What to Watch in the Week Ahead and on Monday, Jan 25
(The Day Ahead is an email and PDF publication that includes the day's major stories and events, analyses and other features. To receive The Day Ahead, Eikon users can register at . Thomson One users can register at RT/DAY/US. All times in ET/GMT) WEEK AHEAD With the markets having calmed down a bit and stocks rallying a little, the focus shifts to quarterly corporate results: a slew of companies are due to report next week, including about 130 S&P 500 components. Earnings expectations have been declining, but the market's lousy performance of late and investors' diminished expectations may produce some surprises to the upside here and there. The big names include Apple, Amazon, Johnson & Johnson, Chevron and Visa. Investors will also be looking at U.S. Federal Reserve's Federal Open Market Committee two-day meeting on interest rates beginning on Tuesday. All eyes are on the fourth-quarter gross domestic product report on Friday, which is expected to confirm that economic growth braked sharply from the third quarter's 2.0 percent annual pace. According to a Reuters survey of economists, GDP growth likely slowed to a 0.8 percent rate on average. Estimates range from as low as 0.1 percent to as high as 1.1 percent. Other data on tap during the busy week include housing, manufacturing, consumer confidence and wage growth. Reports on Tuesday are likely to show solid gains in house prices in November, with the S&P/Case Shiller house price index forecast rising 5.7 percent in the year to November after increasing 5.5 percent in October. The Conference Board is expected to report its consumer confidence index at an unchanged 96.5 in January despite a massive stock market selloff. On Wednesday, the Commerce Department is expected to report that new home sales increased 2 percent to a 500,000-unit pace in December, which would offer more evidence that the housing market recovery remains intact despite the slowing economy and stock market rout. Durable goods orders are forecast to have dropped 0.3 percent in December after being unchanged in November. Core capital goods orders are also expected to have declined 0.3 percent after a similar fall in November. On Friday, the Labor Department is expected to report that its employment cost index rose 0.6 percent in the fourth quarter after a similar gain in the third quarter. Apple Inc is expected to report first-quarter revenue slightly below estimates for the first time in six quarters, according to Thomson Reuters StarMine. The company has been facing well-documented issues around softer demand for iPhone 6 and iPhone 6S. Warnings from Apple suppliers like Cirrus Logic, Jabil Circuit and Qorvo have sparked concerns about slowing shipments. Results of the world's most valuable company by market value are slated on Tuesday. Investors will be looking for clarity around reports that the company will cut output of the iPhone models by about 30 percent for the March quarter. Chief Executive Tim Cook's comments about China, which the company counts as one its biggest markets, will also be on focus. Microsoft Corp is expected to report second-quarter revenue slightly above analysts' average estimate on Thursday. Under Chief Executive Satya Nadella, the company has been shifting its focus to software and cloud services as demand for the Windows operating system slows. The company has also been cutting costs and streamlining its operations to focus on more lucrative businesses. Investor will look for the magnitude of impact from the weakness in PC market and a strong dollar. Johnson & Johnson is expected to report lower fourth-quarter revenue, hurt by a stronger dollar. Weak sales of medical devices and consumer products are expected to weigh on results expected on Tuesday. The company recently said it would cut 3,000 jobs over the next two years in its struggling medical devices business, with the hope of achieving up to $1 billion in annual cost savings. Facebook reports fourth-quarter earnings on Wednesday and is expected to fare slightly above consensus, according to Thomson Reuters StarMine. Facebook reported a surprisingly strong profit growth last quarter, helped by a spike in mobile users and advertising. The company has been spending aggressively on hiring and building data centers. Analysts have said the growth in video views presents the most significant near-term opportunity for Facebook as it looks to grab a bigger slice of the TV advertising market. Ecommerce company Amazon.com Inc is expected to report fourth-quarter revenue slightly above analysts' estimate on Thursday, according to Thomson Reuters StarMine. The beat, which will be the fourth in a row, piggybacks on strong holiday sales that are expected to have garnered an estimated 43 percent of all online sales in November and December, according to research firm Slice Intelligence. The company, which has struggled with profitability while spending to expand beyond its core online marketplace offerings, is also expected to report a profit for the third straight quarter as it continues to cut costs. Analysts estimate Amazon Web Services, the company's cloud computing business, to post as much as 70 percent revenue growth as it continues to add customers. AT&T, the No. 2 U.S. wireless carrier and the world's largest pay-TV operator, is expected to report fourth-quarter earnings slightly above analysts' average