lower-income customers by stocking more low-priced products.
AAA-rated ExxonMobil Expected to Earn $11 billion in Three Months
On Thursday, oil behemoth ExxonMobil (XOM) is expected to report net income of over $11 billion, or $2.32 per share, thanks to higher oil prices. Last month, the company struck oil in the Gulf of Mexico. According to Steve Greenlee, president of ExxonMobil Exploration Co., “This is one of the largest discoveries in the Gulf of Mexico in the last decade.” ExxonMobil is one of four U.S. nonfinancial companies boasting S&P’s coveted AAA credit rating. Automatic Data Processing, Johnson & Johnson, and Microsoft are the others. In fact, earlier this month, S&P noted that a downgrade to the U.S. sovereign credit rating is not likely to affect the AAA standing/ratings of these four companies. Oil giants BP, ConocoPhillips, and Chevron will announce quarterly earnings on Tuesday, Wednesday and Friday, respectively.