Shifting to First Quarter

Earnings Preview 3/23/12

The fourth quarter earnings season is over, but now we start the first quarter season. It is still very early in the game, but some firms with February fiscal period ends will start to report this week. There will be 90 firms reporting, but 9 of them will be members of the S&P 500.

Firms reporting this week include: Best Buy ( BBY - Analyst Report ) , Family Dollar ( FDO - Analyst Report ) , Lennar ( LEN - Analyst Report ) , McKesson ( MCK - Analyst Report ) , Mosaic ( MOS - Snapshot Report ) , Paychex ( PAYX - Snapshot Report ) and Walgreens ( WAG - Analyst Report ) . That is an interesting cross-section of the economy and might offer some clues as to how the first quarter earnings season will go.

There will be several important economic reports out this week. Last week’s focus on housing continues early in the week with reports on pending home sales and the Case Schiller home price index. Then the focus shifts to new orders for Durable Goods, and then at the end of the week we find out about Personal Income and Spending. Along the way we get the old news of the final look at GDP in the fourth quarter, and two gauges of consumer attitudes, the Consumer Confidence index and the University of Michigan Consumer Sentiment index..

Monday

• Pending Home sales are expected to increase by 0.5% after rising 0.5% in January. In recent months this has become a less useful indicator of future existing home sales. This is because many home sales fall through due to an inability to get a mortgage. Still, an increase is a hopeful sign.

Tuesday

• The Case Schiller Home Price index is expected to show a year-over-year price decline of 3.8% in January versus a 4.0% decline in December. While this is considered the gold standard of housing price information, it is very slow in being released. The January numbers are actually a three-month moving average of November, December and January. We are probably getting close to the end of housing price declines, but I would not look for a sharp rebound any time soon.
• The Consumer Confidence Index is expected to slip to 70.0 from 70.8 in February. What consumers say in this survey and what they actually do are often two very different things, so this is not an indicator I put a lot of weight on. Historically it tends to be tied to trends in employment and to gasoline prices. The consensus is expecting that the rise in gas prices will offset the generally positive employment news of late.

Wednesday

• New Orders for Durable Goods are expected to rebound by 2.5% after plunging by 3.0% in January, in large part due to better orders for Aircraft. Those can be very volatile and since each one is so expensive they can really make the headline number swing. Excluding Transportation eEquipment, new orders are expected to rise by 1.0% after declining by 3.0% last month.

Thursday

• Weekly Initial Claims for Unemployment Insurance were down 4,000 to 348,000 last week. The consensus is looking for a slight rise to 350,000 this coming week. The drop in weekly claims well below the key 400,000 level was the first clue that the jobs situation was getting significantly better. If they fall again it would be a powerful sign that the momentum is continuing. We are actually now well below the average level of claims for the last 35 years. Keep an eye on the prior week’s revision as well as the change from the revised number.

• Continuing Jobless Claims have been in a downtrend of late, but the road down has been bumpy. Last week they rose by 9,000 to 3.352 million. That is down 954,000, or 22.2% from a year ago. The consensus is looking for a slight increase to 3.385 million. Some (most?) of the longer-term decline is due to people simply exhausting their regular state benefits which run out after 26 weeks. Those, however, don’t last forever either. Federally paid extended claims fell by 74,000 to 3.329 million last week and are down 1.028 million, or 23.4% over the last year. Looking at just the regular continuing claims numbers is a serious mistake. They only include a little over half of the unemployed now, given the unprecedentedly high duration of unemployment figures. A better measure is the total number of people getting unemployment benefits -- currently at 7.424 million. The total number of people getting benefits is now 1.529 million below year-ago levels. What is not known is how many people have left the extended claims via the road to prosperity -- finding a new job -- and how many have left on the road to poverty, having simply exhausted even the extended benefits. Unless the program is renewed, all extended benefits will end at the start of March. Make sure to look at both sets of numbers! Many of the press reports will not, but we will here at Zacks.
• The final look at fourth quarter GDP is expected to show no change from its 3.0% estimate in the second look. Of as much interest as a change in the headline number will be any shifts in the composition of the growth rate, particularly if inventory growth added more or less than in the last estimate. That is very low quality growth, so a shrinkage in the size of that is good news, even if it ends up lowering the overall growth rate.

