What to Watch in the Week Ahead and on Monday, July 21

Fri Jul 18, 2014 4:20pm EDT

(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) Markets are likely to keep a cautious tone next week, though the downing of a passenger jet over Ukraine and the invasion of Gaza is probably not enough to knock stock markets off their lofty perch. Instead earnings take center stage, with the likes of Apple, Microsoft and McDonald's due. The bond market's tone should be a bit more leery in advance of an EU commissioners meeting to discuss Russia, but more likely the market will remain well-bid given the sharp difference between U.S. and German yields, which hit record lows this past week. The yield differential has the potential to boost the dollar as well, as the euro dipped below $1.35 for the first time since February. Apple offers Wall Street a glimpse into its typically quiet second quarter on Tuesday, but investors are already looking ahead to the fall, when the iPhone maker typically unveils the latest iteration of its best-selling smartphone. Hope persists that the company, which has not unveiled a product in a new category since 2010, will also have another trick up its sleeve, such as the oft-rumored iWatch. Microsoft is expected to report a slightly lower fiscal fourth-quarter profit on Tuesday, partly due to the acquisition of Nokia's handset business in April, but investors are already looking past that - pushing the stock up to new 14-year highs - and want to hear more details from new CEO Satya Nadella about the recent 18,000 job cuts and get more color on how exactly he plans to reshape the company as a mobile and cloud-focused competitor to Google and Apple. Verizon is scheduled to report its second quarter earnings on Tuesday. Some investors have been skeptical of the company's reluctance to follow its competitors' aggressive discounts in a near saturated market. Investors will look closely at Verizon's revenue and churn, or wireless customer defections, to gauge how customers are responding to some of the most competitive pricing the industry has seen. AT&T is scheduled to report second quarter earnings on Wednesday, the company's first since it announced a $48.5 billion bid for DirecTV in May. Investors will look for updates on the deal as the company switches to an equipment installment plan that reduces monthly service fees in an attempt to attract new subscribers. The company is expected to report an increase in subscribers but a reduction in margins. Revenue per user is expected to fall 4.4 percent in the quarter. Beverage giant Coca-Cola is expected report second-quarter earnings on Tuesday before the market opens. The company has posted three straight quarters of sales declines due to weak demand for sodas, but investors have started to see glimmers of hope that the worst might be behind it. Stagnating sales in North America, Coke's biggest market, and the continuing fall in demand for sodas have some investors on the edge. They will be watching out for unit volume growth in developed markets and sales trends in international regions. Coke is expected to marginally miss sales expectations this quarter. Facebook's sizzling mobile advertising business is expected to drive robust revenue growth at the Internet social network in the second quarter on Wednesday. But Wall Street is keen for an update on Facebook's next act, particularly the nascent video ads and the Instagram photo ads that the company has started ramping up in recent months. The Labor Department on Tuesday is expected to report that inflation rose 0.3 percent in June, after rising food prices pushed the index to its biggest increase in more than a year in May (0830/1230). Investors will also watch for a report from Commerce Department on existing home sales, which likely rose to 4.98 million in June (1000/1400). On Thursday, Markit manufacturing PMI flash data is expected to show a rise to 57.5 in July compared to 57.3 in the previous month (0945/1345). New orders for long lasting goods manufactured in the U.S. likely rebounded in June, after unexpectedly falling in May. The Commerce Department is expected to report on Friday that durable goods orders rose 0.5 percent in June. (0830/1230) Amazon is expected to report a loss of 14 cents per share in the second quarter on Thursday, sharper than the 2 cents per share loss posted a year ago. The deeper loss partly reflects the e-commerce giant's aggressive expansion into new business segments and regions. The company is investing heavily in China, home to rival Alibaba.com, as well as India, Italy and Spain. Visa is expected to post a rise in third quarter earnings on Thursday, as more people around the world use plastic instead of cash to make purchases. The company said that fresh sanctions on Russia will have no effect on it. Visa has also recently launched a new digital wallet, which analysts say, is aimed at taking on the might of PayPal when it comes to online shopping. McDonald's, likely to post second-quarter results on Tuesday, is struggling to turn its business around - particularly in its home market of the United States. Investors are looking to see if its new back-to-basics strategy focusing on value and new products are gaining traction. Diversified manufacturer 3M is expected to post quarterly earnings growth of 11 percent on a 4 percent rise in revenue on Thursday. It