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Give Thanks for a Great 3Q
Earnings Preview 11/23/09
Investors will be able to say thanks next Thursday for a wonderful earnings season, one that is rapidly drawing to a close. There will be only 57 firms reporting quarterly results next week, including 10 members of the S&P 500. That group, however, contains some pretty important names, including computer giant Hewlett-Packard (HPQ - Analyst Report), agricultural equipment king John Deere (DE - Analyst Report) and investors will find out if Campbell Soup (CPB - Analyst Report) really is "mm-mm good."
The economic data is squeezed into the front part of the week due to the holiday:
Monday
• Existing Home Sales are expected to rise to a seasonally adjusted annual rate of 5.65 million from 5.57 million in September. While existing home sales make up more than 85% of all home sales, their effect on the economy is minimal and largely indirect. Watch the inventory numbers, though -- a decline would be a very good thing, particularly if it results in a drop in the months of supply outstanding
Tuesday
• We get the second cut at 3rd Quarter GDP. It was originally estimated at 3.5% growth, but due to weaker-than-expected trade numbers and downward revisions to September retail sales, the consensus estimate is now that the economy grew at just 3.0% in the quarter. The GDP deflator is expected to remain unchanged at up 0.8%
• The Case-Schiller home price index is expected to show that the year-over-year decline in housing prices in September was 9.10%, a significant improvement over the 11.32% decline in August. Thanks to extraordinary government support for the housing market, housing prices have started to recover, at least on a month-to-month basis. However, with a huge overhang of supply and shadow supply from seriously delinquent mortgages, this strength will probably fade by the first quarter, especially as government and central bank support diminishes
• The other major house price index is the FHFA report, which is expected to show a 0.3% monthly increase for September, reversing a 0.3% decline in August
• Consumer Confidence is expected to fall slightly to a reading of 47.5 for November from 47.7 in October
Wednesday
• Personal Income is expected to have risen by 0.2% in October after being unchanged in September. Personal Spending is expected to increase 0.5%, reversing a 0.5% decline last month. Combined this means that the savings rate is falling again, which is good news short-term, but a disaster long-term
• Initial Claims for unemployment insurance are to be released a day early due to the holiday. Last week they were at 505,000 and have been in a downward trend since April. The decline will probably continue.
• New Home Sales are expected to have increased to an annual rate of 414,000 in October from 402,000 in September. This is a far more important number for the economy than existing home sales as it directly impacts residential investment. Housing starts came in very light for October, so an increase will help get inventories under better control
• New orders for Durable Goods are expected to have risen by 0.5% in October on top of a 1.0% rise in September. Excluding the very volatile Transportation sector they are expected to be up 1.0% after a 0.9% rise last month
• The University of Michigan Consumer Sentiment Index is expected to show an increase to 66.5 from 66.0 last week
Thursday
• Caloric consumption is expected to hit its high for the year, but this is highly seasonal and should be roughly flat with a year ago
• Belts are loosened, naps taken and football is watched
Friday
• People wake up early to stampede into the malls
• Leftover turkey sandwiches are consumed
Potential Positive Surprises
Historically the best indicators of firms which are likely to report positive surprises are a recent history of positive surprises and rising estimates going into the report. The Zacks Rank is also a good indicator of potential surprises. Some of the companies that have these characteristics include:
Deere (DE - Analyst Report) is expected to post EPS of just $0.05, down from $0.81 last year. That low expectation sets it up for a positive surprise. Last time out they beat by 73.7%. However there has been no change in the estimate over the last month, and the stock has a neutral Zacks Rank of 3
Tyson (TSN - Snapshot Report), the poultry producer, might just make its investors thankful. It is expected to earn $0.26, up from $0.14 last year. Last time out it beat by 83.3%. However, analysts have slightly shaved the mean estimate by 0.6% over the last month.
Potential Negative Surprises
In keeping with the overall very positive tone of this earnings season, the potential negative firms are less clear cut. However:
BJ Services (BJS - Analyst Report) is expected to post EPS of just $0.03, down from $0.57 last year. It badly missed estimates last time, reporting a loss instead of income and analysts have cut the estimates for this year’s quarter by 11.1% over the last month.
