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news.

JULY 2014
PREVIEW: Q2 Earnings Season 2014
MAIN POINTS
Alcoa (AA) kick-off Q2 2014 earnings season on Tuesday 8th July. Although Alcoa are no longer in the DJIA, they are
still viewed as the start of earnings season as the first in the series of reports this month. Since exiting the DJIA, Alcoa
shares have actually outperformed the index, with gains of ~80% vs. ~12% as strong demand for large commercial and
regional jets supports sales.

For Q2 only a few analysts have slashed their EPS and revenue forecast, and trimming of estimate has slowed
considerably when compared to the previous quarter, which has left some analysts speculating that estimate could be
too high. Heading into this quarter the rate of cuts to earnings estimates is at its lowest since Q2 2011 (Materials sector
has seen the largest cuts to estimates). Despite this earnings growth is expected to rebound this quarter after a slower
than expected rate in Q1, with economic growth hit by poor weather as demonstrated by the Q1 GDP reading which
showed a contraction of 2.9%.

With record highs in the DJIA and S&P 500, and the NASDAQ 100 at its best level in 14 years, 2000 in the SPX and
4000 in the NDX will be a closely eyed levels during earnings season, with the cash markets now just 15 and 80
points away respectively (as of the COB Thursday 3
rd
July). The NASDAQ Biotech Index (NBI) trades near record highs
(2872) but remains very sensitive to positive or negative news, particularly in regards to the indexes largest component
Gilead (GILD) and the controversial pricing of their Hep C drug Sovaldi.


FINANCIALS

Financials could see less-than-impressive earnings growth this quarter after several banks have noted a lack of
profit in their fixed-income and currency trading divisions, which has led to the expectation that the financial sector is
to report the lower earnings growth than other sectors in the US corporate space. This point was picked up by BofA/ML
who lowered Goldmans (GS) and Morgan Stanley (MS) Q2 EPS estimates at the beginning of July to reflect lower trading
revenues and weaker trading environment. The first of the financial heavyweights to report will be Wells Fargo (WFC) on
11th July, in their usual slot on the first Friday post-Alcoa, however this quarter JP Morgan (JPM) will not report along with
WFC; JPM are scheduled a few days later on Tuesday 15th July, alongside Goldman Sachs (GS).

HEALTHCARE

The health care sector has seen the biggest increase in earnings expectations since the beginning of the quarter,
with Q2 earnings for publicly traded hospital companies expected to boost sales due to the initial bottom-line impact of
healthcare reform and Medicaid expansion in a number of states where the companies operate. In Q1 some health care
names also suffered after poor weather impacted hospital utilization rates, however with little detrimental effect from
weather in Q2, these rates are expected to have climbed back above Q1 levels.

RETAILERS

Retail names were one of worst performing sectors last quarter (Q1) after poor weather conditions impacted sales, leading
to lower guidance for this quarter, and meaning that just ~40% of companies beat their earnings expectation. Even the
worlds largest retailer Wal-Mart (WMT) suffered in Q1, which saw them guide lower for Q2, seeing Q2 EPS cont ops USD
1.15 - 1.25 vs Exp. USD 1.28.














You can now follow real-time news headlines on the move with the new RANsquawk app available to download for free at
portal.ransquawk.com/mobile_app for Apple iPhone, Blackberry and Android users. Please note the headlines can be
viewed on the app between 0630BST/0030CDT to 2200BST/1600CDT Monday to Friday but does not include Asian-Pacific
news.


KEY DATES
Alcoa (AA) kick off earning season for Q2 on Tuesday 8
th
July
Wells Fargo (WFC) are the first of the financial heavyweights to report on Friday 11
th
July
Intel (INTC) kick off the tech names and report after-market on Tuesday 15
th
July
The largest listed company in the world Apple (AAPL) report after-market on Tuesday 22
nd
July
The Dow Jones Industrial Averages (DJIA) largest member Visa (V) report on Thursday 24
th
July
The worlds largest listed oil & gas name Exxon Mobil (XOM) are scheduled to report on Thursday 31
st
July


S&P 500 EARNING SEASON CALENDAR










Month Week No. of S&P companies reporting
7-11th 5
14-18th 59
21-25th 157
28-1st 146
4-8th 64
11-15th 13
18-22nd 20
25-29th 8
September Month 23
S&P Earnings Calendar
July
August