US STOCKS-Wall St to open lower on caution over earnings season

Mon Jan 13, 2014 9:16am EST

* Suntory Holdings to acquire Beam for $83.50 per share

* Lululemon, Sodastream, Express fall after outlooks

* Futures off: Dow 24 pts, S&P 5 pts, Nasdaq 7.5 pts

By Chuck Mikolajczak

NEW YORK, Jan 13 (Reuters) - U.S. stocks were poised for a modestly lower open Monday, as investors braced for a quarterly earnings season that picks up steam this week and which has raised some red flags about valuations.

Investor concern may be increasing as stocks have become expensive, with the S&P above the mean forward price to earnings ratio and at its highest level in nearly seven years. The benchmark S&P 500 surged about 30 percent in 2013.

According to Thomson Reuters data, fourth-quarter earnings are expected to grow 7.3 percent over the year-ago period. However, the 9.8 ratio of negative guidance to positive outlooks is currently the largest on record.

"It may be that people are speculating that is it is not going to be a very good season at this point," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

"It's certainly been the last three earnings seasons people have been questioning how much more earnings improvement can we get without revenue improvement and it may be that is finally catching up with companies."

Earnings are expected from 29 companies in the S&P 500 this week, including banks such as Morgan Stanley, Citigroup Inc, Goldman Sachs and JPMorgan Chase & Co.

Results are also due from companies including First Horizon National Corp, M&T Bank Corp, People's United Financial Inc and Charles Schwab Corp.

S&P 500 futures fell 5 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 24 points and Nasdaq 100 futures declines 7.5 points.

Equities have started 2014 on a lackluster note, dipping 0.3 percent through the first seven trading sessions as market participants try to gauge the pace of the winding down of market-friendly economic stimulus by the Federal Reserve.

Beam Inc jumped 25.5 percent to $84.05 in premarket trading after the company agreed to be acquired by Suntory Holdings Limited for $16 billion, including debt, making the Japanese company the world's third-largest maker of distilled drinks.

A string of companies tumbled after forecasting earnings.

Lululemon Athletica Inc tumbled 12.7 percent to $52.02 before the opening bell after the yogawear retailer cut its forecast for the fourth-quarter due to weak sales in January.

Sodastream International slumped 15.6 percent to $42.09 in premarket after the home beverage system maker after its 2013 outlook.

Apparel retailer Express Inc lost 2.2 percent to $18.60 before the opening bell after the company lowered its fourth-quarter outlook.

But Wendy's outlook was a bright spot, sending shares up 5.6 percent to $8.91 after the fast-food restaurant chain estimated adjusted quarterly earnings above analysts' expectations, as expenses fell due to franchising many company-owned outlets.

British engineering firm Amec said it had provisionally agreed to buy Foster Wheeler in a cash and share deal that values the Swiss-based engineer at 1.9 billion pounds ($3.13 billion). Foster Wheeler shares added 3.2 percent to $32.48 in premarket.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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