November 7, 2014 / 7:54 PM / 4 years ago

What to Watch in the Week Ahead and on Monday, Nov. 10

(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 Markets head into a quieter week with earnings coming to a close as retailers Wal-Mart, Macy’s and several other large names end an overall solid season that has investors optimistic about U.S. growth headed into a seasonally strong period for the market. Economic data is also relatively thin for the week, leaving the dollar to a more than likely slow, steady appreciation against major world currencies, while the surprising decline in yields Friday should give traders a chance to reset short positions as they anticipate yields to rise again. No Federal speakers are scheduled for Tuesday, which is a federal holiday, but the following day, Philadelphia Fed President Charles Plosser speaks on the economic outlook before the UBS European Conference in London. He speaks again on Thursday on a panel in Philadelphia titled “Monetary Policy After Recovery: What Is the New Normal?” Minneapolis Fed President Narayana Kocherlakota gives a noon talk on Thursday at Stanford University. And on Friday, St. Louis Fed President James Bullard gives a presentation on the U.S. economy and monetary policy before a financial forum hosted by the St. Louis Regional Chamber. Dow component WalMart reports third-quarter results on Thursday. Department store operators Macy’s Inc and Kohl’s Corp report third-quarter results on Wednesday and Thursday, respectively. Macy’s cut its full-year same-store sales forecast in August, hurt by disappointing sales in the first half of the year due to muted consumer spending but maintained its full-year profit forecast. Kohl’s said last month its full-year earnings would be at the low end of its forecast as demand for its women’s wear slowed. Analysts expect Viacom, which owns cable networks MTV and Comedy Central and movie studio Paramount Pictures, to report strong results in the fourth quarter, helped by growth in the company’s movie studio business. Viacom released two movies in the quarter, “Hercules” and “Teenage Mutant Ninja Turtles”, as opposed to none in the same quarter last year. Analysts estimate the two films turned a hefty profit even after Viacom split revenue from them with theaters and distributors. Moreover, Viacom bagged a lion’s share of profit from its biggest hit of the year - “Transformers: Age of Extinction” in the fourth quarter. Largest U.S. homebuilder D.R. Horton Inc has been hit this year as rising mortgage rates and increasing home prices deterred demand. The company had to resort to discounting in the previous quarter to boost sales, halting a rate of price increase that lasted almost two years. With growing signs that home prices may have peaked, investors will be looking for details on D.R. Horton’s sentiment for next year, when it reports fourth-quarter results on Tuesday. Canadian insurer Manulife Financial Corp will release its third-quarter financial results on Thursday, with investors keen to see the impact of volatile financial markets on the country’s largest insurer, as well as any updates on its plan to buy the Canadian assets of Standard Life. The insurer is expected to report adjusted earnings per share of 39 Canadian cents, up from 36 Canadian cents a year earlier. Ford Motor Co will make announcement at its Dearborn, Michigan truck plant. The event will be attended by CEO Mark Fields and the Ford chief from the UAW labor union. Any news on launch of Ford’s redesigned full-size pickup truck, the F-150, is always important given that vehicle drives most of Ford’s global profits. On Wednesday, data storage equipment maker NetApp Inc is expected to report a year-over-year jump in second-quarter profit with both revenue and profit in line with the average analysts’ estimates, according to Thomson Reuters StarMine data. The company’s profit is expected to be boosted by more spending by businesses as they replace their ageing storage equipment. Analysts also expect NetApp to benefit from the launch of its flash-based storage system, FlashRay. Rockwell Automation, which makes systems that help factories run smoothly, is expected to report a higher profit for the fourth quarter on Wednesday, helped by an increase in industrial production in the United States. However, a strong dollar is likely to impact its profit in international markets, which contribute to 50 percent of its annual revenue. Investors will look for an update on outlook for 2015, as its largest control products business, which has significant exposure to mining in China, Brazil and Canada, is expected to grow at a slower pace due to a decrease in spending by miners. 3D printer maker Exone Co is expected to report third-quarter earnings below the average analysts’ estimate on Wednesday, according to Thomson Reuters StarMine data. The company, which has never posted a profit since going public in February 2013, has been spending heavily developing its technologies. Investors will look for plans to cut costs and guidance on profitability as 3D printer shipments are expected to more than double every year between 2015 and 2018, according to market research firm Gartner. Canadian Solar Inc’s third-quarter profit is expected to more than double on Wednesday as its focus on the more-lucrative business of building power plants pays off. Canadian Solar, like other companies manufacturing in China, faces U.S. tariffs on solar products made in the Asian country. The company, in response, is looking to move some of its production “overseas”. Investors will want to know more about these new plants, and how they will affect the company’s profitability. Plug Power Inc’s third-quarter revenue is expected to jump more than four-fold, boosted by rising demand from customers such as Wal-Mart Stores, which uses its hydrogen fuel-cells systems to power forklift. Rising demand for fuel cells used in telecom networks and power backup systems is