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The Coming Week: Earnings Parade Shifts to High Gear

By Rebecca Byrne
Senior Writer
10/16/2004 12:00 PM EDT


Get ready. The earnings floodgates are about to open.

More than a third of S&P 500 companies are due to report third-quarter profits next week, with heavyweights like IBM (IBM:NYSE - news - research), Microsoft (MSFT:Nasdaq - news - research) and J.P. Morgan (JPM:NYSE - news - research) expected to have a big impact on trade.

So far, quarterly earnings are up 12.6% from last year, and companies are beating estimates by 2.3% on average, according to Thomson First Call. While respectable, those numbers aren't as good as analysts had hoped they would be just a few weeks ago. Still, the earnings parade has just begun.

Larry Wachtel, chief market analyst at Prudential Financial, said IBM will set the tone for the market next week. "That's going to be pivotal -- what we're hearing is that it's going to be mediocre at best," he said.

On Monday, Big Blue is expected to earn $1.14 a share on revenue of $23.4 billion. But analysts worry that bookings at the services division could disappoint. Prudential analyst Steve Fortuna said the stock could react unfavorably to the news.

Among other Dow components reporting are 3M (MMM:NYSE - news - research) on Monday followed by Altria (MO:NYSE - news - research) and McDonald's (MCD:NYSE - news - research) on Tuesday.

J.P. Morgan, Honeywell (HON:NYSE - news - research) and United Technologies (UTX:NYSE - news - research) are expected to chime in on Wednesday while Microsoft, SBC Communications (SBC:NYSE - news - research), Caterpillar (CAT:NYSE - news - research), Merck (MRK:NYSE - news - research), American International Group (AIG:NYSE - news - research) and Coca-Cola (KO:NYSE - news - research) are on tap for Thursday.

The news from AIG will no doubt receive extra attention now that New York Attorney General Eliot Spitzer has taken aim at the insurance industry for allegedly fixing prices.

Analysts say results from eBay (EBAY:Nasdaq - news - research), Amazon (AMZN:Nasdaq - news - research) and Google (GOOG:Nasdaq - news - research) also could influence the market.

John Hughes, market analyst at Shields & Co., said investors are generally prepared for bad news and he doesn't expect companies to be punished for narrowly missing estimates or reducing guidance.

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