US earnings season week 1: stocks in the spotlight

US earnings season kicks off tonight and we have all the coverage you need to get the edge.

These are the key companies that are going to report this week.

Citigroup (C)

Citigroup is due to report first-quarter earnings pre-market tonight. Analysts are looking for an increase in fees income. The increase in fees is due to come from the fixed income, commodities and currencies (FICC) and equities divisions on the back of a pick-up in increased trading and better market conditions. However, net interest margins (NIM) and banking revenue is expected to fall quarter-on-quarter and year-on-year.  

Consensus expectations are for revenue to rise to US$19.4 billion from US$18.3 billion over the last quarter, with non-interest income increasing to US$7.73 billion from $5.81 billion. However, with NIM expected to fall by two bp (basis points) to 2.86%, net-interest income will contract to US$11.86 billion from US$11.97 billion as expenses jumps to US$12.12 billion and provisions eke out a further US$180 million to $2.09 billion.  

Yahoo! Inc. (YHOO)

Yahoo is due to report on Tuesday pre-market, with most watching the management’s revenue guidance range of US$1.06 billion to US$1.1 billion, which implies a rather lacklustre growth profile of 0.5% year-on-year.

However, the company continues to point to its Asian investments, particularly Alibaba (and its approaching IPO) and its search and display earnings which it expects to increase by 8% and 6% respectively as drivers of the company’s revenue. It is a challenging outlook for YHOO if these three areas underperform, coupled with the fact mobile and pricing are declining; YHOO may struggle come Wednesday.

Consensus expectations are for revenue to contract over the first quarter to US$1.08 billion (top-end of company range) down 10% quarter-on-quarter with operating income falling 23% to US$200 million. EPS is actually expected to increase slightly, as cost and capital allocations improve the earnings stream which has moved to 35 cents from 34 cents. Considering the NASDAQ pull-back, YHOO will need to deliver or find it falling further.

Google Inc. (GOOG)

Google has so far managed to ride out most of the pullback experienced by online media stocks and this could be due to the expected earnings due on Wednesday.

Consensus expectations for Google see EPS growth of 9.9% as sales jump to US$12.65 billion from the December quarter. Ad revenue is once more expected to drive the online giant with growth anticipated to be between 15% and 20%. Display revenue still represents 70% of total revenues and the double digit growth is still a very exciting prospect.

Net profits will be slightly impacted by an expected slide in Motorola sales, however considering GOOG saw 31% growth in paid click growth, the bottom line should increase by 1% from the December quarter and 6.5% year-on-year; expectations are for 15% growth over FY14. Key upside risks are for better mobile growth and paid click growth offsetting the plateau in display growth.

Goldman Sachs (GS)  

Goldman Sachs is due to report on Thursday, with most expecting the investment bank to lose ground on the EPS line to US$3.48 from US$4.29 in the March quarter last year. GS has seen marked improvements in the cost of doing business lines and company provisioning and is therefore giving itself every chance of improving on the consensus reads if capital management has continued.GS is also expected to see better revenue from its FICC and equities divisions, after markets improved at the back-end of the quarter, which may offset the seasonal weakness.

However, the leverage business and institutional bank are expected to be soft and may be a better guide as to how the bank is tracking. Operating profit is expected to fall to year-on-year to US$2.539 billion, while net profit is expected to ease to US$2.652 billion.

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