Although aluminum giant Alcoa (AA) usually serves as the starting pistol each earnings season, the recent years of sluggish economic growth has definitely taken its toll on the company. Demand for materials in general have tapered off, and as a result, so has growth estimates for companies in the sector like Alcoa, which reports third quarter results tomorrow.
Reporting along with it, however, is YUM! Brands (YUM), the largest chain restaurant company in the world based on locations. The company is expected to rebound in a big way in the third quarter. Analysts are expect net income to grow almost 17 percent year-over-year to 97 cent per share, and revenue to grow 11.3 percent year-over-year to $3.64 billion. YUM missed analysts estimates last quarter.
Much of YUM's growth is expected to come from China, where its KFC and Pizza Hut brands dominate similar fast food rivals like McDonald's (MCD). YUM's Mexican food chain Taco Bell also may be challenging Chipotle (CMG) with a fresher menu and considerably lower cost on consumers, according to hedge fund manager David Einhorn.
On the flip side of tomorrow's start to Q3 earnings, investors don't seem to be expecting much from Alcoa's results. Analysts expect net income of a penny per share, which would be a near 93 percent drop from last year's numbers. Revenue is expected to drop around 13 percent to $5.6 billion.
While the Materials sector is expected to lead decliners in Q3 earnings, it is also expected to make the biggest recovery and lead all sectors in earnings growth in Q4.