Fourth-Quarter Earnings Season Kicks Off As Economy Weakens
Investors will be focused on earnings this week as Alcoa Inc.
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PowerRating) kicks off the unofficial start of fourth-quarter earnings season on Monday. After a dismal jobs report and a number of profit warning last week, investors may be hesitant to dip their toe in the stock market water. Alcoa and Intel Corp.
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PowerRating) set investors up for disappointing quarterly earnings this week after they both warned last week of tough times ahead. Also this week, investors will get the latest reading on inflation at the producer and consumer level. Inflation has become less of a concern as the economy dives deeper into recession.
On Monday, Alcoa will be the first Dow Jones Industrial member to report its quarterly results. The aluminum maker is expected to report a loss of five cents per share on revenue of $5.4 billion, according to Thomson Reuters. The company warned last week that it expects to book an impairment charge of up to $230 million in the fourth quarter, will cut staff by about 13,500, slash output by 18 percent and sell its electrical and electronic systems, global foil, cast auto wheels and European transportation products businesses. As a result, shares of Alcoa dropped nearly 10% last week.Â
In looking back at Alcoa’s session-to-session performance following after-hours earnings events, shares are mixed. There are ten wider next-day moves on the heels of evening financials and nine examples of narrower share moves. Last quarter, Alcoa shares extended their declines in the regular session, dropping 3% in after-hours trading and ending the regular session down 12%, after reporting a 52% drop in third quarter profit.
Intel is set to report results on Thursday. Last Wednesday, the world’s largest chip maker lowered its fourth-quarter outlook for a second time and said its revenue would come in at $8.2 billion, about $500 million short of its previous projection. Analysts have since lowered their expectations for Intel to $0.10 per share, from $0.22 a week ago, on revenue of $8.3 billion.Â
The stock has a tendency to narrow its move following after-hours earnings events, cutting back its evening trade in next-day action in 12 of its last 19 earnings events. Shorts may want to jump in if shares should post an earnings-driven after-hours upside or downside move as eight of the past ten previous quarters, where the stock advanced in after-hours, ended up reversing or narrowing in the next day trade.
Cassie Slane is a Senior Editor at www.MidnightTrader.com.