Are Strong Earnings Leading to Strong Outlooks?
Results keep coming in above investor expectations, but management teams are generally being cautious about guidance.
Market Update
Another week of earnings brought another group of better-than-expected results. This week we glimpsed a pickup in spending across a number of different segments, ranging from Coach (COH) purses to Microsoft's (MSFT) Windows 7.
One thing that does not seem to have blown away investors is earnings guidance. Although several firms significantly raised their full-year or second-quarter guidance, modest changes were more common. We also saw firms like Exelon (EXC) keep the top end of their guidance unchanged while raising the low-end of the range.
The general hesitance to extrapolate solid first-quarter results to better full-year results could be a signal that management teams are being cautious in calling the robustness of the economic recovery. Few think the economy will endure a double-dip recession, but it seems most management teams are still open to the possibility of several sluggish years ahead. It could also be that management teams are being careful because they have more to gain from continuing to beat expectations, than meeting them.
Citigroup (C) kicked off the week by reporting a first-quarter profit driven by the strength of fixed-income revenue. Credit losses remained sky high.
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Read the Citi Earnings Call Transcript
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Eli Lilly's (LLY) results largely met our expectations, with sales of the firm's key products continuing to do well. Management lowered 2010 guidance to account for the impact of the health-care reform legislation.
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Read the Eli Lilly Earnings Call Transcript
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Johnson & Johnson (JNJ) had flat total sales as generic competition and a recall of some over-the-counter drugs hurt results. Some of these headwinds will diminish throughout the year.
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Read the Johnson & Johnson Earnings Call Transcript
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Coca-Cola (KO) had strong results in emerging countries but weaker results in more mature markets. The firm will likely face currency, commodity, and competitive headwinds in the coming quarters.
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Read the Coca-Cola Earnings Call Transcript
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Goldman Sachs' (GS) legal problems overshadowed good first-quarter earnings. Fixed-income and currency trading powered results, and investment banking revenue declined in the quarter.
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Read the Goldman Sachs Earnings Call Transcript
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Coach's (COH) sales rose by 12% as the firm converted more store traffic into sales. Japanese sales were weak, while China was a bright spot.
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Read the Coach Earnings Call Transcript
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Apple (AAPL) continued its incredible run of blowing analyst expectations out of the water. Sales of the iPhone were a big contributor, but results were strong across the business.
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Read the Apple Earnings Call Transcript
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AT&T (T) was able to cut costs in the first quarter, but overall demand was fairly weak. Still, the firm was able to generate solid free cash flow.
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Read the AT&T Earnings Call Transcript
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McDonald's (MCD) got off to a strong start in 2010 as sales in the U.S. showed a strong recovery and the firm sustained its international momentum.
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Read the McDonald's Earnings Call Transcript
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Morgan Stanley (MS) followed the investment banking trend by having a solid quarter driven by trading revenues.
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Read the Morgan Stanley Earnings Call Transcript
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Altria's (MO) first quarter was aided by new product launches and a boost in volume of smokeless tobacco.
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Read the Altria Earnings Call Transcript
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Nokia (NOK) had a tough quarter as prices for its handsets fell, pressuring revenues and operating margins.
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Like Coke, Pepsi's (PEP) first quarter was driven by the power of emerging markets. North America remains tricky, but Pepsi's acquisition of its bottlers should help growth.
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Read the Pepsi Earnings Call Transcript
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Microsoft (MSFT) had a strong quarter, as sales of Windows 7 powered earnings. Sales of Office were weak ahead of the release of Office 2010.
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Read the Microsoft Earnings Call Transcript
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Amazon (AMZN) capitalized on the move of sales from offline to online with sales growing north of 37%. Operating margins improved, but the firm indicated it would need to invest in infrastructure to cope with demand.
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Read the Amazon Earnings Call Transcript
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Cheesecake Factory (CAKE) had an improved quarter as same-store sales improved 2.7% on better traffic and more guests ordering drinks and dessert.
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Exelon's (EXC) results were hurt by low power prices and some outages at the firm's nuclear plants. Commercial demand for power remained weak.
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Read the Exelon Earnings Call Transcript
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On Tap
On Monday we're expecting results from Alcon , Blackrock (BLK), Boardwalk Pipeline , Caterpillar (CAT), and Texas Instruments (TXN).
Tuesday should bring 3M (MMM), Boston Scientific (BSX), BP (BP), Ford (F), and McGraw Hill (MHP).
AOL , Comcast (CMCSA), Honda Motor (HMC), and Wellpoint (WLP) are expected to report Wednesday.
Aetna , Exedia (EXPE), ExxonMobil (XOM), Fortune Brands (FO), Iron Mountain (IRM), Kellogg (K), Motorola (MOT), Unilever (UL), Viacom , and Waste Management (WM) are slated for Thursday.
Friday is scheduled to bring Aon (AON), Avon , Chevron (CVX), and Simon Property Group (SPG).
See the compete list on our earnings calendar.