Analyzing the Earnings Season

04/16/2014 12:01 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

As we start off earnings season, MoneyShow's Jim Jubak suggests that you focus on what guidance companies are giving for the rest of the year.

Earning season has started. Alcoa (AA) has reported. We’re going to get some bank earnings and then really, sort of the middle of April, it will start to kick in and we’ll see Johnson & Johnson (JNJ), Intel (INTC), PepsiCo (PEP), and Coke (KO) all start to report earnings.

The hurdle that they’re going to have to jump for the first quarter is really, really low, that expectations for growth are something like 0.3% or 0.1%. This is quarter-to-quarter over the last year so comparing first quarter 2014 to first quarter of 2013 and getting less than 1% growth, so it’s not a high hurdle to jump but the thing is, at some point, you’ve got to wonder whether we’re going to start to get guidance that says the second half of the year is going to be better or that we’re stuck here for the year, going forward. I think that’s the crucial thing.

Not so much whether a company manages to find a few extra pennies so they beat, and instead of reporting 8 cents, they report 12. The issue is really going to be what they say for the rest of the year. Are we going to be able to say, “Okay, the second half of the year is going to look better than the very, very meager growth we’re seeing in the first quarter,” and that’s what I think you ought to be looking for as we go into this earning season, guidance, not so much what companies are reporting for the first quarter.

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