Tomorrow should start with a bullish tilt after two important earnings reports this evening. Intel beat analysts expectations with 33 cents in EPS and $9.4B in revenues. The company also posted much better than expected guidance (something we expect to see a lot of).
In the real economy, CSX also posted a better than expected quarter. The top line growth was in-line with expectations while EPS came in 3 cents ahead of expectations. Perhaps more important were comments out of their CEO:
“The third quarter reinforces our view that the worst of the recession is likely behind us,” said Michael J. Ward, chairman, president and chief executive officer. “At the same time, our coal business will be impacted by weak demand well into 2010.”
Although we don’t want to place too much emphasis on a handful of reports it is important to note that the expectation ratio has been forecasting this flexibility in guidance and future earnings and given the improvement in the indicator we expect the rest of earnings season to reflect this early strength.*
While these reports don’t necessarily mean the economy is out of the woods, it verifies our belief that analysts and investors in general remain far too negative about the bounce in the economy.
*We should also note that JNJ did in fact boost their guidance.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.