The Week Ahead: Earnings you need to know about

July 28, 2008 8:45 am

Excerpt from my MSN Money article on the coming week’s earnings:

How about we play a game, shall we? It goes like this: I say a term and you tell me the first thing that comes to your mind. Ready?

What do you think of when you hear the word recession? Did you think slowdown or inflation? What comes to mind with the word write-offs? Did you think earnings growth? How about record commodity prices? Do you immediately think of increasing revenues and profits?

I bet you thought of several phrases and words associated with a general economic slowdown, but not those above. I asked because a curious situation is occurring within our markets. For example last week many of the companies reporting earnings showed an increase in year-over-year revenues and actually beat estimates. Of course this isn’t the norm this quarter, but even so, it is a peculiar occurrence.

Of course there were also several companies that had their share of difficulty, but it was still odd to see so many results come in better than expected during a time of widespread economic problems. How does that happen? Studies have shown that analysts often overshoot estimates during bullish times and underestimate in bearish environments, but I am really referring to reported revenue, not the estimate. Does that mean companies are actually selling more and taking in more revenue?

Read The Week Ahead: Pains, Games and Automobiles in its entirety.

Partial list of companies discussed: (AAPL) (MSFT) (F) (SOHU) (GOOG) (LVS) (WYNN)

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