Shudders from the profit warning avalanche in the week just ended have barely faded and earnings season is already starting.
Wall Street can only hope for a improved performance from the tech sector after its retreat in the past week. The Nasdaq Composite Index lost 8 percent for the week to close at 3,361.01. The Dow Jones Industrial Average dipped marginally, to 10,596.54.
The coming week will start to show if Wall Street's nervousness about tech profits is justified. Yahoo! (Nasdaq: YHOO), Motorola (NYSE: MOT) and Gateway (NYSE: MOT) lead a host of technology and Internet companies expected to report quarterly results.
Investors for the past few months have wondered how badly the dot-com crash will affect Yahoo!'s advertising revenue. First Call's survey of 31 analysts predicts a profit of a dozen cents per share for the Web portal operator's third quarter report, scheduled Tuesday after market close.
ABN Amro analyst Arthur Newman says the company has a lot to prove. "We believe Yahoo! will have to beat consensus expectations to impress investors," Newman writes in a research note previewing Web portal earnings. "We believe Yahoo! must show healthy sequential revenue and EPS growth to maintain its multiple. ... EPS upside is more likely to be derived from higher-than-forecasted margins rather than revenue."
Merrill Lynch analyst Henry Blodget predicts a solid third quarter report, but "less robust" than the company's second quarter. Third quarter results themselves won't affect the company's share price, Blodget believes.
"The stock performance for the balance of the year will likely depend on the strength of the quarter and management's outlook for Q4 and beyond," Blodget writes. "We hope to be able to raise our estimates."
Also set for Tuesday are third quarter results from the world's second biggest wireless phone maker. Analysts' consensus forecast for Motorola sees a profit of 26 cents a share.
"They delivered well in the second-quarter, and I think people hope to see the same thing in the third and fourth quarters," Josephthal & Co. analyst Lawrence Borgman told Reuters.
Motorola analysts expect about $10 billion in total revenues compared with $7.7 billion last year. Handset unit orders are expected to be down year-over-year, due to last year's unusually high growth rate, driven by service providers who built big phone inventories amid fears of component shortages.
Last week, Motorola said it has not changed its own forecast -- also 26 cents -- for the quarter. The company has not missed its estimates for two years.
Analysts said they were looking for Motorola's third-quarter handset margins to increase to a range of 5.5 percent to 6.5 percent from 4 percent in the second-quarter. Motorola expects operating margins for the handset business to reach 10 percent by the end of the year.
"I think the whole world is focusing on handset margins, unit volumes and revenue. Margins are where the story is being told for Motorola right now," Chase H&Q analyst Ed Snider told Reuters. "If they do well in margins and they have decent revenues, their stock is going to rock."
Other earnings, economic data
Thursday features several tech reports, including Gateway (Nasdaq: GTW), which recently said its quarter appears on track, despite recent warnings from Intel (Nasdaq: INTC) and other companies conncted with the PC industry. First Call consensus sees a profit of 46 cents per share for Gateway.
Insights into other chip markets should come as well Thursday, when quarterly reports are expected from at least four semiconductor-related companies: PMC-Sierra (Nasdaq: PMCS), for which First Call consensus predicts a profit of 26 cents per share; Lam Research (Nasdaq: LRCX), 43 cents; KLA-Tencor (Nasdaq: KLAC), 51 cents; and MIPS Technologies (Nasdaq: MIPS), 13 cents.
Other companies scheduled to report quarterly results Thursday include network equipment maker Juniper Networks (Nasdaq: JNPR). First Call consensus sees a 9-cents-per-share profit for Juniper.
Some inflation-related statistics are set for release next Friday, including the Producer Price Index and retail sales figures.>