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Investors will be able to say thanks next Thursday for a wonderful earnings season, one that is rapidly drawing to a close. There will be only 57 firms reporting quarterly results next week, including 10 members of the S&P 500. That group, however, contains some pretty important names, including computer giant Hewlett-Packard (HPQ - Analyst Report), agricultural equipment king John Deere (DE - Analyst Report) and investors will find out if Campbell Soup (CPB - Analyst Report) really is "mm-mm good."
The economic data is squeezed into the front part of the week due to the holiday:
Monday
• Existing Home Sales are expected to rise to a seasonally adjusted annual rate of 5.65 million from 5.57 million in September. While existing home sales make up more than 85% of all home sales, their effect on the economy is minimal and largely indirect. Watch the inventory numbers, though -- a decline would be a very good thing, particularly if it results in a drop in the months of supply outstanding
Tuesday
• We get the second cut at 3rd Quarter GDP. It was originally estimated at 3.5% growth, but due to weaker-than-expected trade numbers and downward revisions to September retail sales, the consensus estimate is now that the economy grew at just 3.0% in the quarter. The GDP deflator is expected to remain unchanged at up 0.8%
• The Case-Schiller home price index is expected to show that the year-over-year decline in housing prices in September was 9.10%, a significant improvement over the 11.32% decline in August. Thanks to extraordinary government support for the housing market, housing prices have started to recover, at least on a month-to-month basis. However, with a huge overhang of supply and shadow supply from seriously delinquent mortgages, this strength will probably fade by the first quarter, especially as government and central bank support diminishes
• The other major house price index is the FHFA report, which is expected to show a 0.3% monthly increase for September, reversing a 0.3% decline in August
• Consumer Confidence is expected to fall slightly to a reading of 47.5 for November from 47.7 in October
Wednesday
• Personal Income is expected to have risen by 0.2% in October after being unchanged in September. Personal Spending is expected to increase 0.5%, reversing a 0.5% decline last month. Combined this means that the savings rate is falling again, which is good news short-term, but a disaster long-term
• Initial Claims for unemployment insurance are to be released a day early due to the holiday. Last week they were at 505,000 and have been in a downward trend since April. The decline will probably continue.
• New Home Sales are expected to have increased to an annual rate of 414,000 in October from 402,000 in September. This is a far more important number for the economy than existing home sales as it directly impacts residential investment. Housing starts came in very light for October, so an increase will help get inventories under better control
• New orders for Durable Goods are expected to have risen by 0.5% in October on top of a 1.0% rise in September. Excluding the very volatile Transportation sector they are expected to be up 1.0% after a 0.9% rise last month
• The University of Michigan Consumer Sentiment Index is expected to show an increase to 66.5 from 66.0 last week
Thursday
• Caloric consumption is expected to hit its high for the year, but this is highly seasonal and should be roughly flat with a year ago
• Belts are loosened, naps taken and football is watched
Friday
• People wake up early to stampede into the malls
• Leftover turkey sandwiches are consumed
Potential Positive Surprises
Historically the best indicators of firms which are likely to report positive surprises are a recent history of positive surprises and rising estimates going into the report. The Zacks Rank is also a good indicator of potential surprises. Some of the companies that have these characteristics include:
Deere (DE - Analyst Report) is expected to post EPS of just $0.05, down from $0.81 last year. That low expectation sets it up for a positive surprise. Last time out they beat by 73.7%. However there has been no change in the estimate over the last month, and the stock has a neutral Zacks Rank of 3
Tyson (TSN - Snapshot Report), the poultry producer, might just make its investors thankful. It is expected to earn $0.26, up from $0.14 last year. Last time out it beat by 83.3%. However, analysts have slightly shaved the mean estimate by 0.6% over the last month.
