Earnings, Earning and More Earnings

It is that time of year again. We are fresh off the Employment Report, it’s the end of the quarter and the Chicago’s BlackHawks have won the Stanley Cup Championship.  The next thing to look forward to is Earnings Season.  Alcoa Inc. (AA) are typically the first to report earnings each quarter, like the ceremonial first pitch at a baseball game.  It is a nice tradition but with a stock that only trades at $8, it does not really mean much for the real game.

The real game kicks off with Wells Fargo Company (WFC) and JP Morgan Chase & Co. (JPM) later this week. What should we look for in the earnings season? Although we have had a few weeks of movement in the market, the overall volatility is still relatively low with the CBOE Market Volatility Index (VIX) currently hugging the 15 level.

Many earnings estimates have been lowered.  Although beating the bottom line is great, I think you really have to pay attention to the revenue numbers to see if the companies beat expectations.  An important element in the earnings picture is typically the CEO calls following the release of earnings data.  Be careful of your initial reaction to the earnings reports as you may find, in many cases that sentiments change once the CEOs discuss their outlook for the remainder of the year.    Good Trading,    JJ