Vital Signs: Earnings Winners and Losers

On deck: leading indicators, home prices, home sales, durable goods orders, and a ton of earnings reports

The second-quarter earnings season kicks into high gear this week, with 159 S&P 500 companies set to report. By the end of the week, half of the S&P 500 will have posted their results, offering a good idea of how the winners and losers are stacking up. For now, with only a scant 33 companies having reported, Thomson Reuters says earnings are expected to be down 14.7%, which would be the fourth consecutive quarter of negative growth.

The expected sector breakdown isn’t hard to figure. Energy and technology, currently projected to show gains of 28% and 16%, respectively, will lead the winners. The biggest loser will be financials, expected to post a whopping 72% earnings decline, similar to their first-quarter losses. The consumer discretionary sector, is projected to be down 20%, led by lots of red ink from auto makers. Homebuilders will actually be something of a plus for the sector, in that their second-quarter losses are expected to be half the size of those in the second quarter of 2007.

The week will offer plenty of news relevant to both financial companies and homebuilders. Given that falling home prices lie at the heart of the current dysfunction in the credit markets, Wall Street will be watching the Office of Federal Housing Enterprise Oversight’s home price index for May for any sign that the drop in home prices is either slowing down or still picking up steam. The week also offers reports on sales of new and existing homes. Both have shown some signs of stabilizing in recent months, but inventories are still high, and mortgage rates have backed up, eating into affordability.

One interesting feature of second-quarter earnings is that profits outside of finance are expected to hold up surprisingly well. Thomson Reuters says analysts project earnings, excluding the financials sector, to be up 8.3%, and even further omitting a big boost from the energy sector, the projection is still 2.9%. That’s clearly a modest performance, but it’s far from the broad earnings plunge typically seen in a recession. Right now, earnings guidance from the S&P 500 companies shows a 1.9-to-1 ratio of negative to positive earnings pre-announcements. That’s below the 2.3-to-1 ratio this time last quarter, and it’s also less than the long-term average of 2.1-to-1.

The second half is shaping to be more challenging for companies outside finance. Unexpectedly high gasoline and fuel prices are robbing the buying power of consumer incomes and negating the stimulus from the tax rebates. Plus, the latest round of financial upheaval implies the credit crunch is getting worse, especially for would-be homebuyers. Despite the Fed’s rate cuts, fixed mortgage rates are up more than a half point since April. And growth overseas, a crucial prop under economic growth and profits, is showing clear signs of slowing. As the pace of earnings reports picks up this week and next, investors will be increasingly focused on guidance for the third quarter and full-year 2008.

Here’s the weekly economic calendar from Action Economics.

