Thursday, October 8, 2009

The Revenues Game

The other day we mentioned that much of the positive news in the stock market was the result of companies increasing earnings by cutting costs rather than boosting their revenue. We had an important test case of this yesterday: Alcoa was scheduled to release its numbers for the third quarter, with the consensus forecast being that the aluminum giant would report a loss.

But Alcoa not only beat expectations, it beat them in the right way. Its revenues were $4.62 billion for the third quarter, up 9 percent from the previous quarter. Earnings came in at 4 cents a share, handily beating the consensus estimate of a 9-cent loss. It was Alcoa's first quarterly profit of the year.

There are other key stocks due to release earnings reports this week, including PepsiCo and Marriott International. Remember, the most important factor will be the movement in their revenues, how much money people are willing to spend on their products. That will help us understand not just how these companies are doing but how our American economy is doing.

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