is 3M's first quarterly report for new Chief Financial Officer Nicholas Gangestad. Boeing is expected to post strong second quarter results on Wednesday. Investors will look for wider profit margins, a slow down in deferred production costs for the 787 and updates on the 777X and 737 MAX programs. Boeing probably won't deliver its new, stretched 787, known as the 787-9, in time for inclusion in the quarter. Customer Air New Zealand is scheduled to fly that plane from Seattle on July 10. Union Pacific is scheduled to release second quarter results on Thursday. The company has been able to charge more to move goods across the country as it takes advantage of higher demand for autos and industrial shipments. Investors will be looking for comments on further price increases and whether the recovery in coal shipments is sustainable. Bristol-Myers Squibb Co is expected to report flat earnings on Thursday, with the loss of diabetes drugs that it recently sold to longtime partner AstraZeneca Plc. Investors will pay most heed, however, to the company's promising array of experimental immuno-oncology drugs and how they are shaping up against potential blockbuster products being developed by Merck and Swiss drugmaker Roche. Biogen Idec is expected to report significantly higher second quarter sales and profit on Wednesday, with a focus on whether its oral multiple sclerosis drug Tecfidera can continue to outpace Wall Street expectations as it has in each quarter since its March 2013 approval. Investors are also looking for details on the launch of two recently approved hemophilia treatments - a new therapeutic area for the U.S. biotech - as well as updates on important drugs in development. Ford Motor is scheduled to issue its first quarterly earnings under its new CEO Mark Fields on Thursday. Investors will look to see if Ford adjusts its full-year outlook of $7 billion to $8 billion of pre-tax profit and any signals whether the launch of the F-150 made-with-aluminum pickup truck is on track. U.S. drugmaker Eli Lilly is expected to report sharply lower second-quarter sales and earnings on Thursday, hurt by generic competition for its Cymbalta depression treatment. But investors will be more focused on 2015, when the company's three-year patent cliff ends, and how well its emerging lineup of new prescription drugs will restore earnings growth. Caterpillar, the world's largest maker of earth-moving mining and construction equipment, is likely to release its financial results on Thursday. Celgene is likely to report higher second quarter sales and profit on Thursday after high costs weighed on first quarter results. As the company awaits U.S. and European approval for use of the biotech's flagship multiple myeloma drug Revlimid earlier in the disease treatment, investors will be looking for the Celgene to raise its full-year forecast as a sign of a stronger second half of 2014. Dow Chemical is expected to report a higher second-quarter profit on Wednesday, helped by continued margin expansion at its plastics unit. Dow is looking to raise as much as $6 billion from non-core asset sales by the end of 2015. Investors will be looking for updates on the asset sales. Dow has put up its epoxy business and some chlorine and derivatives assets for sale and is also looking to shed non-core businesses in its functional materials and performance materials units - two of its slowest-growing units. Chemicals company DuPont is expected to post a lower second-quarter profit on Tuesday, hurt by weakness at its agriculture business. DuPont has made a big push into seeds and insecticides to shield itself from the volatility of commodity chemicals. However, the farm business was hit by lower-than-expected corn seeds production in the quarter. GM is scheduled to report second-quarter earnings on Thursday, during which they will provide further details on the costs associated with the defective ignition switch linked to at least 13 deaths. Investors may be more focused on the turnaround efforts in Europe, where GM now expects to return to profit by mid-decade. The company previously said it was tracking ahead of profit estimates for the year, excluding the recall costs. Starbucks is expected to report good, but not blow-out, results for its latest quarter on Thursday. The world's biggest coffee chain is one of the best-performing U.S. restaurant operators, and any stumble - real or perceived - will be punished by investors. EMC Corp, the world's largest data storage equipment maker, is likely to report in-line second quarter results on Wednesday. Analysts expect the company to report bookings and margins growth in its information storage unit. Analysts also expect EMC to reaffirm its full-year revenue forecast, as it benefits from new product launches and enterprise data center spending in the second half of the year. Lockheed Martin, the Pentagon's largest supplier, is expected to report second quarter results on Tuesday. The company has been hit by U.S. government budget cuts over the past year and a half. Its sales to the U.S. military are likely to drop by about 6 percent in 2014 on top of a 4 percent drop last year. However the company has said it expects foreign sales to offset some of the drop in U.S. orders. Analysts will also be keen for comment on the impact of the grounding of the F-35 - the world's most expensive weapons project - after the engine on a plane failed at a Florida airbase in June. Travelers Cos, expected to report earnings on Tuesday, may benefit from low claims during the second-quarter. The a Dow 30 component said it incurred after-tax catastrophe losses of about $150 million in the second quarter. Travelers said it was looking to grow market share through discounting auto insurance prices. The company's results are a bellwether for the property and casualty insurance industry. United Technologies is expected to report second-quarter results on Tuesday, with analysts watching orders for the Otis elevator division, which is heavily leveraged to China. Analysts will also keep an eye on the company's potentially slowing residential building market, and the aftermarket of spare parts for its aerospace businesses. Nasdaq is expected to report higher year-over-year earnings driven by U.S. acquisitions the transatlantic exchange operator made last year. Chief Executive Bob Greifeld may use the earnings call to highlight Nasdaq's views on U.S. market structure, particularly around broker-run trading platforms, known as "dark pools," which have been taking market share from the exchanges and have been in the news following the New York Attorney General's recent case alleging securities fraud by Barclays in its U.S. dark pool. The market will have questions for Freeport McMoRan, scheduled to report earnings on Wednesday, on its discussions with the Indonesian government about copper exports, which have been halted since January. How Freeport plans to reduce its high debt levels will also be top of mind for the market. There have also been reports of buyers being interested in Freeport's Candelaria copper mine in South America. Northrop Grumman and General Dynamics are scheduled to report second-quarter results on Wednesday. The crisis in Ukraine and other emerging threats is expected to strengthen military equipment demand, which will likely provide a much-awaited reprieve from falling revenue. Investors will be watching for comment on any changes in the U.S. government's spending patterns. Results from industrial gas suppliers' Praxair and Air Products & Chemicals on Wednesday are expected to show a gain from increased prices and higher sales volumes. Air Products, scheduled to report third quarter results, is banking on its cost cutting efforts to raise margins. Praxair, expected to report second quarter earnings, is also looking to cut expenses, expects higher sales in South America and Asia, and of packaged gas. Eastern railroad Norfolk Southern is expected to report higher revenue and profit for the second quarter on Wednesday, helped by a recovery in thermal coal demand. The company is also likely to benefit from growing volumes in its intermodal business as the U.S. economy slowly recovers and customers opt for a far reaching and economical transportation network to enhance market reach. Investors will be looking forward to comments on whether the recovery in coal shipments is sustainable. Delta Air Lines is likely to report higher second quarter results on Wednesday, as strong U.S. business and leisure demand helped offset some international weakness. The carrier's growth in unit revenue slowed in June from April and May because excess seats available on international routes hurt its ability to raise ticket prices. Analysts on average expect profit of $1.04 a share from Delta, compared with 98 cents a year earlier. Raytheon is scheduled to report second quarter results on Thursday. Analysts will want to know about any updates on the company's homeland missile defense system contract with the U.S. defense department. The DoD said in July that it could switch from the current systems built by Raytheon to a new design being offered by Boeing. Investors will be looking for signs of progress in China when Qualcomm gives its quarterly report card on Wednesday. With smartphone sales losing steam in the U.S. and other developed countries, Qualcomm and its rivals are banking on new demand from customers in China, where carriers are rolling out their first LTE networks. On Thursday, Southwest Airlines is expected to post higher second quarter earnings as demand from leisure travelers picked up. Profit of 60 cents a share is expected, compared with 38 cents a year earlier. Unit revenue, an important measure, could rise more than 8 percent, suggesting full planes and pricing power for Southwest. Separately, American Airlines Group is expected to report profit of $1.93 a share for the second quarter. Passenger revenue per available seat mile is expected to rise up to 6.5 percent. The company's outlook for the current quarter will be the key focus. Meanwhile, United Continental is expected to report a higher quarterly profit as it cut costs and benefited from travel demand. Analysts expect $2.14 a share for the second quarter, compared with $1.35 a year earlier. Omnicom, the No.1 U.S. advertising company's second-quarter profit and revenue is likely to beat analysts' estimates on Tuesday. Omnicom is expected to benefit from higher ad spending in the United States. Xerox's second quarter profit and revenue may fall short of Wall Street estimates on Friday. Analysts also expect the company to benefit from acquisitions, cost cutting measures and a contract win in New York. TripAdvisor is expected to report strong second quarter