By Wallace Witkowski, MarketWatch
SAN FRANCISCO (MarketWatch)--As peak earnings season starts
winding down, media companies will figure heavily this week along
with results from other consumer-focused companies, testing the
fortitude of last week's rally.
Following the Federal Reserve's end of quantitative easing and
the Bank of Japan starting its own stimulus plan stocks finished
the week at record levels with the Dow Jones Industrial Average
(DJI) and the S&P 500 index (SPX) reaching new highs, the
Nasdaq Composite Index (RIXF) hitting its highest level since March
2000.
So far, quarterly results are going well. With about
three-fourths of the S&P 500 having already reported, the
blended earnings growth rate is tracking at 7.3%, and 78% of
companies have beaten the Wall Street earnings consensus, the
highest rate since the second quarter of 2010, according to John
Butters, senior earnings analyst at FactSet.
Also, investors are more prone to rewarding those beats than
punishing misses, Butters said. On average, companies who have beat
this season see their stock up about 2.8% two days later, while
companies who miss are seeing their stock down 0.6% in the same
period. Over the past five years, earnings beats have been rewarded
with a 0.9% gain in stock price, while misses have been punished
with a 2.4% decrease, according to FactSet data.
Only one Dow component reports on the week, Walt Disney.
Media companies reporting earnings this week
Report Date Company/Ticker (FactSet estimated EPS / revenue)
Nov. 4 21st Century Fox Inc. (37 cents / $6.25 billion)Discovery Communications Inc. (43 cents / $1.59 billion)
Nov. 5 Time Warner Inc. (94 cents / $6.16 billion)CBS Corp. (73 cents / $3.32 billion)MarketWatch parent News Corp (3 cents / $2.09 billion)
Nov. 6 Walt Disney Co. (88 cents / $12.36 billion)DirecTV ($1.30 / $8.3 billion)Scripps Networks Interactive Inc. (84 cents / $651.5 million)Cablevision Systems Corp. (18 cents / $1.61 billion)
Nov. 6 Prudential Financial Inc. ($2.41 / $11.33 billion)First Solar Inc. (63 cents / $1.05 billion)Molson Coors Brewing Co. ($1.48 / $1.17 billion)Lions Gate Entertainment Corp. (13 cents / $522.8 million)Wendy's Co. (9 cents / $514.7 million)
Nov. 7 Humana Inc. ($2.01 / $12.27 billion)Berkshire Hathaway Inc. ($1.71 Class B shares / $51.33 billion)
Some analysts are cautious about media companies going into
earnings season.
"We remain cautious on big media space due to worsening
fundamentals," said Cowen & Co. analyst Doug Creutz in a recent
note. "Most notably, we now believe that digital media is pulling
advertising dollars away from national TV. However, most big media
stocks have recently pulled back."
Disney may be the most healthy of the bunch since its the most
diversified given its theme parks, consumer products and studio
assets that help stem worsening TV economics, Creutz notes. Then
again, that could also already be baked into Disney's stock price
given its one of the best performer in the space this year.
Just over 80 S&P 500 companies report this week with about
of a quarter of those companies either in the consumer
discretionary or consumer staples sectors.
Both consumer sectors are expected to see the worst earnings
growth of the season year-over-year compared with other sectors.
The consumer staples sector is expected to see earnings growth of
1.7%, while the consumer discretionary sector is expected to grow
by 1.4%, when one excludes home builder PulteGroup, which had a
huge gain a year ago from a deferred tax asset valuation allowance,
according to FactSet data.
On the revenue side, the sectors stack up a little better with
the fifth- and sixth-best expected gains. Revenue for the consumer
discretionary sector is expected to rise 3.4%, while consumer
staples revenue is projected to rise 3.3%.
Other notable earnings reports this week
Report Date Company/Ticker (FactSet estimated EPS / revenue)
Nov. 4 21st Century Fox Inc. (37 cents / $6.25 billion)Discovery Communications Inc. (43 cents / $1.59 billion)
Nov. 5 Time Warner Inc. (94 cents / $6.16 billion)CBS Corp. (73 cents / $3.32 billion)MarketWatch parent News Corp (3 cents / $2.09 billion)
Nov. 6 Walt Disney Co. (88 cents / $12.36 billion)DirecTV ($1.30 / $8.3 billion)Scripps Networks Interactive Inc. (84 cents / $651.5 million)Cablevision Systems Corp. (18 cents / $1.61 billion)
Nov. 6 Prudential Financial Inc. ($2.41 / $11.33 billion)First Solar Inc. (63 cents / $1.05 billion)Molson Coors Brewing Co. ($1.48 / $1.17 billion)Lions Gate Entertainment Corp. (13 cents / $522.8 million)Wendy's Co. (9 cents / $514.7 million)
Nov. 7 Humana Inc. ($2.01 / $12.27 billion)Berkshire Hathaway Inc. ($1.71 Class B shares / $51.33 billion)
Here's what to look for in from earnings from AIG, Michael Kors,
Priceline, and Tesla Motors.
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