2Q Earnings Season Kicks Off

Earnings Season Gets Underway

The second quarter earnings season got underway a few weeks back, but the market typically starts keeping track of the reporting cycle with Alcoa’s (AA) results after the close on Monday. It is a bit early to draw conclusions about this earnings season, but the early signs do not look that good.

A number of the companies that have already reported results (we have second-quarter results from 26 S&P 500 companies already), and quite a few that have pre-announced, have been painting a less-than-inspiring earnings picture. As a result, expectations have been steadily coming down in recent weeks. Driving these lowered expectations are growth concerns about the global economy given the ongoing problems in Europe, and the slowdown in China and the other major emerging markets.

These problems are not new, but many companies cited domestic strength on the first quarter earnings calls as providing an offset to these global headwinds. Friday’s June jobs miss and the sub-par manufacturing ISM report earlier in the week show that the domestic economic may not be entirely immune from these negative global forces.

We will see what the second quarter earnings season has in store for us, but margins have peaked already and top-line gains become difficult to come by in the low economic growth environment. A replay of the first quarter earnings season, which turned out to be better than pre-season expectations, will be the best-case scenario for the second quarter reporting cycle.

Current expectations are bottom-up earnings growth of less than 1%, which has come down substantially over the last few weeks. Half of the sixteen Zacks sectors are expected to have negative year-over-year earnings comparisons, with Finance as the key growth driver this time around despite the massive trading loss at J.P. Morgan (JPM).

For a detailed look on aggregate earnings, please read our weekly Earnings Trends write-up. (2Q Early Signs: Not Looking Too Good)

The economic calendar is on the thin side this week, with hardly any market-moving reports on the docket. Release of the minutes of the Fed’s last meeting Wednesday afternoon will be of particular interest to the market as that meeting addressed the question of additional quantitative easing, but ended up extending Operation Twist instead. The recent run of soft economic reports has revived the debate all over again and the Minutes will be parsed to handicap the Fed’s future moves.


Monday - 7/9

• Nothing major on the economic calendar.
• Alcoa (AA) will report after the close, with the current Zacks Consensus EPS of 6 cents, down from 12 cents a month back. The Aluminum giant came out with a strong positive surprise last quarter, but our proprietary leading indicator of earnings surprise, the “Earnings ESP,” is pointing towards a negative surprise this time around.

Tuesday - 7/10

• Nothing major on the economic calendar
• Apparel and footwear maker Wolverine Worldwide (WWW) will report before the open.

Wednesday - 7/11

• We will get the May Trade Deficit data in the morning, while minutes of the Fed’s June meeting will be released in the afternoon. Investors will be handicapping the odds of more QE from the discussion in that meeting where Operation Twist was extended.
• Marriott International (MAR) and India’s Infosys Tech (INFY) will report results after the close.

Thursday - 7/12

• It will be interesting to see whether the weekly Jobless Claims numbers this morning maintain the positive trend from the preceding week. Last week’s data on the labor market was very conflicting, with the ADP and Jobless Claims data showing improvement and the official jobs numbers again disappointing.
• Google (GOOG) will be reporting after the close, while Fastenal (FAST), a nuts and bolts distributor, will report before the open. Earnings expectations for Google ahead of the release have been stable in recent days, though the overall trend over the last couple of months has been modestly negative.

Friday - 7/13

• We will get the June PPI data in the morning, while the preliminary University of Michigan Sentiment survey will come out after the market opens.
• The major results this morning are from J.P. Morgan (JPM) and Wells Fargo (WFC). J.P. Morgan’s trading loss announcement drove earnings expectations lower, with the current Zacks Consensus EPS of 85 cents down 32% in the last two months. The Zacks Earnings ESP, our proprietary leading indicator of earnings surprise, is pointing towards a negative surprise from JPM.

Here is a list of 42 companies reporting this week, including 7 from the S&P 500.