results on Wednesday, helped by increased revenue from referrals to third-party sites for booking. TripAdvisor is benefiting from higher fees every time a user clicks through to a third-party booking site after the company changed its display to show prices more prominently. Virtualization software maker VMware is expected on Tuesday to report second quarter revenue in-line with estimates. Analysts expect the early closing of some deals and robust demand for the company's cloud infrastructure services to add to revenue. They also expect the company's booking rate to grow. ABB, a Swiss engineering company, is expected to report second quarter results on Wednesday. The focus will be on how its efforts to fix its power systems business are going as well as the outlook for large orders. While new orders have been slow in the coming, D.R. Horton, expected to release second-quarter results on Thursday, has been able to raise prices of its homes. Investors will be looking for comment on how the company performed in the spring selling season - traditionally the strongest season for homebuilders. They will also want to know how long the company can rely on raising prices to boost revenue and will be comparing its performance with that of PulteGroup, the No. 3 U.S. builder, which reports earlier on Thursday. Rogers Communications is scheduled to report second quarter results on Thursday. Investors will be eager to see improvements in this unit, the largest revenue. It has spent heavily to acquire more airwaves and the rights to broadcast professional hockey. Potash Corp of Saskatchewan is scheduled to report second quarter results that it warned in April would be lower than the previous year. Of interest will be new CEO Jochen Tilk's first conference call with analysts, where he will likely be asked to explain his philosophy on emphasizing price over sales volume. Fire-grilled chicken restaurant chain El Pollo Loco is expected to debut, raising up to $107.1 million at the upper end of its expected price range $13-$15 per share. The company is expected to be valued at up to $537.9 million at the IPO price. PayPal, in conjunction with First Bank Nigeria, will launch the PayPal platform in the West African country on Tuesday. PayPal will be providing online payment alternatives for consumers via mobile phones or PCs in markets often blighted by financial fraud. The IMF will release its world economic outlook update from Mexico City on Thursday. Mexican data includes May retail sales due on Tuesday, May economic activity and early-July inflation data, both on Thursday, and June trade balance data on Friday. MONDAY 21 Halliburton, is expected to report a higher second quarter profit on improved drilling activity in the United States. Investors will be looking for details on the its operations in Iraq and Russia. While the impact from Russian sanctions has been limited so far, there are some fears that Halliburton may take a hit from recently imposed sanctions on Rosneft. The second season of "Orange is the New Black" is expected to help lift Netflix results for the quarter ended June. Netflix releases results after U.S. markets close. Wall Street is forecasting the video streaming company will report growth in U.S. and international subscribers, boosted by customers who signed up to see the Emmy-nominated prison comedy. The company is projected to report earnings per share of $1.14, up from 49 cents a year earlier. Billionaire businessman Carlos Slim's America Movil, is scheduled to report second quarter results that will likely show its earnings are coming under further pressure from tough new regulation in Mexico, which accounts for more than half of the company's core profit. HDFC Bank, India's second-largest private sector lender, is scheduled to report earnings for its fiscal first quarter. Mortgage lender Housing Development Finance Corp also reports first quarter earnings. HDFC Bank is expected to report a profit growth of about 26 percent, having reported its slowest profit growth in a decade in the previous quarter. ManpowerGroup, scheduled to report second quarter earnings, is expected to have benefited from a recovery in the eurozone economy. ManpowerGroup said in April it expected revenue to grow 4-6 percent during the quarter and EPS to grow between $1.26 to $1.34 from $0.87 last year. Canadian National Railway, the country's largest rail operator, is expected to report strong gains in revenue and earnings for the second quarter, reflecting record volumes of grain from Canada's massive crop last summer, growing crude oil cargo, and a surge of international shipments of intermodal containers, as shippers brace for potential disruptions from ports on the U.S. west coast. CN's rail volumes surged some 11 percent in the quarter, outpacing the industry average of a 7 percent gain. The key issue is how well railroads capitalized on stable pricing and volume growth, analysts say. Interview with Mexican central bank governor Manuel Sanchez, considered the most hawkish member of the board, on June's surprise interest rate cut and the outlook for inflation amid a sluggish economic recovery. Mexican lawmakers are expected to pass bills needed to implement last year's opening of the energy sector to private investment. (Compiled By Nandi Kaul; Editing by Savio D'Souza)

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