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  1. Home
  2. / Investing
  3. / Stocks

The Daily Dose: Secret Earnings Messages

A quick rundown of what I'm seeing in recent results.
By BRIAN SOZZI Oct 14, 2014 | 10:23 AM EDT
Stocks quotes in this article: JPM, JBHT, C, WFC, MCHP, HD, LOW, OC, VAL, WWW, M, JCP, WMT, CSX

Earnings season has begun and you need to be looking for several things from the big-name reports from JPMorgan Chase (JPM), JB Hunt (JBHT), Citigroup (C), and Wells Fargo (WFC) today.

For example:

1. Was Ford's (F) warning on Europe a Ford specific problem?

2. Were dreadful comments from Microchip's (MCHP) CEO a key read on the global economy?

3. How did softening macro data from the eurozone feed into earnings late in the second quarter? And if those conditions did feed into results late in the quarter, how are executives looking at their full-year guidance ranges?

Not asking yourself these questions? Start today.

Here are some things I am seeing in the reports out this morning. For the banks, I focused on quarter-over-quarter trends instead of year over year. For me it's more important in helping to gauge economic momentum (the same momentum the Fed is analyzing via numerous economic data points before it recommits to more QE in 2015).

J.P. Morgan

• Dimon noted the U.S. economy is experiencing "steady improvement."

• Business banking originations -14% sequentially.

• Mortgage banking volume +2% sequentially.

• Auto loans -4% sequentially.

Read: The Philadelphia Housing Index has slumped 9.32% in the past month and it seems justified given what J.P. Morgan outlined. What JPM reported aligned with Wells Fargo in that mortgage banking revenue fell in the quarter, with home lending declining $72 billion sequentially. I don't believe the mortgage banking sluggishness in the third quarter will be reflected in the results at Home Depot (HD) and Lowe's (LOW) (though both names caught investment bank downgrades today) as they are later cycle names. But where it could appear is in Owens Corning (OC) and Valspar (VAL), and the less-quality homebuilders, which are early cycle.

Wolverine Worldwide (WWW)

• CEO noted "tepid environment in the U.S."

Read: Confirms the reduced third-quarter sales outlook from J.C. Penney on analyst day last week. I think third-quarter earnings for many retailers were very challenging on both the sales and earnings lines, things got much more competitive late in the quarter than I believed. Seeing some pretty substantial clearance levels at the likes of Macy's (M), J.C. Penney (JCP) and Wal-Mart (WMT).

JB Hunt

I always look at the company's intermodal volume as a clue on the global economy.  It also gives insight into railroad earnings. JB Hunt intermodal volume rose a strong 8% year over year, consistent with the growth rate logged in the second quarter. As I noted late last week, I would be very surprised if CSX (CSX) doesn't beat on revenue and earnings after the close tonight. JB Hunt's strong showing solidified that view for me on CSX.

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At the time of publication, Sozzi had no positions in any of the securities mentioned.

TAGS: Investing | U.S. Equity | Stocks

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