estimate, according to Thomson Reuters StarMine. As the U.S. wireless market stagnates, AT&T is seeking new revenue streams and betting on DirecTV's satellite TV business to help beef up its bundles of cellular, broadband, TV and fixed-line phone services. When it reports earnings on Tuesday, investors will focus on 2016 forecast and progress on integration of DirecTV it bought in July. Procter & Gamble Co is expected to report second-quarter sales above analysts' average estimate, according to Thomson Reuters StarMine. A stronger dollar has crimped the value of sales from overseas markets. The company missed out on key trends in important markets like China and India due to a very centralized organizational structure. P&G has been downsizing its product portfolio to concentrate on higher-margin brands, a move that analysts and investors have lauded. The company, which reports on Tuesday, said it expected organic sales to grow from the latest quarter. Time Warner Cable Inc is expected to report Q4 revenue and profit below the average analysts' estimates on Thursday. The company, which is being bought by Charter Communications in a $56 billion deal announced in May, is under pressure from shareholders to sell or spin off HBO. Investors will be looking for updates on the closing of the Charter deal and also if the company is capable of stemming an exodus of net video subscribers. Eli Lilly and Co is likely to report fourth-quarter revenue in line with expectations, according to Thomson Reuters StaMine. The drugmaker said earlier in the month that its Jardiance diabetes treatment grabbed market share during the fourth quarter even as it forecast 2016 revenue below expectations. Lilly, which is due to report on Thursday, has been struggling with declining sales and earnings since 2011 after sales of its biggest products plunged due to competition from cheaper generics. Boeing posts Q4 results, the first annual tally under CEO Dennis Muilenburg. Analysts and investors will look for evidence that Boeing's 787 production started generating cash flow in the fourth quarter and will examine prospects for the declining defense businesses when the company reports on Wednesday. There's also speculation that Boeing may take an accounting charge for the production cost of the 787 or the 747. Chemical company Dupont, which is merging with rival Dow Chemical, is expected to report a fall in fourth-quarter profit, hurt by weak earnings from its farm segment. Falling prices for seeds, especially corn, has weighed on the business for more than a year now. Investors will be keen to learn more about the company's outlook for its agriculture business and non-farm demand from China. Details about the pending merger and the impact of a strengthening dollar are also on the agenda when the company releases results on Tuesday. Ford Motor Co is expected to report record pre-tax profits for 2015, excluding one-time items, on Thursday. Investors will focus on the automaker's projections for 2016, looking for any change from the outlook company executives presented Jan. 12 that 2016 pre-tax profits would be "at least as high" as last year. Ford said it expects higher costs in North America and cautioned that it could be difficult to expand North American operating margins, projected at 9.5 percent "or better" for 2016. Cessna jet maker Textron Inc is expected to report a rise in its revenue and profit in the fourth quarter on Wednesday. Also slated to report fourth-quarter results same day is United Technologies, the maker of Pratt & Whitney aircraft engines. Qualcomm is expected to report first-quarter profit above analysts' expectations, according to Thomson Reuters StarMine. The company said it would not break itself up after it delivered its fourth profit warning in November. The chipmaker, which faces intense competition from Taiwanese and Chinese companies, said its agreements with two major Chinese customers were taking longer than anticipated. Investors will look for indications about the state of the chipset business as well as commentary on cost control in the face of tough competition when it reports results on Wednesday. Visa Inc is expected to report a jump in first-quarter earnings on Thursday, boosted by higher volumes. However, some analysts have expressed concerns that Visa, which gets a large chunk of revenue from outside the United States, could take a blow from the quarter's strong dollar and falling oil prices. According to some analysts, Mastercard's entry into China could push costs up during the period, and will continue to do so for the year. AbbVie Inc is expected to report fourth-quarter profit and revenue above Wall Street estimates on Friday, according to Thomson Reuters Starmine. The company, which in October forecast double-digit EPS growth through 2020, had some good news earlier this month when U.S. patent officials denied Amgen's efforts to market a biosimilar version of its drug Humira; which is considered the world's top-selling prescription medicine. Investors will be looking for additional color on other patent challenges and biosimilar developers, and also how the FDA-mandated potential liver injury warning on AbbVie's hepatitis C drugs have impacted sales. On Friday, the maker of aircraft parts and climate control systems Honeywell International Inc is expected to report a higher fourth-quarter profit helped by cost controls. The company, which