By Wallace Witkowski, MarketWatch
SAN FRANCISCO (MarketWatch)--Earnings from the energy and health
care sectors will dominate investor attention as respective
heavyweights report following a week where upside earnings
surprises lifted the broader market out of a slump.
The broader market comes off a big week with the Dow Jones
Industrial Average (DJI) finishing up 2.6%, the S&P 500 index
(SPX) having its best gain of 2014 with a 4.1% advance, and the
Nasdaq Composite Index (RIXF) closing up 5.3%.
Dow components reporting this week
Company/Ticker Report date Estimated EPS / revenue Market cap
Merck & Co. Oct. 27 88 cents / $10.64 billion $163.36 billion
Pfizer Inc. Oct. 28 55 cents / $12.27 billion $181.35 billion
DuPont Oct. 28 53 cents / $7.95 billion $62.78 billion
Visa Inc. Oct. 29 $2.10 / $3.19 billion $133.53 billion
Exxon Mobil Corp. Oct. 31 $1.72 / $103.46 billion $401.35 billion
Chevron Corp. Oct. 31 $2.54 / $52.97 billion $220.64 billion
Out of the six Dow components reporting, two are the biggest
names in the energy sector and two represent heavyweights in
heathcare. The week also sees more than 150 companies on S&P
500 reporting.
The two sectors represent polar opposites of the broader market
this year: Healthcare is the best performer on the S&P 500
while energy has fallen to a loss on the year following a plunge in
oil prices.
Energy earnings expectations slip on slumping oil prices
Energy earnings are expected to take a big third-quarter hit. At
the beginning of the third quarter, August crude oil futures were
trading at about $105 a barrel on the New York Mercantile Exchange.
By the end of September, the most actively traded futures contract
settled just above $91 a barrel, a 13% decline over the
quarter.
Exxon Mobil is expected to report quarterly earnings of $1.72 a
share, down from the $1.91 a share consensus expected at the start
of the third quarter, according to FactSet data.
Similarly, Chevron is estimated to report third-quarter earnings
of $2.54 a share, down from the $2.79 a share consensus that
started that quarter. ConocoPhillips earnings are expected at $1.19
a share, down from a forecast $1.48 a share at the beginning of the
quarter. Earnings for the sector are expected to decline 1% from a
year ago.
The outlook for the sector isn't looking much better. Since the
end of September, analysts have slashed energy earnings estimates
for the fourth quarter, according to John Butters, senior earnings
analyst at FactSet.
"As a result of these cuts to estimates, the Energy sector has
recorded the largest decrease in expected earnings growth (to -4.7%
from 7.0%) of all 10 sectors during this time," Butters said in a
recent note.
Health care looks healthiest on the revenue side
Health care earnings are much better positioned this season. The
sector is expected to see earnings growth of 12.4% in the third
quarter and the best revenue growth of any other sector at 10.2%.
In addition to Pfizer and Merck, it's a big week for biotechs
Gilead Sciences, Amgen, and AbbVie, along with drug distributor
McKesson and pharmacy-benefits manager Express Scripts.
As far as earnings growth for the sector, Gilead is expected to
do the heavy lifting. Excluding the biotech's contribution,
earnings growth for the health-care sector is estimated at 5.7%,
according to FactSet's Butters.
Social media to have its say
The social media side of tech will have some big shoes to fill
following earnings beats from Microsoft, Yahoo, and Apple this past
week. Earnings reports from Twitter and Facebook will start off and
the week.
Notable earnings reports this week
Company/Ticker Report date Estimated EPS / revenue Market cap
Merck & Co. Oct. 27 88 cents / $10.64 billion $163.36 billion
Pfizer Inc. Oct. 28 55 cents / $12.27 billion $181.35 billion
DuPont Oct. 28 53 cents / $7.95 billion $62.78 billion
Visa Inc. Oct. 29 $2.10 / $3.19 billion $133.53 billion
Exxon Mobil Corp. Oct. 31 $1.72 / $103.46 billion $401.35 billion
Chevron Corp. Oct. 31 $2.54 / $52.97 billion $220.64 billion
Subscribe to WSJ: http://online.wsj.com?mod=djnwires