Potential Negative Surprises
In keeping with the overall very positive tone of this earnings season, the potential negative firms are less clear cut. However:
BJ Services (BJS - Analyst Report) is expected to post EPS of just $0.03, down from $0.57 last year. It badly missed estimates last time, reporting a loss instead of income and analysts have cut the estimates for this year’s quarter by 11.1% over the last month.
| Company | Stock | Zacks Estimate | Year Ago EPS | Last Qtr Surprise | Date | Time | Price |
| CDC SOFTWAR-ADR | CDCS | $0.29 | n/a | N/A | 11/22 | $10.08 | |
| CDC CORP | CHINA - Snapshot Report | $0.01 | ($0.07) | 0.0% | 11/22 | $2.43 | |
| ANALOG DEVICES | ADI - Analyst Report | $0.26 | $0.49 | 10.0% | 11/23 | AMC | $27.84 |
| ACTUANT CORP | ATU - Snapshot Report | $0.16 | $0.45 | 12.5% | 11/23 | BTO | $16.59 |
| ATWOOD OCEANICS | ATW - Snapshot Report | $0.66 | $1.16 | 26.5% | 11/23 | AMC | $38.14 |
| BJ SERVICES | BJS - Analyst Report | $0.03 | $0.57 | (400.0%) | 11/23 | BTO | $18.94 |
| CHINAEDU CP-ADR | CEDU - Snapshot Report | $0.04 | $0.05 | 125.0% | 11/23 | $7.99 | |
| CNINSURE IN-ADR | CISG - Snapshot Report | $0.20 | $0.17 | 58.8% | 11/23 | AMC | $21.39 |
| CAMPBELL SOUP | CPB - Analyst Report | $0.81 | $0.77 | 15.4% | 11/23 | BTO | $34.05 |
| CITI TRENDS INC | CTRN - Analyst Report | ($0.02) | ($0.05) | (100.0%) | 11/23 | AMC | $28.00 |
| DYCOM INDS | DY - Snapshot Report | $0.17 | $0.28 | 13.3% | 11/23 | AMC | $9.54 |
| GLADSTONE CAPTL | GLAD - Snapshot Report | $0.23 | $0.29 | 13.0% | 11/23 | AMC | $7.82 |
| HEWLETT PACKARD | HPQ - Analyst Report | $1.13 | $1.03 | 1.1% | 11/23 | AMC | $49.82 |
| 51JOBS INC-ADR | JOBS - Snapshot Report | $0.07 | $0.15 | 175.0% | 11/23 | BTO | $16.27 |
| LDK SOLAR CO | LDK - Snapshot Report | ($0.08) | $0.77 | (123.1%) | 11/23 | BTO | $7.73 |
| THE9 LTD-ADR | NCTY - Snapshot Report | ($0.47) | $0.52 | (96.7%) | 11/23 | AMC | $7.54 |
| NOAH EDUCATION | NED - Snapshot Report | $0.19 | $0.14 | 250.0% | 11/23 | BTO | $6.09 |
| NUANCE COMM INC | NUAN - Snapshot Report | $0.23 | $0.22 | 16.7% | 11/23 | AMC | $13.58 |
| RESOLUTE ENERGY | REN | $0.06 | $0.01 | N/A | 11/23 | BTO | $10.73 |
| STAR BULK CARRS | SBLK - Snapshot Report | $0.01 | $0.30 | (400.0%) | 11/23 | AMC | $3.50 |
| TECH DATA CORP | TECD - Analyst Report | $0.70 | $0.37 | 55.6% | 11/23 | BTO | $41.51 |
| TYSON FOODS A | TSN - Snapshot Report | $0.26 | $0.14 | 83.3% | 11/23 | BTO | $13.07 |
| VALSPAR CORP | VAL - Analyst Report | $0.48 | $0.42 | 26.4% | 11/23 | BTO | $27.49 |
| AMER EAGLE OUTF | AEO - Snapshot Report | $0.22 | $0.30 | (6.7%) | 11/24 | BTO | $14.84 |
| AMER ITALIAN | AIPC - Snapshot Report | $0.67 | $0.54 | 47.6% | 11/24 | $28.83 | |
| AMER WOODMARK | AMWD - Snapshot Report | ($0.16) | ($0.03) | (385.7%) | 11/24 | BTO | $19.82 |
