Technical and fundamental analysts have been perplexed by the resilience of the equity indices, and this week we may see some news influence market direction rather than the usual "nothing."
With about 15% of S&P 500 companies slated to report this week, there will be plenty of data to go around. There will be meets, beats, raised estimates, lowered estimates, shrinking margins, growing margins and, presumably, some warnings. In other words, the usual suspects.
In addition to the high-profile companies, including American Express (AXP), Bank of America (BAC), Google (GOOG), McDonald's (MCD) and Johnson & Johnson (JNJ), some "growthier" big caps are on the docket.
Intuitive Surgical (ISRG) is expected to deliver first-quarter results after Thursday's close. The maker of Da Vinci robotic surgical systems still sports outstanding estimates, although investors were spooked in February on news that the FDA was examining the company's self-reported incidents of device malfunctions.
These incidents did not involve patient deaths or injuries, and they were compiled by hospitals and the company itself, rather than ambulance-chasing lawyers. Nonetheless, even a whiff of a problem is usually enough to send a stock tanking these days -- that's what happened to Intuitive. It closed Friday at $512.05, 14% off its 52-week high of $594.89, reached a year ago this week.
Analysts are eyeing per-share income of $3.99, which would be a gain of 14% over the year-ago quarter. Revenue is seen coming in at $582.80 million, also an increase from a year ago.
Investors (and the media) will be attuned to anything in the report that alludes to the FDA's "interest," whether it is a positive or negative indicator. There could be some activity resembling the reading of tea leaves accompanying the release.
Medical devices, like consumer-facing productivity apps for the iPad, are hot right now, and with good reason. The landscape for surgery is changing, for the better. My own doctor is a big proponent of Da Vinci surgeries, and she uses the system whenever a particular case makes the robot the best option. So a little bit of hysteria is part and parcel of a new process becoming more accepted by the medical community, as well as the investing community.
Health care is a hot sector now, and one that grabs the public's attention. But for a decidedly low-profile S&P component reporting this week, look to Amphenol (APH), maker of fiber optic gear and various connectors used in industries including telecom, automotive, aerospace and medical.
The company is due to report its first quarter before Thursday's open, and analysts have pegged earnings at $0.89 per share, up 16% from $0.77 a year ago. Revenue is expected to be $1.07 billion, a 9% gain over last year's first quarter.
Unlike Intuitive Surgical, this stock has been in froth mode, advancing nearly 14% year-to-date? Extended? Maybe. But I don't advise approaching any stock as a trade these days. Instead, I have changed my point of view, and I encourage investors to consider a stock as part of a larger equity portfolio.
In that situation, it really doesn't matter over the long term if you miss an earnings report. I prefer to buy on a pullback, rather than trying to chase a stock as it rallies higher. It's been consolidating just above its 10-week average, which bodes well. But earnings news can just as easily send a stock tumbling (usually temporarily - hence the idea of waiting for a pullback) as send it soaring.
Don't try to grab a trade ahead of earnings. Let the stock make its move on the report, and then watch to see how trading patterns settle down in the ensuing days and weeks.