It feels like we just finished earnings season and already we’re gearing up for another one! As you know, Alcoa Inc. (AA) is always the first to report earnings. This marks the official start of the season and that date is today after the market close.
This is the time for companies to put it all on the table and give investors real numbers (rather than speculation) to rely on. I’m expecting that this fourth-quarter season will be a big help in giving the market the direction it needs, and although year-on-year comparisons are going to be tougher this time around, I think that we are going to see some absolutely fantastic positive earnings surprises. </p>
Analysts have lately been a bit cautious, revising back their estimates for S&P 500 earnings growth–currently coming in at about 7.1% average growth, down from the 15% that was expected just three months ago. This would represent the slowest growth since the third quarter of 2009.
In this type of environment, stock selection is critical. Making certain that you hold companies with the right sort of fundamentals–positive earnings revisions and surprises, increasing sales numbers, expanding operating margins, free cash flow, earnings growth, earnings momentum and return on equity–is the first step in making certain that your portfolio will be able to thrive in the New Year.
So before you buy any stock, you should always run it through my free Portfolio Grader ratings system. This tool lets you analyze nearly 5,000 stocks on these eight fundamental criteria (plus a special quantitative variable that measures buying pressure–that’s the virtual cherry on top of my formula). You can even save your own personal stock portfolios to it, and check on them anytime.
Now, as a side note, I recently downgraded Alcoa in my Portfolio Grader tool to an F, a strong sell. So I’m not expecting that the company will be able to meet the already-low expectations that analysts have placed. But check back here tomorrow for the results from Alcoa’s earnings and what to expect next from the market.