Filed under: Earnings reports, Google (GOOG), Microsoft (MSFT), International Business Machines (IBM), JPMorgan Chase (JPM), Merrill Lynch (MER), Wells Fargo (WFC)

Reuters reports that today is a big one for bank and technology earnings. It looks like Merrill Lynch (NYSE: MER) will lose big and will try to soften the blow with an announcement about selling its 20% of Bloomberg LP for $4.5 billion to its founder, New York mayor, Michael Bloomberg. JP Morgan Chase (NYSE: JPM) and a handful of big technology companies are expected to report profits. But will they be enough?

Meanwhile, how can we make sense of yesterday’s 276 point rally on Wall Street? Nobody knows what happened, but theories abound: the price of oil fell — possibly due to anticipation that the Fed would raise interest rates to deal with inflation that is roaring out of control. Higher interest rates would strengthen the dollar, which would drive down the price of oil since it’s traded in dollars. But I think yesterday’s market was a short-covering frenzy. With the SEC foolishly squeezing the shorts, they needed to cover their bets that financials would fall further. Of course good news from Wells Fargo (NYSE: WFC) didn’t hurt.

Today’s earnings — with estimates courtesy of a Reuters analyst survey — are likely to move the market. Here’s a roundup:

• Merrill Lynch is expected to lose $1.94
• JPMorgan was expected to make $0.44, down 63% from 2007. At a Price/Earnings to Growth (PEG) ratio of 0.4 and a P/E of 12 on earnings forecast to grow 31% to $3.34 in 2009, it looks cheap. CNNMoney reports it made 54 cents — well ahead of expectations and its shares are up 5% in premarket.
• Microsoft Corp. (NASDAQ: MSFT) will earn 47 cents a share, a 21% increase from last year. At a PEG ratio of 1.1 and a P/E of 15 on earnings forecast to grow 14.3% to $2.16 in 2009, it looks reasonably priced.

• Google Inc. (NASDAQ: GOOG) is likely to earn $4.72, up 61% from last year. At a PEG ratio of 1.7 and a P/E of 36 on earnings forecast to grow 25% to $21.57 in 2009, it looks expensive.
• International Business Machines (NYSE: IBM) is anticipated to earn $1.82, 21% higher than 2007. At a PEG ratio of 1.3 and a P/E of 16 on earnings forecast to grow 12% to $9.57 in 2009, it looks priced about right.

As always, I predict the market will boost the shares of companies that beat these expectations and raise their revenue and profit growth forecasts. For those that fail to beat and raise, investors could slash their shares. JPMorgan beat expectations this morning and the upside surprise is rewarding those who bet on it prior to the announcement.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter . He owns Wells Fargo shares and has no financial interest in the other securities mentioned.

Share This

This entry was posted on Thursday, July 24th, 2008 at 12:14 pm and is filed under Goog news. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.