Top Economic Reports
Reports Date Time For Median Estimate Last Period
Leading Indicators Index Monday, July 21 10:00 a.m. June -0.1% -0.1%
Existing Home Sales (millions) Thursday, July 24 10:00 a.m. June 4.930 4.909
Durable Goods Orders Friday, July 25 8:30 a.m. June 0.1% 0.1%
New Home Sales (millions) Friday, July 25 10:00 a.m. June 0.508 0.506
Consumer Sentiment Index (final) Friday, July 25 9:55 a.m.. July 55.0 55.1
Other reports and events
Other Reports and Events Date Time For
ICSC-UBS Store Sales Tuesday, July 22 7:45 a.m. July 13-19
Johnson Redbook Weekly Store Sales Tuesday, July 22 8:55 a.m. July 13-19
SPEECH: Philadelphia Fed President Plosser Tuesday, July 22 8:30 a.m.
Richmond Fed Survey Tuesday, July 22 10:00 a.m. July
OFHEO House Price Index Tuesday, July 22 10:00 a.m. May
Mortgage Applications Wednesday, July 23 7:00 a.m. July 13-19
SPEECH: Fed Governor Mishkin Wednesday, July 23 9:00 a.m.
SPEECH: Fed Vice Chairman Kohn Wednesday, July 23 11:15 a.m.
Federal Reserve Beige Book Report Wednesday, July 23 2:00 p.m.
Initial Unemployment Claims Thursday, July 24 8:30 a.m. July 13-19
Earnings Calendar
Company Report Date
Weatherford International Ltd Monday, July 21
Bank of America Corp Monday, July 21
Texas Instruments Inc Monday, July 21
Hercules Inc Monday, July 21
QLogic Corp Monday, July 21
Equifax Inc Monday, July 21
Boston Scientific Corp Monday, July 21
Apple Inc Monday, July 21
Hasbro Inc Monday, July 21
Schering-Plough Corp Monday, July 21
Merck & Co Inc Monday, July 21
SanDisk Corp Monday, July 21
Freeport-McMoRan Copper & Gold Inc Tuesday, July 22
Regions Financial Corp Tuesday, July 22
Quest Diagnostics Inc Tuesday, July 22
Baker Hughes Inc Tuesday, July 22
Forest Laboratories Inc Tuesday, July 22
UnitedHealth Group Inc Tuesday, July 22
SunTrust Banks Inc Tuesday, July 22
CME Group Inc Tuesday, July 22
Biogen Idec Inc Tuesday, July 22
Jacobs Engineering Group Inc Tuesday, July 22
EI Du Pont de Nemours & Co Tuesday, July 22
Fifth Third Bancorp Tuesday, July 22
Wachovia Corp Tuesday, July 22
Tellabs Inc Tuesday, July 22
Rockwell Automation Inc/DE Tuesday, July 22
Western Union Co/The Tuesday, July 22
Keycorp Tuesday, July 22
Caterpillar Inc Tuesday, July 22
United Parcel Service Inc Tuesday, July 22
Avery Dennison Corp Tuesday, July 22
AK Steel Holding Corp Tuesday, July 22
CH Robinson Worldwide Inc Tuesday, July 22
Nabors Industries Ltd Tuesday, July 22
E*Trade Financial Corp Tuesday, July 22
Sigma-Aldrich Corp Tuesday, July 22
Broadcom Corp Tuesday, July 22
Washington Mutual Inc Tuesday, July 22
Norfolk Southern Corp Tuesday, July 22
Pactiv Corp Tuesday, July 22
Boston Properties Inc Tuesday, July 22
Waters Corp Tuesday, July 22
BJ Services Co Tuesday, July 22
Halliburton Co Tuesday, July 22
Lockheed Martin Corp Tuesday, July 22
Linear Technology Corp Tuesday, July 22
SUPERVALU Inc Tuesday, July 22
Lexmark International Inc Tuesday, July 22
XTO Energy Inc Tuesday, July 22
Stanley Works/The Tuesday, July 22
Intuitive Surgical Inc Tuesday, July 22
Precision Castparts Corp Tuesday, July 22
PACCAR Inc Tuesday, July 22
Omnicom Group Inc Tuesday, July 22
Yahoo! Inc Tuesday, July 22
PepsiCo Inc Wednesday, July 23
Ryder System Inc Wednesday, July 23
New York Times Co/The Wednesday, July 23
Sovereign Bancorp Inc Wednesday, July 23
Travelers Cos Inc/The Wednesday, July 23
McDonald's Corp Wednesday, July 23
Praxair Inc Wednesday, July 23
Whirlpool Corp Wednesday, July 23
WellPoint Inc Wednesday, July 23
Dover Corp Wednesday, July 23
