EPS & Earnings ... Hits & Misses

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Wall St Week Ahead: Stock bull riders eye home sales, earnings
Fri Jul 20, 2007 5:33PM EDT

Stock bull riders eye home sales, earnings | Video
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Free practice account at FOREX.comBy Cal Mankowski

NEW YORK, July 20 (Reuters) - Home sales and a report on economic growth may help investors decide if they want to keep riding a bull market in stocks, while a torrent of quarterly earnings reports will no doubt cause some anxious moments.

A sharp drop in shares of equipment-maker Caterpillar Inc. (CAT.N: Quote, Profile, Research) on Friday showed just how badly a stock can be hurt when there is an earnings shortfall. The company reported an earnings decline that was greater than expected. The stock fell 4.4 percent and spoiled the Dow's day.

Despite Caterpillar's problems, multinational corporations have been in a position to benefit from stronger economies overseas.

"One of the reasons big-cap stocks have done so well is that they have a lot of foreign exposure and that is where profit growth has been coming from," said Bob Schaeffer, portfolio manager at Becker Capital Management in Portland, Oregon. "Domestic profitability has been flagging for some time."

In the coming week, earnings are due from the likes of pharmaceutical companies Merck & Co. Inc. (MRK.N: Quote, Profile, Research), Schering-Plough Corp.(SGP.N: Quote, Profile, Research), Eli Lilly and Co.(LLY.N: Quote, Profile, Research) and Bristol-Myers Squibb (BMY.N: Quote, Profile, Research).

Others on the list include such high-profile names as Boeing Co.(BA.N: Quote, Profile, Research), Exxon Mobil Corp.(XOM.N: Quote, Profile, Research) and Ford Motor Co. (F.N: Quote, Profile, Research)

Although investors have been caught off guard by the occasional earnings disappointment from companies such as Caterpillar and Pfizer Inc. (PFE.N: Quote, Profile, Research), U.S. stock indexes have been reaching new lifetime and closing highs, with the Dow industrials closing above 14,000 for the first time on Thursday.

The Standard & Poor's 500, which earlier in the month finally surpassed its old all-time set in 2000, also ended Thursday at a new closing high.

But worries about earnings shortfalls and subprime mortgages led to Friday's sharp pullback and broke a three-week streak of gains for the three big U.S. stock indexes. The subprime problem is tied to a weak housing sector, where sales have faltered and prices have slumped. Continued...
http://www.reuters.com/article/marketsNews/idINN2034436020070720?rpc=44