October 15, 2014 / 7:08 PM / 4 years ago

What to Watch in the Day Ahead - Thursday, Oct. 16

(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) Internet ad titan Google Inc releases third-quarter earnings after the bell. The undisputed king of traditional internet advertising is struggling to meet Wall Street expectations as it begins to delve deeper into mobile ads, an area where Facebook and Twitter are also active. The company missed targets last quarter after a run of consistent performances, so investors will be watching both paid clicks (a measure of volume) and cost-per-click (generally, prices) when it reports quarterly earnings. Goldman Sachs Group Inc will report third-quarter earnings before the bell. Higher revenue from stock underwriting and a smaller decline in fixed-income trading spurred the bank’s second-quarter earnings. Federal Reserve Chair Janet Yellen tours the CONNECT facility and meets consortium leaders and local residents to hear about conditions in the local economy and the impact of CONNECT for residents entering or re-entering the workforce (1245/1645). Separately, Federal Reserve Bank of Philadelphia President Charles Plosser speaks on the economic outlook before the Lehigh Valley Partnership, Lehigh Valley Economic Development Meeting (0800/1200). Meanwhile, Dennis Lockhart, president of the Federal Reserve Bank of Atlanta speaks on “Strategic Workforce Development” (0900/1300). Separately, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota speaks on “Clarifying the Objectives of Monetary Policy” (1000/1400). Apple Inc is expected to take unveil its new iPads and Macs. Apple wants to get its latest computing gadgets on shelves before the crucial holiday shopping season, but its second event in as many months is unlikely to drum up the same level of excitement as its Watch and iPhone 6 unveiling in September. Tablet sales, after a bravura three-year run, are finally tailing off as innovation stalls and the PC replacement cycle gradually gets underway. The Labor Department issues weekly jobless claims numbers. The level of initial jobless claims is expected to rise by 3,000 to 290,000 (0830/1230). The Federal Reserve releases U.S. manufacturing output, which fell in August for the first time in seven months. Economists forecast factory production to rise 0.4 percent in September from a drop of 0.4 percent in August (0915/1315). Separately, the National Association of Home Builders issues the Housing Market index (1000/1400). Credit-card issuer Capital One Financial Corp will post third-quarter results after the bell. The company is expected to benefit from lower credit losses and increased spending in the United States as more people use cards to make payments. The company’s cards are set to be accepted by Costco in Canada from next year, after the retailer said it would not be renewing its relationship with AmEx this year. Investors will have an eye on UnitedHealth Group Inc, the first managed care company to report in the third quarter. UnitedHealth’s earnings are expected to be about flat from a year ago, a reflection of the government’s tough line on payments for Medicare services and less growth in the employer-based healthcare services business. The company’s Optum unit, which includes healthcare technology and specialty pharmacy benefit management, is once again is once again expected to be a bright spot. Memory chipmaker SanDisk Corp is expected to report third-quarter revenue and profit above estimates, according to StarMine. Analysts are expecting strong growth in solid state drives, but are becoming more cautious on NAND suppliers after the Chinese government said it would source 40 percent of its semiconductors domestically. Delta Air Lines Inc reports third-quarter earnings before the bell. Analysts expect the company to report earnings of $1.18 per share for the September quarter. Medical device and drug maker Baxter International Inc is expected to post sharply higher third-quarter earnings, on strong demand for brands within its medical products unit. The company, which announced in March plans to spin off its biotechnology operations to focus on its core medical technology business, will likely provide more detail on expected benefits from the move.

Oilfield services providers Schlumberger Ltd and Baker Hughes Inc are expected to report higher profits in the third quarter. The results will turn the spotlight on a recent recovery in drilling activity in North America, following a two-year slump. Higher revenue and margins in North America are expected to help the companies offset weakness in Russia and Iraq, where drilling activity has been subdued due to geo-political tensions. Schlumberger, which generates about 4 to 5 percent of its revenue from Russia, warned in August that U.S. and EU sanctions against Russia would hurt its third-quarter profit by as much as 3 cents per share. Schlumberger is more heavily dependent on revenue from international operations than Baker Hughes, whose operations are nearly all concentrated in North America. Baker Hughes is also expected to benefit from a seasonal rebound in activity in Canada. Mattel Inc reports third-quarter results before the bell. Lego has deposed Mattel as the world’s largest toymaker, as a lack of innovation and a sluggish response to competition has crimped growth. Sales of Barbie and Fisher-Price toys, two of Mattel’s biggest brands, fell in double digits in percentage terms in the latest quarter, contributing to a 7 percent drop in revenue for the first half of the year. Mattel says it has taken steps to better position itself for the holiday shopping season, with a slew of new toy launches in the second half of the year, but the evidence will only be weighed once the season ends. Investors will want details on these new launches and on how the company is ramping up production to meet holiday shopping season demand. Programmable chipmaker Xilinx Inc is expected to report second-quarter revenue and profit in line with analysts’ estimates, according to StarMine, which may reflect a slowdown in the semiconductor market. Xilinx had indicated earlier that it had accumulated inventory as a result of transitions involving base-station customers. Analysts will be looking at how the company’s collaboration with China Mobile to deploy LTE base-stations is panning out. Investors are also keen to know how Xilinx’s new products are faring against competitor Altera’s. Stryker Corp releases results for the third quarter. Analysts expect Stryker to post sharply higher earnings on sales of its orthopedic medical devices. But the company’s potential appetite for acquisitions will also loom large on investors’ minds, following rival Medtronic Inc’s $43 billion agreement in June to buy Covidien and re-domicile to tax-friendly Ireland. Chipmaker Cypress Semiconductor is likely to report better-than-expected third-quarter profit, according to StarMine. Analysts are looking for the company to start delivering revenue growth in this quarter and for the second half of the year. An U.S. Food and Drug Administration panel will vote on the recommendations from an Advisory Committee on Pfizer’s quit-smoking drug Chantix. The panel will be voting on additional steps suggested to address side effects from the use of Chantix. Pfizer had earlier settled lawsuits accusing the company of not doing enough to let users know of the drug’s neuropsychological side effects. The vote could possibly negate the dark cloud of controversial safety data or spell disaster for the company’s hopes of seeing the drug rake in sales of more than $1 billion.

Winnebago Industries Inc reports fourth-quarter earnings. Winnebago’s motor homes have been in high demand as consumers in the United States spend more on luxury items. The trend is set to continue, with the industry forecasting recreational vehicle sales in 2015 to be the highest since 2006. Due to its affluent customer base, the largest U.S. motor home maker is unlikely to be affected by fluctuating gasoline prices. The company will also benefit from its foray into Australia and New Zealand, where U.S. motor home makers have a relatively small presence. Canadian manufacturing sales, which rose by a faster-than-expected 2.5 percent in July according to Statistics Canada, are expected to dip by 1.6 percent in August. Separately, the country’s statistical agency releases data on Canadian securities for August (0830/1230). Chile’s central bank meets to decide the interest rate, which has been in an easing cycle since last October and was cut to 3.25 percent last month (1700/2100). (All analysts’ estimates are according to Thomson Reuters I/B/E/S) (Compiled by Sourav Bose in Bangalore; Editing by Simon Jennings)

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