Zacks Earnings Preview: Wal-Mart, J.C. Penney, Kohl's, Macy's, Cree, Inc. and Ethan Allen

For Immediate Release

Chicago, IL – August 10, 2009 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Wal-Mart (WMT - Snapshot Report), J.C. Penney (JCP - Analyst Report), Kohl's (KSS - Snapshot Report), Macy's (M - Snapshot Report), Cree, Inc. (CREE - Analyst Report) and Ethan Allen (ETH - Snapshot Report). To see more earnings analysis, visit http://at.zacks.com/?id=3207.

Every day, Zacks.com makes 4 stock picks available, free of charge. To see them, go to http://at.zacks.com/?id=5612.

This Week's Events

Retailers will start to release second-quarter results this week, accounting for nearly 10% of the 246 scheduled reports. Dow component Wal-Mart (WMT - Snapshot Report) will be joined by 15 other members of the S&P 500, including J.C. Penney (JCP - Analyst Report), Kohl's (KSS - Snapshot Report) and Macy's (M - Snapshot Report).

The Fed will hold a 2-day meeting on Tuesday and Wednesday. No change in interest rates will be made, though the statement should acknowledge that the economy is nearing stabilization.

The bond markets could be volatile, not only because of the Fed meeting, but also because of quarterly refunding. The Treasury Department will auction 3-year, 10-year and 30-year bonds. The offerings should total $75 billion.

Most of the week's economic data will be released after the Fed's meeting, with the exception of the preliminary estimate of Q2 productivity. We'll see the latest industrial production and consumer sentiment numbers on Friday.

• Tuesday: Q2 productivity
• Wednesday: June wholesale inventories, June trade balance, Fed statement (about 2:10 p.m.), July treasury budget, weekly crude inventories
• Thursday: July retail sales, June business inventories, July import and export prices, weekly initial jobless claims
• Friday: July Consumer Price Index (CPI), July industrial production and capacity utilization, preliminary August University of Michigan consumer confidence

No Fed officials are scheduled to speak.

As I write this on Friday morning, the S&P 500 has broken above resistance. Though the trend still favors the bulls, the major indexes are overbought. Furthermore, the tailwind from second-quarter earnings is disappearing. I think a pullback will occur soon, though I do feel a bit like a guy who is trying to sell umbrellas in the midst of a drought.

Companies That Could Issue Positive Earnings Surprises

One of the 10 covering brokerage analysts on Cree, Inc. (CREE - Analyst Report) recently raised his fiscal fourth-quarter forecast. Though the change was not enough to move the Zacks Consensus Estimate from its current level of 11 cents per share, it did result in a more bullish most accurate estimate of 14 cents per share. Furthermore, projections for fiscal 2010 have gradually been rising, suggesting that guidance could be good. CREE has topped expectations twice and matched forecasts twice during the last 4 quarters. Cree is scheduled to report on Tuesday, Aug 11, after the close of trading.

Though J.C. Penney Company (JCP - Analyst Report) experienced a 12.3% drop in July same-store sales, the decline was less than the company had feared. As a result, JCP raised its adjusted second-quarter profit guidance to a loss of 1 cent per share. The Zacks Consensus Estimate also calls for an adjusted loss of 1 cent per share. Though JCP matched expectations last quarter, it did top forecasts the previous 6 quarters. J.C. Penney is scheduled to report on Friday, Aug 14, before the start of trading.

Kohl's (KSS - Snapshot Report) just raised its second-quarter guidance. Crediting growth in July sales (accessories, home goods and footwear sold well), the company now projects profits of 73 to 74 cents per share. Previously, the department store chain had guided for profits of 56 to 64 cents per share. The Zacks Consensus Estimate has been revised up to 74 cents per share, though there could still be more upside given that KSS has topped expectations for 5 consecutive quarters. Kohl's is scheduled to report on Thursday, Aug 13, before the start of trading.

Companies That Could Issue Negative Earnings Surprises

Ethan Allen (ETH - Snapshot Report) has missed expectations for 3 consecutive quarters. The majority of the covering brokerage analysts are bracing for another disappointing quarter, judging by the 9-cent drop in the average forecast. The Zacks Consensus Estimate is calling for a loss of 25 cents per share. Ethan Allen is scheduled to report on Wednesday, Aug 12, before the start of trading.

Charles Rotblut, CFA, is the senior market analyst for Zacks.com.

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Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank Stocks have generated an average annual return of +26%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have underperformed the S&P 500 by 111% annually (-0.8% versus +8%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

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Contact: Charles Rotblut, CFA
Company: Zacks.com
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