Market Overview

Earnings Expectations for the Week of October 3


Though the calendar page has turned, things will be fairly quiet again this week on the earnings front. The new earnings season does not kick off until Alcoa (NYSE: AA) posts its third-quarter results on October 10, followed shortly thereafter by PepsiCo (NYSE: PEP) and JPMorgan (NYSE: JPM). This week's highlights include results from Costco (NASDAQ: COST), Constellation Brands (NYSE: STZ), Marriott (NYSE: MAR), Monsanto (NYSE: MON) and Yum! Brands (NYSE: YUM). Here is a quick look at what analysts expect from these reports.

Membership warehouse operator Costco Wholesale is expected to report Wednesday that its fiscal fourth-quarter earnings rose 11.8% from a year ago to $1.10 per share. And revenues are anticipated to have risen 15.2% to $27.8 billion. The full-year forecast calls for $3.32 per share (up 11.7%) on $88.2 billion (up 13.1%). Note though that Costco earnings have topped consensus estimates in only two of the past six quarters. Per-share earnings are predicted to grow 12.9% over the next five years. The share price fell to the neighborhood of its 52-week low during the August sell-off but has bounced back since to recent 52-week highs. The stock has outperformed BJ's Wholesale (NYSE: BJ) and Walmart (NYSE: WMT), the operator of the Sam's Club chain, since the beginning of the year.

Analysts are looking for alcoholic beverages producer Constellation Brands to report Thursday that its per-share earnings rose 21.2% year over year to $0.66. But for the fiscal second quarter during which the Harley-Davidson (NYSE: HOG) CEO joined Constellation Brands' board, revenues are expected to total $667.8 million. That would be a decrease of 22.6% from a year ago. Revenues are expected to decline by about as much in the current quarter as well. Note though that this maker of Robert Mondavi wines and Svedka vodka regularly tops consensus EPS estimates. Shares ended last week more than 12% lower than six months ago but nearly 10% higher than the 52-week low. Year to date, the stock has underperformed competitors Brown-Forman (NYSE: BF-B) and Diageo (NYSE: DEO), as well as the broader markets.

Marriott International says it plans to open 27 hotels in Asia in 2013 to meet rising demand in the region; the company also recently announced the retirement of its managing director of International Lodging. When Marriott posts its fiscal third-quarter results on Wednesday, the company is expected to offer up $0.27 per share earnings and $2.8 billion in revenues. A year ago, earnings were $0.22 per share and revenues totaled $2.6 billion. Marriott likewise has beaten consensus EPS estimates in only two of the past six quarters. This S&P 500 component has a long-term EPS growth forecast of 15.7% and a return on equity of 41.8%. But Marriott's share price has fallen most of this year and has bounced between $26 and $29 since early August. Yet, over the past six months, the stock has outperformed competitors Hyatt Hotels (NYSE: H) and Starwood Hotels (NYSE: HOT).

During the three months that ended in August, pesticide and seed producer Monsanto said it was focusing on growth opportunities in Brazil and China, it opened a new corn-breeding facility in the state of Washington, and it also boosted its dividend. But the company is expected to post a net loss of $0.27 per share for that period, on revenue of $1.9 billion. That compares to a net loss of $0.09 per share and $2.0 billion in revenue in the fourth quarter of last year. But the full-year forecast calls for $2.87 earnings per share (up 16.0%) on $11.5 billion (up 9.9%). The long-term EPS growth forecast is 13.2% and the dividend yield is 2.0%. The share price ended last week at $60.04, which is near a nine-month low. But the stock has outperformed DuPont (NYSE: DD) and Syngenta (NYSE: SYT) over the past six months.

The consensus forecast for Yum! Brands, which operates quick-service restaurants KFC, Pizza Hut and Taco Bell, calls for $0.83 per share earnings in Wednesday's fiscal third-quarter report. That would be a 12% increase from a year ago. Revenues are expected to have grown 8.2% to $3.1 billion for the quarter in which the company boosted its dividend and also reached a deal to sell its Long John Silvers and A&W brands. Analysts have underestimated Yum! Brands per-share earnings in most recent quarters. This S&P 500 component has a dividend yield of 2.3% and a return on equity of 81.9%. The share price is more than 8% higher than a year ago, despite falling about 9% in the past month. Over the past six months, the stock has outperformed competitor Wendy's (NYSE: WEN) but underperformed McDonald's (NYSE: MCD).

Other companies expected to post year-over-year EPS growth this week include Acuity Brands (NYSE: AYI), Global Payments (NYSE: GPN), Helen of Troy (NASDAQ: HELE), Robbins & Myers (NYSE: RBN), RPM International (NYSE: RPM) and Wolverine World Wide (NYSE: WWW).


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