Friday

• Personal Income is expected to increase by 0.4% in February, up from 0.3% growth in January. This is a very broad-based measure of income, not just from wages and salaries. Proprietors (small business) income has lately been very strong, as has dividend income, while growth of interest income has been weak. Wage income should start to do better given the job growth we have seen of late. Income from transfer receipts was strong last month due to an increase in Social Security payments, but has been trending down. Personal Spending is expected to accelerate to 0.6% growth from just 0.2% last month. That implies that the savings rate will fall. Over the long term we need a higher savings rate, but a falling savings rate helps economic growth in the short term.

Potential Positive or Negative Surprises

The best indicators of firms 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. Similarly, a recent history of earnings disappointments, cuts in the average estimate for the quarter in the month before the report is due and a poor Zacks Rank (#4 or #5) are often red flags pointing to a potential disappointing earnings report. Given how few companies are reporting, we omit this section this week.

In the Earnings Calendar below, $999.00 should be read as N.A.

Earnings Calendar

Company	Ticker	Qtr End	EPS Est	Year Ago EPS	Last EPS Surprise %	Next EPS Report Date	Time	Daily Price
APOLLO GROUP	APOL	201202	$0.39	$0.83	8.47	20120326	AMC	$42.99
CAL-MAINE FOODS	CALM	201202	$1.13	$1.27	40.58	20120326	BTO	$41.15
CHINA XD PLASTC	CXDC	201112	$0.33	$0.35	9.68	20120326	BTO	$5.18
CTI INDUSTRIES	CTIB	201112	$0.10	$0.12	-50	20120326		$4.45
GOL LINHAS-ADR	GOL	201112	$0.02	$0.29	-373.91	20120326		$7.45
KIOR INC-A	KIOR	201112	($0.16)	($0.10)	-7.14	20120326	AMC	$10.76
LANDEC CORP	LNDC	201202	$0.13	$0.09	8.33	20120326	AMC	$6.54
MULTIBAND CP	MBND	201112	$0.06	$0.31	45.45	20120326	AMC	$3.36
PACIFIC DRILLNG	PACD	201112	$0.12	$999.00	N/A	20120326	AMC	$10.80
SARATOGA RESRCS	SARA	201112	$0.06	$999.00	N/A	20120326		$6.44
TENGION INC	TNGN	201112	($0.24)	($0.48)	22.22	20120326		$0.57
AETERNA ZENTARS	AEZS	201112	($0.09)	($0.03)	111.11	20120327		$1.93
AROTECH CORP	ARTX	201112	$0.01	($0.03)	-375	20120327	AMC	$1.23
ATHERSYS INC	ATHX	201112	($0.14)	($0.11)	41.18	20120327	AMC	$1.73
CHARMING SHOPPE	CHRS	201201	($0.02)	($0.08)	11.11	20120327	BTO	$5.89
