Earnings season hasn’t disappointed in the sense of fulfilling renewed doubts about the strength of the U.S. economic recovery. Earlier this morning, the investment community received quarterly results from both Bank of America and Citigroup. While Bank of America met its net income forecast, revenue came in significantly lower than analyst expectations. Citigroup managed to disappoint on both earnings and revenue, causing investors to sell on the news.
Without question, it’s a difficult process having to navigate the mixed indicators between company-specific earnings reports and broader economic data. Often times the best approach is to step back, use earnings season as a learning resource, and put your cash to work once the dust settles. Here are three notable S&P 500 components that report earnings after today’s market close.
American Express Company (NYSE:AXP)
Thursday, Jan. 17 after market close; Consensus $1.06 EPS / Revenue $8.12 billion
American Express pre-announced earnings on January 10 when the company disclosed preliminary adjusted net income of $1.09 per share for fourth quarter 2012. Cardmember spending was 8 percent higher during the calendar fourth quarter 2012 compared to the identical 2011 period, despite a brief dip in early fall due to Hurricane Sandy. This announcement is preliminary and the company will not file formal results with the SEC until after the market close on Thursday.
Following the January 10 announcement, American Express has received downgrades from analysts at both Goldman Sachs and JPMorgan. Goldman downgraded American Express to Neutral from Buy citing limited revenue growth and valuation, while maintaining its $65 price target. AXP trades at 14x price-to-earnings, and earnings have outpaced revenue growth over the last 12 months, which is not sustainable over the long-term.
Analysts at JPMorgan made similar remarks, downgrading the stock to Underweight from Neutral while maintaining a $60 price target. The Wall Street firm cited the lack of near-term catalysts for American Express and concerns over the company’s operating leverage.
Capital One Financial Corp. (NYSE:COF)
Thursday, Jan. 17 after market close; Consensus $1.62 EPS / Revenue $5.88 billion
For the fourth quarter 2012, analysts expect Capital One to report income of $1.62 per common diluted share on revenue of $5.88 billion. The Wall Street community is notably more bullish on Capital One than American Express going into Thursday afternoon’s earnings release. On January 2, Asia’s largest brokerage firm CLSA named Capital One a top pick for the 2013 calendar year, citing anticipated improvement in operating earnings and the company’s repurchase plan. CLSA is short for Credit Lyonnais Securities Asia.
In contrast to its downgrade of American Express, Goldman Sachs upgraded shares of Capital One to Buy from Neutral with a $75 price target. Both CLSA and Goldman believe the share price of Capital One could rise on the basis of multiple expansion. The company currently trades at 10.5x price-to-earnings, compared to a 20x industry average.
In other news, Capital One’s quarterly Small Business Barometer report found that small business owners have a steady business outlook for the next 6 months. 29 percent of small business owners believe economic conditions will improve, 24 percent are pessimistic and expect a decline in business, while 45 percent believe the economy will remain about the same.
Intel Corporation (NASDAQ:INTC) Corporation
Thursday, Jan. 17 after market close; Consensus $0.45 EPS / Revenue $13.53 billion
The Santa Clara, California based technology giant has seen its shares fall more than 12 percent in the last 52 weeks. For the fourth quarter 2012, analysts expect Intel to report earnings per share of $0.45 on quarterly revenue of $13.5 billion.
