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Goldman, Yahoo on tap as earnings season heats up

Earnings season heats up tomorrow, with four Dow components releasing quarterly results. Coca-Cola, IBM, Intel, and Johnson Johnson are all set to announce how 2012 has started off, and all will offer compelling data on how the global economy is faring so far.

Goldman Sachs, CSX and Yahoo will add to the mix, giving traders a lot to digest.

Here’s what you need to know:

Coca-Cola (KO): The beverage company is expected to report earnings per share of US$0.87 on revenue of US$10.8-billion. Coca-Cola has invested heavily in its bottling ventures both in the U.S. and abroad, as a greater mix of net income is generated from international markets. But some analysts see headwinds overseas tampering results, most notably increased commodity costs and foreign exchange rates. “We anticipate China to slow to 4% volume growth on a more difficult comp and slowing consumption trends,” Kaumil Gajrawala at UBS says. ”Internationally, we expect Eurasia Africa +5.2%, Pacific +4.5%, Latam +3.8% and the EU +0.9%.” Last quarter Coca-Cola announced it would create a cost cutting program aimed at saving between US$550 and US$650-million a year by 2015. Analysts will be looking for greater details on how the company actually plans on wringing out those savings.

CSX (CSX): The transport giant is seen earning US$0.38 per share on top line results of US$2.9-billion. The company’s results, and any guidance it offers, will be closely watched as it acts as a gauge for the broader economy. Retailers, automakers and manufacturers all use CSX to move goods throughout the country, making it a nice leading indicator. Reported coal traffic has been soft for the start of 2012, heightening the importance of other shipments for CSX. “In the east, we still like the prospects for CSX and expect improved cost performance should begin to develop as the year progresses,” Brandon Oglenski of Barclays says. “Non-coal related growth remains robust in the industrial related segments, which should provide varying degrees of offset for most carriers.”

Goldman Sachs Co. (GS): Goldman is expected to report quarterly results of US$3.55 per share on US$9.4-billion in revenue. Unlike peers J.P. Morgan Chase and Citi, the focus on Goldman will be exclusively on progress made in trading and investment banking. Already analysts see a return within the company’s Fixed Income, Currencies Commodities unit, which accounts for a majority of Goldman’s profits. “Given our expectation of stronger FICC trading performance in 1Q (helped by mark-ups from tighter spreads especially in credit and mortgage) and gains from private equity and ICBC – we boost our 1Q12 EPS estimate from US$3.56 to US$4.00,” Citi’s Keith Horowitz says. ”Equities however – despite the strong market rally – is likely to be little sluggish given weaker volumes (US tapes running -15% y/y) and slower derivatives activity.”

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Johnson Johnson (JNJ): The Dow component is forecast to report earnings of US$1.36 per share on revenue of US$16.3-billion. Analysts will be looking to commentary on early sales of three new drugs: Incivo for hepatitis C, Zytiga for prostate cancer, and Xarelto to treat blood clotting. The company has a new leadership team stepping in next quarter, replacing its CEO of 10 years. Also in focus: the recent US$1.2-billion fine for violating Arkansas’ deceptive practices laws.

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Intel (INTC): Intel will report first quarter results after the bell, with analysts eyeing earnings per share of US$0.51 on US$12.83-billion in revenue. The tech giant will offer an important glimpse into how sales of PCs are faring. Analysts are slightly above the company’s own guidance of $12.8 billion for the quarter. ”We believe an improving [hard disk drive] supply chain should position INTC for an in line to modestly better C1Q12,” Vijay Rakesh of Sterne Agee says. ”Gartner also last week reported better than expected PC shipments versus our and consensus estimates, though we believe primarily on restocking. Near term we believe Ultrabook OEM adoption and sell-through continue to be weak primarily on higher Retail pricing versus the mainstream Notebooks.”

IBM (IBM): The global tech giant is expected to report earnings per share of US$2.65 on US$24.8-billion in revenue when it announces tomorrow. IBM’s commentary on new contract signings will be an important gauge of the environment for tech services. Hardware is equally important to IBM — the category fueled the beat last quarter, with unit revenue up 21%. ”For IT Hardware, bright spots include solid expectations around storage and services spending and ongoing tablet momentum,” Darrin Peller of Barclays says. ”Indications for corporate PC and server demand down-ticked from our last survey, however.”

Yahoo (YHOO): Things have not been so rosy for Yahoo recently. Even after layoffs that the company hopes will lower costs, analysts have panned current prospects. The Street anticipates EPS of US$0.18. Citi’s Mark Mahaney is hoping Yahoo can offer some turn-around strategy to pacify investors. Otherwise it’s wait and see he thinks. “Based on intra-quarter channel checks and our model sensitivity work, we believe Street Q1 estimates are reasonable, with slight probability of upside on the bottom line due to cost controls,” Mahaney says. “In terms of the guide, we would expect YHOO to be more conservative than typical, given the newish CEO, Scott Thompson.”

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