Philip Morris International Inc Wednesday, July 23
Wyeth Wednesday, July 23
Boeing Co Wednesday, July 23
AT&T Inc Wednesday, July 23
Unisys Corp Wednesday, July 23
ConocoPhillips Wednesday, July 23
Air Products & Chemicals Inc Wednesday, July 23
Robert Half International Inc Wednesday, July 23
McKesson Corp Wednesday, July 23
QUALCOMM Inc Wednesday, July 23
Teradyne Inc Wednesday, July 23
Noble Corp Wednesday, July 23
CR Bard Inc Wednesday, July 23
Allstate Corp/The Wednesday, July 23
LSI Corp Wednesday, July 23
Pulte Homes Inc Wednesday, July 23
Citrix Systems Inc Wednesday, July 23
Range Resources Corp Wednesday, July 23
SLM Corp Wednesday, July 23
Terex Corp Wednesday, July 23
Ameriprise Financial Inc Wednesday, July 23
Torchmark Corp Wednesday, July 23
Allegheny Technologies Inc Wednesday, July 23 Inc Wednesday, July 23
Hershey Co/The Wednesday, July 23
MEMC Electronic Materials Inc Wednesday, July 23
Varian Medical Systems Inc Wednesday, July 23
American Express Co Wednesday, July 23
EMC Corp/Massachusetts Wednesday, July 23
Convergys Corp Wednesday, July 23
General Dynamics Corp Wednesday, July 23
Aflac Inc Wednesday, July 23
Hudson City Bancorp Inc Wednesday, July 23
Anheuser-Busch Cos Inc Wednesday, July 23
Pinnacle West Capital Corp Wednesday, July 23
Genzyme Corp Wednesday, July 23
Peabody Energy Corp Wednesday, July 23
Pfizer Inc Wednesday, July 23
General Motors Corp Wednesday, July 23
Rohm & Haas Co Thursday, July 24
Cooper Industries Ltd Thursday, July 24
Medco Health Solutions Inc Thursday, July 24
L-3 Communications Holdings Inc Thursday, July 24
Prologis Thursday, July 24
Thermo Fisher Scientific Inc Thursday, July 24
Smith International Inc Thursday, July 24
Janus Capital Group Inc Thursday, July 24
Ecolab Inc Thursday, July 24
Starwood Hotels & Resorts Worldwide Inc Thursday, July 24
Laboratory Corp of America Holdings Thursday, July 24
Snap-On Inc Thursday, July 24
ENSCO International Inc Thursday, July 24
Applied Biosystems Inc Thursday, July 24
AmerisourceBergen Corp Thursday, July 24
Scripps Networks Interactive Inc Thursday, July 24
3M Co Thursday, July 24
Goodrich Corp Thursday, July 24
Eli Lilly & Co Thursday, July 24
Ball Corp Thursday, July 24
Dow Chemical Co/The Thursday, July 24
Zimmer Holdings Inc Thursday, July 24
Xerox Corp Thursday, July 24
Raytheon Co Thursday, July 24
Union Pacific Corp Thursday, July 24
MeadWestvaco Corp Thursday, July 24
Burlington Northern Santa Fe Corp Thursday, July 24
Eastman Chemical Co Thursday, July 24
Microchip Technology Inc Thursday, July 24
Juniper Networks Inc Thursday, July 24
Chubb Corp Thursday, July 24
Developers Diversified Realty Corp Thursday, July 24
Federated Investors Inc Thursday, July 24
BMC Software Inc Thursday, July 24
PerkinElmer Inc Thursday, July 24
Kimberly-Clark Corp Thursday, July 24
Southwest Airlines Co Thursday, July 24
Occidental Petroleum Corp Thursday, July 24
Ashland Inc Thursday, July 24
Newmont Mining Corp Thursday, July 24
RadioShack Corp Thursday, July 24
Compuware Corp Thursday, July 24
Celgene Corp Thursday, July 24
National City Corp Thursday, July 24
Bristol-Myers Squibb Co Thursday, July 24
UST Inc Thursday, July 24
Cabot Oil & Gas Corp Thursday, July 24
AutoNation Inc Thursday, July 24
Becton Dickinson & Co Thursday, July 24
ITT Corp Friday, July 25
Fortune Brands Inc Friday, July 25
Coventry Health Care Inc Friday, July 25
Black & Decker Corp Friday, July 25
T Rowe Price Group Inc Friday, July 25
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