| BLUE COAT SYS | BCSI - Snapshot Report | $0.18 | $0.15 | 7.1% | 11/24 | AMC | $25.20 |
| BORDERS GROUP | BGP - Snapshot Report | ($0.46) | ($0.64) | (31.3%) | 11/24 | BTO | $1.92 |
| BARNES & NOBLE | BKS - Snapshot Report | ($0.23) | ($0.21) | 40.0% | 11/24 | BTO | $22.31 |
| BANK MONTREAL | BMO - Snapshot Report | $0.91 | $0.95 | 2.4% | 11/24 | $50.18 | |
| BROCADE COMM SY | BRCD - Snapshot Report | $0.08 | $0.18 | (50.0%) | 11/24 | BTO | $8.04 |
| BROWN SHOE CO | BWS - Snapshot Report | $0.39 | $0.49 | 12.5% | 11/24 | BTO | $11.23 |
| CRACKER BARREL | CBRL - Snapshot Report | $0.62 | $0.57 | 10.5% | 11/24 | BTO | $34.73 |
| COLDWATER CREEK | CWTR - Snapshot Report | ($0.03) | ($0.01) | 0.0% | 11/24 | AMC | $5.32 |
| DAKTRONICS INC | DAKT - Snapshot Report | $0.02 | $0.30 | 200.0% | 11/24 | BTO | $8.02 |
| DELIAS INC | DLIA - Snapshot Report | ($0.04) | ($0.09) | 11.8% | 11/24 | BTO | $2.00 |
| DOLLAR TREE INC | DLTR - Snapshot Report | $0.65 | $0.47 | 16.7% | 11/24 | BTO | $48.75 |
| DSW INC CL-A | DSW - Snapshot Report | $0.46 | $0.30 | 70.0% | 11/24 | BTO | $20.10 |
| FREDS INC | FRED - Analyst Report | $0.17 | $0.15 | 0.0% | 11/24 | BTO | $10.57 |
| GIANT INTERACTV | GA - Snapshot Report | $0.11 | $0.08 | 7.1% | 11/24 | $6.86 | |
| HILLENBRAND INC | HI - Snapshot Report | $0.37 | $0.31 | 0.0% | 11/24 | BTO | $19.84 |
| HEINZ (HJ) CO | HNZ - Analyst Report | $0.69 | $0.87 | 8.1% | 11/24 | BTO | $42.01 |
| HORMEL FOODS CP | HRL - Analyst Report | $0.68 | $0.50 | 9.6% | 11/24 | BTO | $38.37 |
| J CREW GROUP | JCG - Snapshot Report | $0.58 | $0.30 | 93.3% | 11/24 | AMC | $41.11 |
| CHINA FIN ONLIN | JRJC - Snapshot Report | ($0.06) | $0.21 | (33.3%) | 11/24 | AMC | $8.94 |
| MEDTRONIC | MDT - Analyst Report | $0.74 | $0.67 | 1.3% | 11/24 | BTO | $39.61 |
| NETEZZA CORP | NZ - Snapshot Report | $0.02 | $0.05 | (50.0%) | 11/24 | AMC | $10.52 |
| SIGNET GRP PLC | SIG - Analyst Report | ($0.17) | ($0.18) | 52.4% | 11/24 | DMT | $27.54 |
| TIVO INC | TIVO - Analyst Report | ($0.05) | ($0.01) | 40.0% | 11/24 | AMC | $10.83 |
| WSP HOLDING-ADR | WH - Snapshot Report | $0.19 | $0.29 | 50.00% | 11/24 | BTO | $3.95 |
| WARNER MUSIC GP | WMG - Snapshot Report | $0.05 | $0.04 | (56.3%) | 11/24 | BTO | $6.90 |
| CONNS INC | CONN - Snapshot Report | ($0.05) | $0.11 | (35.3%) | 11/25 | BTO | $6.42 |
| DEERE & CO | DE - Analyst Report | $0.05 | $0.81 | 73.7% | 11/25 | BTO | $50.89 |
| TIFFANY & CO | TIF - Analyst Report | $0.23 | $0.35 | 24.2% | 11/25 | BTO | $41.17 |
| WIMM-BILL-DANN | WBD - Snapshot Report | $0.00 | $0.17 | n/a | 11/25 | $20.10 | |
| FRONTLINE LTD | FRO - Snapshot Report | ($0.11) | $1.77 | n/a | 11/27 | $27.24 | |
| SHIP FIN INTL | SFL - Snapshot Report | $0.53 | $0.79 | 0.0% | 11/27 | BTO | $12.57 |
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