counts Boeing Co and Bombardier Inc among its customers, has cut jobs and sold or merged businesses to reduce costs. Strong dollar and weak demand from oil and gas customers could affect revenue. Colgate Palmolive Co is grappling with a strong dollar that has reduced the value of sales from overseas. Colgate, which gets about 66 percent of sales from outside North America, has raised prices in markets like Latin America and Africa to cushion the impact of the dollar. However, unit volume in these regions have reduced as an effect. The company cut its full-year profit forecast in October to reflect the changes in foreign exchange rates, which generally have a double-digit impact on total sales. Investors will look out for any updates to the forecast and whether the company has other plans to offset the impact of currency when it reports fourth quarter earnings on Friday. Payments network operator Mastercard Inc is expected to report a fall in fourth-quarter profit, hurt by a strong dollar, as markets outside the United States account for nearly 60 percent of its purchase volumes. Mastercard said in September it expected operating expenses for 2015 to grow in high single digits due to ramping China investments and continued digital-related spending. The investors will look for the company's update on gas prices, foreign exchange headwinds and rebates when it publishes results on Friday. Data storage giant EMC, which is in the process of being acquired by Dell, is expected to post fourth-quarter revenue in line with market estimates, according to StarMine. EMC has seen dwindling foreign sales as a result of the stronger dollar and weakness in the large markets of Asia-Pacific and Latin America. Investors will watch out for the company's forecast for 2016 as well as updates on the structure of the proposed buyout by Dell when it posts earnings on Wednesday. PayPal Holdings Inc is expected to report a fourth-quarter profit in line with analysts' estimate, according to Thomson Reuters StarMine, as the payments company continues to struggle with fierce competition from Stripe and Square Inc. Investors remain on the fence about PayPal's customer base. However, analysts expect some upside to revenue from PayPal's partnership with Macy's and are looking for an update on a potential agreement with Visa Inc when the company reports on Wednesday. On Wednesday, e-commerce company eBay is expected to report fourth-quarter profit and revenue slightly above market estimates, according to Thomson Reuters StarMine. Ebay, which raised its full-year earnings forecast in October, also posted a strong profit last quarter that helped allay concerns about its post-Paypal prospects. Investors will want to see if eBay has sustained that momentum in the fourth quarter as well, in terms of gross merchandise volume and new active buyers as well. Abbott Laboratories Inc is expected to report fourth-quarter profit and revenue just below estimates, according to Thomson Reuters StarMine, as it continues to remodel itself following the spinoff of AbbVie in 2013. Investors will be looking for more color on the likely trajectory of emerging markets sales, which accounts for more than half its revenue and potential M&A when the drugmaker reports on Thursday. AIG is under tremendous pressure from shareholders, including activist investor Carl Icahn, to address concerns about its structure, leadership and cost management as rock-bottom insurance rates batter its underwriting operations. The No. 1 U.S. commercial insurer's strategic update on Tuesday comes amid mounting tensions between AIG Chief Executive Peter Hancock and Icahn over the billionaire's suggestion in October that the company should split into three - an idea Hancock promptly rebuffed. AIG's last strategic announcement in December saw four top-level executives, including its CFO, leaving the company - a move some analysts think was in response to Icahn's criticisms. Amid sliding prices of fertilizers, Potash Corp reports fourth-quarter results and offers guidance for the year ahead on Thursday. Comments on company's expectations for a supply contract with Chinese buyers, which usually sets a global price floor, will be keenly watched. American Airlines Group Inc, the world's largest airline, reports its fourth-quarter results and guidance for early 2016 on Friday. The airline is expected to discuss its decision to write off half a billion dollars of revenue trapped in Venezuela due to currency controls there, as well as increased competition in Latin America from its U.S. rivals. Canadian National, Canada's largest rail company, is expected to announce an improved operating ratio during the last three months of 2015, benefiting from cheaper oil and the weakening Canadian dollar, despite lackluster volumes due to lower bulk shipments. The company is due to report fourth-quarter earnings on Tuesday. Heart device maker St Jude will report Q4 results short of Wall Street expectations on Wednesday, according to Thomson Reuters StarMine. The company, which reported preliminary results earlier this month, has been seeing lower sales in its cardiac rhythm management business which sells pacemakers and heart failure monitoring systems. The company has said these pressures were partially offset by growth in its neuromodulation business and strong sales from its recent Thoratec acquisition. On Tuesday, Coach Inc is expected to report second-quarter