One imagines that a couple of months ago, Yahoo Inc. (ticker: YHOO) thought its third-quarter earnings report would be a mere formality — just a procedural hurdle to clear until its buyout by Verizon Communications Inc. ( VZ) was finalized.
So much for that.
In a week stuffed with earnings reports, Yahoo is a must-watch company because it’s cutting back on its earnings information. YHOO will release its earnings on Tuesday afternoon, but the conference call/webcast has been nixed amid growing uncertainty over its pending deal with Verizon.
[See: 7 Pharma Stocks and the Prognosis for Profits.]
The biggest culprit: In September, Yahoo confirmed what was rumored in August: that the company suffered a major security breach that put the information from at least 500 million user accounts in hackers’ hands. According to Yahoo, that information “may have included names, email addresses, telephone numbers, dates of birth, hashed passwords (the vast majority with bcrypt) and, in some cases, encrypted or unencrypted security questions and answers.” Yahoo also suffered a PR hit when the company was accused of scanning user emails at the direction of U.S. intelligence officials.
The Verizon-Yahoo deal still seems likely, just at renegotiated terms. Reports say the telecom is now asking YHOO to accept $1 billion less than the original $4.8 billion offered, which makes all the sense in the world. Yahoo’s core assets suddenly look a lot less attractive in the wake of a massive hit to the brand — but that also should make Yahoo even more desperate to get a deal done than before.
Here are four other stocks investors should be watching this week:
Tesla Motors (TSLA). Tesla would appear to be another must-see stock of the non-reporting variety, though given CEO Elon Musk’s history of overtweeting and underdelivering, we might be leading you to disappointment on this one.
Musk on Oct. 9 tweeted that there would be a “Tesla product unveiling on the 17th (unexpected by most), followed by Tesla/SolarCity ( SCTY) on the 28th.” That was it, and thus started the rumor mill. So, what all could we see?
Just remember: Musk has a tendency of teasing a lot of things via Twitter, and it doesn’t always work out for the best. The best example of this is “The D” — Musk’s tweet to what many thought would be a brand-new model, but turned out to be just a variant of the Model S. The disappointment knocked Tesla shares to the ground, costing Musk $500 million in a day.
When Monday hit, Musk pushed back the announcement to Wednesday, saying it “needs a few more days of refinement.” We’ll see.
Intel Corp. (INTC). Intel is up 37 percent year for the year, but is stumbling a little heading into Tuesday afternoon earnings report, signifying a struggle between short-term optimism and long-term headwinds.
Last week, research firms IDC and Gartner provided some ominous cloud cover for the PC industry. The former reported that while PC shipments in the U.S. actually grew 1.7 percent, global sales were off 3.9 percent. The latter said its data showed a 5.7 percent decline worldwide, with analyst Mikako Kitagawa pointing to lethargic adoption in emerging markets, where people “primarily use smartphones or tablets for their computing needs.”
[See: 7 Turnaround Stocks and How They’re Doing.]
Also last week, Reuters reported that a new consortium of tech firms, including International Business Machines Corp. ( IBM) and Micron Technology ( MU), are teaming up to take on Intel in the data center space. Specifically, this group is launching an open specification — Open Coherent Accelerator Processor Interface — that will “help corporate and cloud data centers to speed up big data, machine learning, analytics and other emerging workloads.” This flies in the face of Intel, who keeps its technology close to the chest.
INTC still could do some work for the longs, however.
Wells Fargo analyst David Wong last week reiterated Intel as his top pick for a number of reasons, including, ironically enough, improvements in the data center business and better PC demand for client computing. Intel itself telegraphed a strong third quarter in September, when it upgraded its revenue guidance from $14.9 billion to $15.6 billion.
Wall Street adjusted its expectations for Intel appropriately, with analysts now expecting revenue growth of 7.6 percent to $15.56 billion, and a sharp 12.5 percent improvement in earnings to 72 cents per share.
Microsoft Corp. (MSFT). Speaking of troubling PC figures, Microsoft will step up to the earnings plate this week as well.
Microsoft’s up-and-down 2016 has finally settled on “up” for a couple of months, and the company will try to keep it that way when it reports fiscal first-quarter earnings Thursday evening.
There’s not much of a bar to clear here. Earnings are expected to tick up a penny per share to 68 cents, on revenues up fractionally to $21.71 billion, so it won’t take much to provide a pleasant earnings surprise. And if MSFT is going to get that kind of a surprise, it’ll likely come from better-than-expected results from either Productivity (Office 365 and other products), or Intelligent Cloud, which combined for about $5.5 billion in operating income last quarter.
However, Microsoft does have a couple things working against it.
While MSFT is up only about 4 percent for the year, that has come courtesy of a massive 20 percent-plus jump since June, so Microsoft could be due for a pullback on any sort of disappointment. Moreover, it won’t have the benefit of being able to woo investors with cash — it already upped its dividend 8 percent and announced a new $40 billion buyback program last month.
Johnson & Johnson (JNJ): J&J’s third-quarter report comes out Tuesday before the open, and analysts expect improvement on both the top and bottom lines, which if met would continue to prop up the stock’s strong 2016.
JNJ is up 15 percent year-to-date thanks in large part to earnings beats in the first two quarters of the year, which were heavily driven by strength in the pharmaceutical business. The consumer health/pharma company goes into Tuesday’s report with analysts expecting 11 percent earnings growth to $1.65 per share on 3.6 percent revenue growth to $17.71 billion.
RBC Capital Market’s Glenn Novarro, who has been bullish on JNJ for some time now, recently expressed optimism ahead of the company’s report. He believes concerns about Olysio — a hepatitis C treatment — are overdone “and have created a buying opportunity ahead of what we expect will be another strong quarter, driven by the pharmaceutical segment.”
[Read: 8 Stocks to Buy for a Cold Winter.]
If that is the case, expect JNJ to finish out 2016 strongly.
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Yahoo Inc., Verizon Communications and Tesla Motors Inc. Are Stocks On the Move This Week (YHOO, VZ, TSLA) originally appeared on usnews.com
