Tuesday, April 22, 2008

Tuesday Earnings Highlights

My Monday thoughts were hit and miss; I was a little too bearish on BAC, but my thoughts on NFLX were pretty accurate. Just like flipping a coin...

Anyway, on Tuesday, more major corporations will report earnings.

McDonalds reports in the morning, and I think that they will likely report a solid quarter due to growth overseas and favorable exchange rates. Also, domestic restaurant statistics were good during months during the first quarter, so I am expecting a very good release from MCD. However, the stock has priced in a lot of good news, so I don't expect more than a 3 or 4 percent price increase, even if the earnings are great. However, I definitely think that MCD is a great company to own; with expansion into the developing world, mainly China, and attractive menu items like new coffees and dollar-menu items, MCD looks set to perform well for a while.

In the afternoon, two big tech names report: VMWare and Yahoo!

VMW disappointed the street last quarter, and the shares were sent to the chopping block - the stock fell more than $20 overnight. VMW's technologies may be attractive in this macroeconomic climate as they provide savings over buying more hardware, but the stock is still very expensive. VMW is only expected to earn $1.08 this year and $1.52 next year - with shares trading at $56, current P/E is over $50 and forward P/E is still about 37. Unless VMW dramatically upwardly revises future estimates, there could be more pain for VMW longs this quarter.

I think that YHOO earnings may be moot, considering that the merger process has stabilized share price since MSFT put its offer on the table. Maybe blockbuster earnings could fuel hope for a higher bid, but I think that a quarter that's fairly in-line with estimates won't do much to move the price. A bad miss, however, may spook investors, fearing that MSFT may be able to lower its bid price.

I'll hopefully publish some thoughts on Wed's morning's earnings before the end of the session Tuesday.

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