sales above the average analyst estimate, according to StarMine. The handbag maker has been revamping its products under design chief Stuart Vevers, a move that helped the company beat the odds of a dull handbag market last quarter. Analysts have lauded Coach's strategies that included a reduction in promotional cadence in an over-distributed market. A Cowen-Sahler Research showed that while sales growth in the handbag market continues to be subdued, Coach was the most favored brand. Corning Inc, which supplies Gorilla Glass to Apple, is likely to report fourth-quarter revenue slightly below analysts' average estimate, according to Thomson Reuters data. The company, which posts results on Tuesday, could take a negative impact from weakening global economy and a strong U.S. dollar. While Corning is best known for the hardy scratch-resistant Gorilla Glass used in smartphones, a majority of its revenue comes from making LCDs and other displays for TVs. 3M Co, the maker of Scotch tape and Post-it notes, is expected to report lower fourth-quarter revenue on Tuesday, hurt by a strong dollar and a global economic slowdown. The company, which gets more than 60 percent of revenue from outside the United States, had cut its 2015 profit outlook in December, and forecast 2016 earnings below the average analyst estimate. Software maker VMware is expected to post fourth-quarter profit and revenue in line with market estimates on Tuesday, according to Thomson Reuters Starmine. The company which makes cloud and virtualization software, lowered its revenue forecast and had warned in October that it would take a hit by softer bookings due to weak demand from China, Russia and Brazil. Investors will watch out for updates on company's 2016 outlook and how VMware will be structured within parent EMC following Dell's purchase of EMC. On Wednesday, Factory automation systems maker Rockwell Automation is expected to report lower first-quarter sales and profit hurt by slowing industrial production growth in the energy and mining sectors. Rockwell, which gets nearly half of its annual revenue from outside the United States, also forecast 2016 sales and profit below the average analyst estimates, citing continued weakness in emerging markets. Norfolk Southern, the No. 4 U.S. railroad, faces a double dilemma as it reports fourth-quarter results on Wednesday. On the one hand, it is struggling to cope with a freight recession and the risk of an industrial recession that threatens the continent's manufacturers. On the other, it is in the middle of a takeover challenge from Canadian Pacific. Investors will be looking for commentary on what the company is doing to successfully manage through the freight downturn and why it presents a better prospect for shareholders as a standalone company. Thursday will see oilfield services provider Baker Hughes, which is awaiting regulatory approval for its merger with bigger rival Halliburton, report a fourth-quarter loss compared with a year-ago profit. The company is struggling to cope with a steep fall in drilling activity, caused by persistently low crude prices. Sports and athletic apparel maker Under Armour Inc is expected to report fourth-quarter profit below analysts' estimates, according to Thomson Reuters StarMine. While Under Armour's sales are estimated to rise more than 20 percent, the company expects the strong dollar, higher costs and spending to hurt gross margins in the fourth quarter. The company has spent close to $1 billion on its fitness and activity-tracking platforms, and is spending on marketing and reducing turnaround times for its merchandise. Johnson Controls Inc which makes automotive batteries and heating and ventilation equipment, is due to report first quarter results on Thursday. The company marks another quarter closer to the spin-off of its automotive seating and interiors business which occurs in October. JCI will take about a half a billion dollars expense this year as it spins off most of its automotive ventures. Hershey Co is likely to report sales below analysts' average estimate, according to Thomson Reuters StarMine. The company, due to report results on Thursday, was forced to reduce its sales forecast for the year five times due to weak demand in North America and slow growth in China. Hershey's China business may have worsened in the quarter while response to new products such as Hershey Caramels and Ice Breakers Cool Blasts in the domestic market has also not been as robust as expected by the company. Harman International Industries Inc, the maker of JBL and Harman Kardon audio systems, is expected to report a second-quarter profit above average analysts' estimate, according to Thomson Reuters StarMine data. The company has benefited from strong demand from automakers for its "connected cars" products. Harman, earlier this month, agreed to buy Israeli-founded cyber defense start-up TowerSec to boost security of its offerings designed for connected vehicles. Investors will be looking for impact of Volkswagen AG's emission scandal on Harman when it post results on Thursday. HCA Holdings Inc, the largest for-profit U.S. hospital operator, is likely to report better-than-expected earnings, helped by greater patient volumes and improved expense control. The company, due to report results on Thursday, expects the Affordable Care Act to drive more growth in 2016 as Americans sign up for insurance coverage