There's no glossing over it. The big story today is a proxy fight for the right to a seat at one of the best-known companies in the world, Procter & Gamble (PG) . Nelson Peltz, an engaged investor we have often highlighted, wants a seat at the table of the giant consumer-products company in order to shake things up because the stock has underperformed its group and the stock market over any reasonable period of time. For the life of me, I don't understand, given how well companies have done once he joins a board, why they don't let him in.
The issue is, given how hard Procter & Gamble's management has worked to improve, you have to wonder how much Peltz can add. My feeling: Buy the stock, you've just gotten still one more way to win as the uglier this gets, the more shareholders stand to gain.
But let's not lose sight of the prize here as the market stands at a make-or-break level, and the fulcrum will be a slew of earnings that are representative of every important group and may determine where stocks are headed for the rest of this quarter.
Tomorrow morning's classic: The most important drug company, Johnson & Johnson (JNJ) , the most important healthcare company, United Health (UNH) , and two of the most important financials, Bank of America (BAC) and Goldman Sachs GS, report and I think we'll get a great read on each group. I expect Johnson & Johnson to be superb, but keep in mind this is a stock that runs in advance of the quarter and then gives up some gains, affording you a chance to get in. United Health is the healthcare company of the era, the most important publicly traded cog in the entire U.S. healthcare system, and it's a huge winner given the stalemate in Washington over repeal and reform.
The bank stocks have been weak ever since JPMorgan (JPM) , Citi (C) and Wells Fargo (WFC) reported and I fear Goldman and Bank of America will not be able to change the direction of the group because they are hostage to the need for more volatility and higher rates, neither of which seems to be in the cards any time soon.
After tomorrow's close, IBM (IBM) reports, and what a battleground this is. Barclays this morning came out and said it's time for IBM to slash numbers and reset expectations. I sure didn't feel that way after speaking to CEO Ginni Rometti a few weeks ago, but I understand if you want to wait to see if this, at last, is the quarter where the faster-growing businesses are able to make up for the legacy portions of the old IBM.
The stocks of the telephone companies have been horrendous performers of late and I think that's in large part because one company keeps stealing the customers of so many others: T-Mobile (TMUS) . That's why, when it reports, I bet we get a nice surprise as the stock has pulled back enough to give you a real good entry point.
You want a read on the economy? No one has a better one than Union Pacific (UNP) . I have found that its commentary on the big cargo that gets shipped -- whether it be autos or homebuilding equipment or coal or agriculture or construction equipment -- gives you a mosaic that will let you decide how strong growth really is in this country.
Plus, I am of the camp that as the transports go, so goes the economy, and the key transport to me is Union Pacific.
After Thursday's close, we have two of the best-performing stocks in the Dow Jones Average that might be responsible for the index to put on some real mileage: Microsoft (MSFT) and Visa (V) . So many research firms have been saying fabulous things about Microsoft of late, particularly Azure, its web services business, that I think the company's in the sweet spot and I would use any weakness that might come from a marketwide selloff to own this stock. CEO Satya Nadella impresses many as an intellectual techie, but what they might be missing is I don't know if there are many as competitive as this man when it comes to winning. Don't forget that we will see the full fruits of his LinkedIn acquisition and I bet they will be very positive.
Visa's played a huge role in these endless Dow Jones new highs, and I think you have to hope they say something negative, anything, so you can get into this stock before Europe really turns and they get into China in a meaningful way.
Finally, Friday brings results from two incredibly challenged companies that my charitable trust owns, Schlumberger (SLB) and General Electric (GE) , and a third that I wish it owned, Honeywell (HON) . (Citigroup, Wells Fargo, Schlumberger and General Electric are part of TheStreet's Action Alerts PLUS portfolio.)
I want to spend some time on these companies as they are the true microcosms of so much of the rest of the earnings season.
First, if you look back to the most recent dive in the oils, it started with Schlumberger saying it did not expect a return to higher prices any time soon. If you don't know Schlumberger, it is a marvel, the oil service company that remains the gem in a very tattered industry. Suffice it to say the entire sector tunes into this call to hear this company's prediction for price and activity because, unlike the perennially bullish executives in the group, CEO Paal Kibsgaard tells it like it is. I have a real bad feel for what he will say this time, mainly that oil's not going higher and activity will be subdued for the rest of the year and perhaps much of 2018. It could be brutal so stay focused to the Q&A where Kibsgaard really lowered the boom.
Speaking of brutal, when I mentioned GE on Scott Wapner's Halftime Report today and the possibility that they might have something to say, everyone snickered. The company, once the idol of so many, has seen a twilight unbecoming of a great American company, with the stock down 15% for the year. This will be the last quarter that outgoing CEO Jeff Immelt leads the call and I had postulated that he might deliver a decent quarter, but the panelists simply dismissed that possibility out of hand. Oh my. GE presents a cautionary tale for those who own Procter & Gamble. Nelson Peltz's Trian took a big position in GE a couple of years ago and Peltz and Immelt were most congenial from the get-go. But Immelt failed to hit the targets laid out and the stock's been a bomb.
The two situations are somewhat analogous. Procter, like GE, has set out to cut costs and boost revenues. Both did the former but both have failed at the latter. I agree with Peltz when he says GE and Procter can accelerate cost cuts. Let's see what Immelt and incoming CEO John Flannery have to say about the prospects for a better 2018.
Finally, we get a report from the company that has one of the best records of all the industrials, Honeywell. The call will be led by new CEO Darius Adamczyk, who stepped in after longtime CEO Dave Cote retired and he was met with an immediate call by the activist Dan Loeb to spin off aerospace, often thought to be the heart of the company.
Adamczyk has committed to reviewing all options, although we don't expect anything until the fall. Nevertheless, when I speak about the quarter being in the balance this week, Honeywell's got divisions that play a huge role in aerospace, defense, construction, auto, climate controls and oil and gas. I think Adamczyk will tell us, in clinical fashion, how all of those key areas of the economy are doing and we'll take our cue from his thinking.
Yep, this is a defining week. I think every sector we need to care about will be covered and we'll be able to game the rest of earnings from what we hear over the next four days.