Thursday is a busy day at the office with one of the most iconic three brands on earth reporting their financial earnings: Microsoft, McDonald’s and Starbucks.
I will start with McDonald’s, its logo being probably the most recognizable on the globe and happens to be the largest global chain of fast food restaurants. Based on the company’s recent evolution, McDonald’s remains a safe instrument for investing in the long term, presenting some stagnancy over the last year, up only 5% in the last twelve months. The same picture we find if we look at the quarterly earnings history for the most recent four quarters, which is consistency. Whether the EPS was better or worse than the consensus forecast, the surprise was too small to make a difference in the shares price.
McDonald’s is expected to report EPS of $1.39 on revenues of $7.11 billion for the last quarter of 2013 and in my opinion we don’t have big chances to see anything special from McDonald’s this quarter either. Let’s now take a look at the technical analysis.
Since March, McDonald’s shares were in a descending channel, being traded for the moment at $95. A negative surprise would easily take the price around the support zone at $94, which if it will be broken, could send the price even lower at $91.11, the corresponding quotation for the 61.8 Fibonacci level. A better than forecast EPS would be such a big surprise for the markets that the upward movement generated by it could drive the price towards the resistance level at $99.
The next big brand in line is Microsoft that was going through a corporate reorganization last year and now is looking for the next CEO, expected to be announced within the next few months. Looking back a year ago, earnings are expected to decline, with the average analyst estimate of $0.68 per share down from $0.75 per share in the same period last year. Last quarter, Microsoft beat earnings estimates by nearly 15%, and another beat could be in the cards if analysts are being too pessimistic.
But, analysts are quite optimistic on Microsoft and they are expecting revenue for the quarter to grow with an average of $23.68 billion, up 10.4% from the same quarter last year. The release and the success of the Xbox One is one of the key drivers that analysts think it will help to grow the revenues.
The bullish sentiment is backed up by the technical analysis with an Inverted Head&Shoulders looming on the horizon. But, this kind of H&S is a rare one because is a continuation pattern, the textbook definition for H&S being a reversal one. So, some strong revenue numbers and an EPS slightly above the consensus could put the price in the position of challenging the resistance line at $37.60. Then, a close above this area can give the shares the boost needed to retest the high from $39.
The last, but not the least is Starbucks, one of the biggest and well known coffee retailers on the planet with over 20,000 stores in 62 countries worldwide. Over the past year, its stock soared to all-time highs and has made it one of the most talked about businesses on Wall Street.
In a turn of events, Starbucks has started 2014 on the wrong foot, being down 6% for the year. Goldman Sachs wrote that it was concerned about slowing same-store sales in the U.S. and downgraded the coffee company from “strong buy” to “buy”. Goldman’s price target dropped to $86 from $91. The coffee company is expected to report EPS of $0.69 on revenues of $4.30 billion, which is in line the management view that said it expects first-quarter earnings to be in the range of $0.67 to $0.69.
The chart doesn’t look too good, with a Head & Shoulders already confirmed and going towards the pattern price target. So, any number which will be in disagreement with the market consensus can be the right pretext to easily drive the price on the recent descending trend to the $69 level or even lower, hitting $65 per share.