Company	Ticker	1Q-12E	1Q-11A	Last EPS Surprise %	Report Day	Time
ALCOA INC	AA	0.06	0.32	350	Monday	AMC
CROWDGATHER INC	CRWG	-0.01	-0.01	0	Monday	AMC
PRICESMART INC	PSMT	0.6	0.52	-5.6	Monday	AMC
SCHULMAN(A) INC	SHLM	0.62	0.65	-13.6	Monday	AMC
WD 40 CO	WDFC	0.61	0.47	20.4	Monday	AMC
AUGME TECH INC	AUGT	-0.08	999	-11.1	Tuesday	BTO
HEALTHCARE SERV	HCSG	0.17	0.15	-13.3	Tuesday	AMC
HELEN OF TROY	HELE	0.88	0.78	4.6	Tuesday	BTO
HI TECH PHARMA	HITK	0.78	1.08	-6	Tuesday	BTO
OCZ TECHNOLOGY	OCZ	-0.13	0	-33.3	Tuesday	AMC
PENFORD CORP	PENX	0.04	-0.06	-400	Tuesday	BTO
SEMILEDS CORP	LEDS	-0.25	-0.19	3.7	Tuesday	BTO
SHAW GROUP INC	SHAW	0.43	0.36	2.2	Tuesday	BTO
VOXX INTL CP	VOXX	0.13	0.15	206.3	Tuesday	AMC
WOLVERINE WORLD	WWW	0.44	0.48	18.5	Tuesday	BTO
ZEP INC	ZEP	0.37	0.32	22.2	Tuesday	N/A
ADTRAN INC	ADTN	0.36	0.56	10	Wednesday	N/A
API TECH CORP	ATNY	0.05	999	-67	Wednesday	BTO
DRAGONWAVE INC	DRWI	-0.26	-0.28	-63	Wednesday	AMC
INFOSYS LTD	INFY	0.73	0.67	0	Wednesday	AMC
ITRON INC	ITRI	0.97	1.2	-2.2	Wednesday	N/A
MARRIOTT INTL-A	MAR	0.42	0.37	3.5	Wednesday	AMC
NORTHERN TECH	NTIC	0.41	0.23	-48.2	Wednesday	BTO
TEXAS INDS	TXI	-0.33	-0.57	-6.1	Wednesday	AMC
ANGIODYNAMICS	ANGO	0.09	0.11	-14.3	Thursday	AMC
BANK OZARKS	OZRK	0.52	0.4	2	Thursday	AMC
COMMERCE BANCSH	CBSH	0.72	0.75	10.5	Thursday	BTO
FASTENAL	FAST	0.37	0.32	0	Thursday	BTO
GOOGLE INC-CL A	GOOG	8.78	7.66	6.2	Thursday	AMC
INDEP BK MASS	INDB	0.52	0.52	12	Thursday	AMC
MEDTOX SCIENTIF	MTOX	0.2	0.16	30.8	Thursday	BTO
NOVAGOLD RSRCS	NG	-0.06	-0.03	80	Thursday	BTO
PEREGRINE PHARM	PPHM	-0.13	-0.15	0	Thursday	AMC
PROGRESSIVE COR	PGR	0.27	0.38	7.7	Thursday	BTO
RESOURCES CNCTN	RECN	0.16	0.09	25	Thursday	AMC
WASH FEDL INC	WAFD	0.32	0.27	6.7	Thursday	BTO
AMES NATL CP	ATLO	0.4	999	0	Friday	N/A
IGATE CORP	IGTE	0.27	0.13	-15.2	Friday	BTO
JPMORGAN CHASE	JPM	0.85	1.27	12	Friday	BTO
PDL BIOPHARMA	PDLI	0.46	0.39	15.4	Friday	AMC
WEBSTER FINL CP	WBS	0.44	0.36	5	Friday	BTO
WELLS FARGO-NEW	WFC	0.81	0.7	2.7	Friday	BTO