through exchanges created under the law. The video game maker Electronic Arts is expected to report third-quarter revenue and profit above expectations, according to Thomson Reuters StarMine. EA is expected to benefit from strong digital sales of its "Star Wars Battlefront" videogame, which it released in November after three years of development. Despite receiving lukewarm reviews, the game is expected to be a commercial hit, drafting off the success of the Star Wars movie. When the company reports on Thursday, investors and analysts will look for comments whether the company will raise or cut its estimate of selling 13 million units of the game for the fiscal year. Xerox Corp, best known for its printers and copiers, is set to report fourth quarter results below estimates; for the ninth straight quarter as corporate customers cut printing costs and consumers shift to mobile devices. Xerox, which has lost more than a third of its market valuation in the last one year, said in October that it would review its businesses and capital allocation options, but was not currently considering a sale of the company. Activist investor Carl Icahn disclosed a stake in the company and said he would look to get board representation and pursue strategic alternatives. Analysts will be looking for further details on the restructuring and any outlook when it reports earnings on Friday. On Tuesday, U.S. diversified miner and oil producer Freeport-McMoRan is expected to post a fourth quarter loss, hurt by weakening metals and oil prices. Freeport has had a turbulent quarter, during which co-founder James Moffett stepped down and the company suspended its annual dividend and lowered its capital spending. The company came under the scrutiny of activist investor Carl Icahn last August, who criticized the company's spending and capital structure in light of its massive debt. Investors will be looking at Freeport's ability to raise funds through the potential sale of minority interests in certain mining assets, even as uncertainty hovers over its plan to divest its Indonesian unit. The main economic report for Canada next week will be monthly gross domestic product. Canada's economy is expected to have grown by 0.2 percent in November, underscoring expectations that the fourth quarter was likely weak at best. The Bank of Canada recently forecast that the economy likely stalled in the fourth quarter, not long after the country emerged from the mild recession it saw in the first half of 2015. A report on producer prices will also be released on Friday, which is forecast to show a 0.2 percent decline in December. On Tuesday, Mexico retail sales for November will be published, after sales rose 0.3 percent in October. On Wednesday data will show how the trade balance fared in December, after factory exports slumped in November by thee most in three months. On Friday December's fiscal balance will be released and the national statistics institute's new preliminary growth estimate for the fourth quarter. ON MONDAY Fast food giant McDonald's Corp is likely to report fourth-quarter sales above analysts' average estimate, according to Thomson Reuters StarMine. The company's all-day breakfast is expected to have lifted U.S. sales and the company is likely to report a second straight quarter of positive same-store sales for the market after two years of no growth. The company announced plans in November for luring back diners, cutting more costs, shifting restaurant ownership to franchisees and returning more cash to investors. Investors will be interested in the performance of the "Mc Pick 2" deal, that lets customers order two items for $2 launched this month, and a likely sale of a portion of McDonald's stake in its Japan business. Halliburton, the world's No.2 oilfield services provider, is expected to post a steep fall in fourth-quarter profit, hurt by lower drilling activity as oil producers slash their capital budgets. Halliburton is waiting for regulatory approval for the takeover of smaller rival Baker Hughes. The merger, announced in 2014, was originally expected to close in November 2015, but Halliburton now expects the deal to close in 2016. Bigger rival Schlumberger posted a slightly better-than-expected quarterly profit, but warned it may miss analysts' profit expectations in the first quarter. Helped by higher home sales, the no.1 U.S. homebuilder D.R. Horton Inc is expected to report a rise in its first-quarter revenue and profit. However, investors would want to see whether the homebuilder could cope with the impact of an industry-wide labor shortage and whether it could offset labor costs with its sales prices. Also, the homebuilder's home deliveries may get impacted by unfavorable weather in the Southern United States during the quarter. The national statistics institute of Mexico will release unemployment data for December, after the gauge fell to a seven year low the prior month. Also, economic activity data for November will be released, after it notched its weakest showing since July the prior month. (0900/1400) LIVECHAT-FX WEEK AHEAD with Reuters FX analysts Jeremy Boulton and Richard Pace Join Reuters FX analyst Jeremy Boulton at (0500 EST/1000 GMT) for a look at the week's top topics and implications for the FX market. To join the Global Markets Forum, click here bit.ly/1kTxdKD (Compiled by Astha Rawat in Bengaluru)
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