CHINA XINIYA FS	XNY	201112	$0.23	$0.27	-14.29	20120327	BTO	$1.92
CHRISTOPHER&BNK	CBK	201202	($0.47)	($0.41)	10	20120327	AMC	$2.14
EPAM SYSTEMS	EPAM	201112	$0.28	$999.00	N/A	20120327	BTO	$16.60
EXFO INC	EXFO	201202	$0.04	$0.07	25	20120327	AMC	$7.34
GENTIUM SPA-ADR	GENT	201112	$0.04	$0.07	-60	20120327	BTO	$8.20
LENNAR CORP -A	LEN	201202	$0.05	($0.06)	-5.88	20120327	BTO	$26.12
MCCORMICK & CO	MKC	201202	$0.53	$0.57	6.19	20120327	BTO	$52.07
MCEWEN MINING	MUX	201203	($0.15)	($0.07)	21.43	20120327	BTO	$3.74
NEOGEN CORP	NEOG	201202	$0.22	$0.21	-18.52	20120327	BTO	$36.03
OXFORD INDS INC	OXM	201201	$0.55	$0.32	14.29	20120327	AMC	$48.72
PACIRA PHARMACT	PCRX	201112	($0.54)	($11.95)	6.78	20120327	BTO	$10.98
POWER SOL INTL	PSIX	201112	$0.15	$999.00	58.33	20120327	BTO	$14.75
PVH CORP	PVH	201201	$1.09	$0.93	4.42	20120327	AMC	$89.97
RESPONSE GENETC	RGDX	201112	($0.04)	($0.06)	-250	20120327	BTO	$2.05
ROBBINS & MYERS	RBN	201202	$0.74	$0.62	11.59	20120327	AMC	$44.29
SEALY CORP	ZZ	201202	($0.02)	$0.00	-1500	20120327	AMC	$1.76
SYNNEX CORP	SNX	201202	$0.91	$0.81	21.24	20120327	AMC	$42.13
US HOME SYS INC	USHS	201112	$0.13	$0.07	46.67	20120327	AMC	$12.32
WALGREEN CO	WAG	201202	$0.77	$0.80	-5.97	20120327	BTO	$33.38
WILLDAN GROUP	WLDN	201112	$0.09	$0.04	107.14	20120327	AMC	$3.65
AURICO GOLD INC	AUQ	201112	$0.16	$0.17	36.36	20120328	BTO	$8.69
CARDIOME PHARMA	CRME	201112	($0.10)	($0.12)	-20	20120328	BTO	$0.80
COMMERCIAL METL	CMC	201202	$0.09	($0.40)	11.11	20120328	BTO	$13.74
FAMILY DOLLAR	FDO	201202	$1.13	$0.98	0	20120328	BTO	$57.63
HUNTINGTON INGL	HII	201112	$0.94	$999.00	23.53	20120328	BTO	$37.18
LGL GROUP INC	LGL	201112	$0.00	$1.87	-89.29	20120328	AMC	$7.43
LINDSAY CORP	LNN	201202	$0.83	$0.89	30.43	20120328	BTO	$63.99
MOSAIC CO/THE	MOS	201202	$0.77	$1.21	7.69	20120328	AMC	$56.27
NEXXUS LIGHTING	NEXS	201112	($0.06)	($0.09)	-20	20120328	BTO	$1.01
PAYCHEX INC	PAYX	201202	$0.37	$0.36	2.63	20120328	AMC	$31.98
PERNIX THERAPTC	PTX	201112	$0.14	$0.07	33.33	20120328	BTO	$8.55
PROGRESS SOFTWA	PRGS	201202	$0.20	$0.36	0	20120328	BTO	$23.65
RED HAT INC	RHT	201202	$0.20	$0.19	10.53	20120328	AMC	$51.54
RESOURCES CNCTN	RECN	201202	$0.08	$0.02	-8.33	20120328	AMC	$12.92
SANCHEZ ENERGY	SN	201112	$0.03	$999.00	N/A	20120328		$23.00
TEAVANA HOLDING	TEA	201201	$0.31	$0.24	0	20120328	BTO	$20.99
UNIFIRST CORP	UNF	201202	$0.89	$0.82	20.37	20120328	BTO	$59.60
