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Five Earnings Reports to Watch

Jason Stipp

Coming Soon on Morningstar: Watch for conference call transcripts on Morningstar.com this earnings season, starting with Alcoa (AA). You'll get transcripts from the most widely held companies as soon as three hours after the call. In our Earnings Call Transcripts Center (under the Stocks tab), you can see the most recent, most popular, and bellwether transcripts, and easily search transcripts by Company, Keyword, Sector, Analyst, and Date.

Jason Stipp: I'm Jason Stipp for Morningstar and welcome to the Friday Five. That dull roar you hear is the sound of earnings season; it's almost upon us. It's going to kick off next week with Alcoa.

Here to talk with me about five earnings reports that we're looking forward to here at the Friday Five is Markets Editor Jeremy Glaser. Thanks for joining me, Jeremy.

Jeremy Glaser: You're welcome, Jason.

Stipp: Let's start out for number one the first company that you're looking forward to and what are you looking for in that report?

Glaser: The first one is Manpower, which is a huge, temporary staffing organization. In this report, I'm less interested in actually Manpower's earnings, and more interested in what they have to say about the state of the labor market. One of the big unanswered questions in this economic recovery is when will jobs return?

Because without jobs, we're still going to have problems with consumer spending; we're still going to have problems with people not being able to pay their mortgages. I think that Manpower usually has some pretty good insights as to what's happening in the labor market and what they think is going to happen in the future.

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Stipp: Certainly temporary help could be a great leading indicator for the employment market overall, so it would be an interesting one to watch.

So now for number two, a good indicator potentially for consumers, what do you have for the second one?

Glaser: Marriott International is one of my favorite travel bellwether stocks. They have hotels across the world under all different price points. And it shows both how consumers and business travelers are reacting to the economic environment. Is the "stay-cation" still ruling? Are business travelers and traveling salespeople finally hitting the road again?

By looking at Marriott's results and seeing where the strength was and what travelers are out there--is it convention businesses? What kind of people are out there on the road? It can tell us a lot about where we are in the economic recovery and what we can look forward to in the future.

Stipp: So, travel may be the first thing to get cut and the last thing to come back. So if it's coming back, that's certainly a good sign.

For number three, another area where consumers may be opening their wallets a little bit is in the stores, in the retail front. You have a retailer for number three. Tell us a little bit about that.

Glaser: There's going to be a lot of interesting retail earnings, which come a little bit later in earning season, but Target, I think, is going to be one to watch. They came out this week and said that earnings for the first quarter are going to be a little bit better than they initially expected.

Target has a lot of discretionary goods that they sell. So unlike if Wal-Mart does well, it means people are still buying those everyday things that they always need. I'm less concerned now about the recession that people are just cutting out all spending. What we want to see is, are people out there and buying more video games or buying more home decor items--things that aren't necessary, but that people would really like and have been holding off for a while.

If Target earnings start to do really well, it could show that people are feeling a little bit more confident and that could bode well for their company.

Stipp: That will certainly be an interesting one to watch on the retail front. So for number four, moving along to tech: there's a tech stock that you're going to be looking out for. Tell us what it is and what you're hoping to see there.

Glaser: HP has really become the behemoth when it comes to selling computers, both to consumers and businesses, but the thing that's going to be really interesting this quarter is how enterprise IT spending is holding up. Are businesses investing in their future through servers and through desktops and through laptops?

If they're really spending a lot of money out there, it could be a sign that they're looking to add to their workforce or they want to equip their workforce with even better equipment. It shows that companies are optimistic about the future, which could make us optimistic about the future of those companies.

Stipp: For number five, Jeremy, I know that you have high hopes for this one. I just hope they're not too high. Tell us about the last company that you're really interested to see.

Glaser: I can't wait to see Crocs' earnings, mainly out of curiosity to see if anyone is still buying Crocs. This is one of those stocks that seems to be hyped quite a bit in the beginning. It has fallen very much back to earth, and I'll be keeping a close eye to see how many pairs they sold and how many of those were actually to Mario Batali and how many were to the rest of the general public.

Stipp: Something tells me that their sales are becoming more and more correlated with pet rocks, but it will be an interesting one to see.

Glaser: Absolutely.

Stipp: Thanks for joining me, Jeremy.

Glaser: You're welcome.

Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.