also expected to narrow its quarterly losses. Plug Power, which has reaped the increasing investor interest in cleaner technology, has been increasing its investments and expanding its clientele in European auto-manufacturing markets as well. When the company reports results on Wednesday, investors will want to know about the company’s gross margins, free cash flow status and its order backlog. On Wednesday, shares of Axalta Coating Systems Ltd, a paint coatings company backed by buyout firm Carlyle Group LP, are expected to start trading on the NYSE. Axalta’s IPO, expected to be priced at $18-$21, is expected to raise up to $945 million. The company is expected to be valued at about $4.8 billion at the upper end of the range. On Friday, shares of Virgin America Inc, a low-cost airline partly owned by Richard Branson, are expected to start trading on the Nasdaq. The company’s initial public offering is expected to be priced at $21-$24 per share, valuing the airline at about $1.04 billion at the top end of the range. The company is selling 13.1 million of the 13.3 million shares in the offering, which is expected to raise up to $320 million. Canada’s economic calendar is a light one next week, but reports on housing will shed some light on the closely watched market. The homebuilding sector has shown resilience this year, bouncing back from weakness at the beginning of 2014 that was caused by severe winter weather. Two separate home price reports will also be released, one on existing home prices on Wednesday and one on new home prices on Thursday. Manufacturing sales will close out the week on Friday, with sales expected to increase 1.1 percent in September, recovering some of the previous month’s 3.3 percent decline. Mexican September industrial production data, due Tuesday, is expected to show an about 0.4 percent expansion over the prior month as Latin America’s No. 2 economy recovers from a weakness early this year. President Enrique Pena Nieto makes a state visit to China during the week as he seeks to boost the country’s anemic trade and investment ties to Beijing. The expected announcement of a Mexico-China investment fund has been soured by the sudden revocation of a contract to a Chinese-led group to build a the country’s first high-speed train. On Friday, central bank minutes will provide further detail on how much policymakers are worried that recent social unrest could crimp the modest economic recovery. MONDAY, NOVEMBER 10 McDonald’s Corp, scheduled to report October sales figures, is struggling to turn in growth all around the globe. Traders will be watching closely for results from the U.S., where the chain faces significant competition; Europe, where economic and political events are weakening sales; and China, where a supplier scandal has pummelled sales. Boston Fed President Eric Rosengren speaks at Washington and Lee University (1710/2210). Online storage space provider Rackspace Hosting Inc is expected to post a third-quarter profit above the analysts’ average estimate, according to Thomson Reuters StarMine data. The company, which also provides its clients management and support services for cloud operations, has been benefiting from higher demand for its cloud management services and forecast third-quarter revenue above Street expectations in August. Dean Foods Co, the largest U.S. milk processor, is likely to report a bigger-than-expected third-quarter loss, according to Thomson Reuters StarMine. The company withdrew its full-year profit forecast in August after raw milk prices, which remained “unpredictable and volatile”, led to lower second-quarter sales and pressured margins on products such as ice cream and cottage cheese. Dean Foods has been also been struggling to boost volumes amid tough competition from cheaper private label brands and a general trend of low consumption of milk. Investors will be looking for comments on how the company plans to boost volumes, make up for the loss of a contract with Wal-Mart last year and comments on where milk prices are headed next year, following indications that prices will coming down due to low demand in China. Turquoise Hill Resources Ltd, majority owned by mining giant Rio Tinto, is expected to report a third-quarter profit compared with a year-ago loss. The company cut its 2014 production forecast last month for its Oyu Tolgoi mine in Mongolia as it faces delays in expanding the mine. The Oyu Tolgoi mine project, which the company owns in partnership with the Mongolian government, hit a roadblock last year after the Mongolian government raised concerns about cost overruns and its share of mine profits. The company and the government are in talks to resolve the issues. Turquoise’s CEO announced his retirement earlier this month, a day after Mongolia’s parliament voted to remove Prime Minister Norov Altankhuyag. Investors will be looking for comments on how the new leadership will deal with the problems, and on outlook for 2015 output and spending plans. Coal miner SouthGobi Resources which Rio controls through Turquoise Hill, is also expected to report results. Analysts expect results to be weighed down by weak pricing and lower sales volumes. In-flight wireless service provider Gogo Inc is expected to report third-quarter profit above estimates, according to Thomson Reuters StarMine data. The company has been in talks with major airlines in Europe, Asia, Africa and Latin America for its in-flight internet service. Gogo is yet to report a profit since going public in June last year as it has been spending more on international expansions, connectivity fees and obtaining approvals for its services. Canada Mortgage and Housing Corp releases housing starts data for October. Groundbreakings forecast to have edged up to 199,900 units in October after climbing to 197,343 units in September (0815/1315). (Compiled by Ayesha Sruti Ahmed in Bangalore; Editing by Joyjeet Das)

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