ADECOAGRO SA	AGRO	201112	$0.01	$999.00	-50	20120329	AMC	$10.57
ASURE SOFTWARE	ASUR	201112	$0.03	$0.02	50	20120329	BTO	$8.12
AUXILIO INC	AUXO	201112	($0.05)	($0.05)	100	20120329		$1.20
BEST BUY	BBY	201202	$2.16	$1.98	-7.84	20120329	BTO	$26.96
CACHE INC	CACH	201112	$0.18	($0.16)	-100	20120329	BTO	$7.34
CENTURY CASINOS	CNTY	201112	$0.02	$0.03	50	20120329		$3.01
CHINA TRANSINFO	CTFO	201112	$0.20	$0.23	-13.33	20120329	BTO	$4.76
CORONADO BIOSCI	CNDO	201112	($0.33)	($0.32)	N/A	20120329	BTO	$9.10
COSI INC	COSI	201112	($0.03)	($0.04)	-133.33	20120329	AMC	$1.22
CYTOMEDIX INC	CMXI	201112	$0.00	($0.05)	-50	20120329	AMC	$1.27
DREAMS INC	DRJ	201112	$0.14	$0.10	33.33	20120329	AMC	$2.95
FRANKLIN COVEY	FC	201202	$0.03	$0.02	50	20120329		$8.69
JOS A BANK CLTH	JOSB	201201	$1.59	$1.47	5.88	20120329	BTO	$53.89
KID BRANDS INC	KID	201112	$0.13	$0.18	0	20120329	BTO	$2.72
LJ INTL INC	JADE	201112	$0.02	$0.14	-144.44	20120329	BTO	$2.35
NEWLINK GENETIC	NLNK	201112	($0.36)	$999.00	N/A	20120329	AMC	$10.17
RESEARCH IN MOT	RIMM	201202	$0.82	$1.78	4.1	20120329	AMC	$13.78
SABA SOFTWARE	SABA	201202	($0.06)	$0.03	0	20120329	AMC	$12.61
SEACHANGE INTL	SEAC	201201	$0.16	$0.24	-30.77	20120329	BTO	$8.20
SHAW GROUP INC	SHAW	201202	$0.45	$0.40	9.3	20120329	BTO	$31.14
SORL AUTO PARTS	SORL	201112	$0.21	$0.31	0	20120329	BTO	$3.44
TELENORTE L ADR	TNE	201112	$0.07	$0.19	N/A	20120329	AMC	$11.56
TEXAS INDS	TXI	201202	($0.82)	($0.75)	-4.92	20120329	AMC	$37.42
TIBCO SOFTWARE	TIBX	201202	$0.14	$0.13	23.33	20120329	AMC	$30.30
WORTHINGTON IND	WOR	201202	$0.35	$0.35	0	20120329	BTO	$17.69
XYRATEX LTD	XRTX	201202	$0.22	$0.15	133.33	20120329	AMC	$16.50
AMER ORIENT BIO	AOB	201112	$0.10	$0.08	60	20120330	AMC	$1.52
CLEARONE COMM	CLRO	201112	$0.14	$0.26	N/A	20120330		$4.58
DEJOUR ENERGY	DEJ	201112	$0.00	($0.01)	100	20120330		$0.41
ENGLOBAL CORP	ENG	201112	$0.03	($0.02)	-66.67	20120330	BTO	$2.13
FEIHE INTL INC	ADY	201112	$0.22	$0.07	-30	20120330	AMC	$3.34
FINISH LINE-CLA	FINL	201202	$0.79	$0.65	0	20120330	BTO	$24.18
FORBES ENERGY	FES	201112	$0.16	$0.00	N/A	20120330	AMC	$5.40
GAS NATURAL INC	EGAS	201112	$0.32	$0.24	0	20120330	AMC	$11.43
GEOKINETICS INC	GOK	201112	($1.19)	($2.15)	-13.61	20120330	AMC	$1.91
NATUZZI SPA-ADR	NTZ	201112	$0.00	($0.04)	N/A	20120330	AMC	$2.80
PINNACLE AIRLNS	PNCL	201112	($0.19)	$0.14	18.18	20120330	BTO	$1.27
ZAP	ZAAP	201112	($0.04)	($0.09)	N/A	20120330		$0.20