Earnings Preview 6/18/10
The pregame festivities for the second quarter earnings season are getting underway. There will be just 48 firms reporting next week, but that includes 15 S&P 500 firms. We define the second quarter as fiscal periods ending in May, June and July, so these are mostly firms with fiscal periods ending in May. The 15 S&P 500 firms reporting represent a wide cross section of the market. These include Oracle (ORCL), Discover Financial (DFS), ConAgra (CAG), Lennar (LEN), Walgreen (WAG) and Nike (NKE).
On the economic data front, there will not be a lot of reports, but the ones we get are some important ones, most notably the reports on Used, and especially New Homes Sales. We will also get new orders for durable goods, the final numbers on first quarter GDP and the University of Michigan Consumer Sentiment index.
Monday
- No reports of significance.
Tuesday
- Existing Home Sales are expected to have risen to an annual rate of 6.10 million in May from 5.77 million in April. Existing home sales, which are reported at closing, are still benefiting from the home buyer tax credit. People had until April 30 to be under contract, but they have until the end of June to close. Thus we will have strong sales in May and probably even stronger sales in June, but come July there will be a massive hangover and sharply lower sales.
Wednesday
- New Homes Sales are expected to drop to an annual rate of 480,000 in May from 504,000 in April. New home sales are recorded when the contract is signed, thus they are already suffering from the hangover. I suspect that the actual level will be below the 480,000 forecast. While much smaller than existing home sales, new home sales are FAR more important to the economy. Each new home built creates an enormous amount of economic activity. Existing home sales affect the economy mostly indirectly — for example, as people redecorate the homes that are new to them.
- The Federal Reserve’s Open Market Committee meets to decide the fate of the Federal Funds rate. It is universally expected to remain at the current 0.00 to 0.25% range. The real interest will be in any change to the policy statement, particularly the language on keeping rates extremely low for an extended period of time. With unemployment still at 9.7%, manufacturing capacity utilization still far below normal, and inflation nearly non-existent, it would be foolish in the extreme to raise rates any time soon.
Thursday
- Weekly initial claims for unemployment insurance come out. They rose 12,000 in the last week, to 472,000. After a huge downtrend from mid-April through the end of 2009, initial claims have become very erratic so far in 2010. Look for them to fall next week. Longer term, we have made good progress, but not good enough. We probably need for weekly claims (and the four-week moving average of them) to get down to closer to 400,000 to signal that the economy is adding enough jobs to make a dent in the unemployment rate. We are a lot closer now than we were last spring when they were running north of 640,000 on a consistent basis, but still have a ways to go.
- Continuing claims have also been in a steep downtrend of late, but that was reversed last week as claims rose to 4.571 million, an increase of 88,000. Part of the longer-term decline is due to people simply exhausting their regular state benefits, which run out after 26 weeks. Federally paid extended claims fell by 169,000 to 5.221 million. However that is probably due to even the extended claims running out as a bill to further extend benefits has been stalled in the Senate. 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 9.792 million, which is down 81,000 from last week, but up 559,000 from a year ago. Make sure to look at both sets of numbers! Many of the press reports will not, but we will here at Zacks.
- New orders for Durable goods are expected to have dropped by 1.4% in May partially reversing a 2.8% increase in April. However, most of the April increase was due to a huge surge in the extremely volatile transportation equipment segment, which includes jetliners. Excluding transportation equipment orders are expected to have risen by 0.9% after a 1.1% decline in April. The ex-transportation number is probably the more important one to keep your eye on.
Friday
- We get our final read on the first quarter GDP. The first read of 3.2% was revised down to 3.0% growth in the second look, but the consensus is expecting the final number to stay at 3.0%. Changes to the composition of that growth though could be significant, as almost half of the growth came from inventory building, which is a very low quality (i.e. usually reversed in subsequent quarters) source of growth.
- The University of Michigan Consumer Sentiment index is expected to fall slightly in June to a reading of 75.3 from 75.5. In theory, the consumer sentiment and confidence indexes should be important since the consumer comprises 71% of the economy. However there is often a disconnect between what people say on these surveys and their actual behavior. Generally, lower gasoline prices and higher stock prices drive the number higher, and higher gasoline and a lower stick market drive it down. Since the last survey, gas prices are down, but so is the stock market.
Earnings Calendar
| Company | Ticker | Qtr End | EPS Est | Year Ago EPS |
Last EPS Surprise % |
Next EPS Report Date | Time | Daily Price |
| Sonic Corp | SONC | 201005 | 0.2 | 0.24 | -150.00% | 20100621 | AMC | 9.33 |
| Steelcase Inc | SCS | 201005 | -0.06 | 0.02 | -999.00% | 20100621 | AMC | 7.44 |
| Adobe Systems | ADBE | 201005 | 0.34 | 0.28 | 3.33% | 20100622 | AMC | 33.12 |
| Aerovironment | AVAV | 201004 | 0.58 | 0.27 | -6.25% | 20100622 | AMC | 25 |
| Apogee Entrprs | APOG | 201005 | -0.05 | 0.27 | -90.91% | 20100622 | AMC | 13.07 |
| Carnival Corp | CCL | 201005 | 0.3 | 0.33 | 69.23% | 20100622 | BTO | 36 |
| Carnival Plc | CUK | 201005 | 0.28 | N/A | 120.00% | 20100622 | BTO | 38.6 |
| China Cord Bld | CO | 201003 | 0.04 | N/A | N/A | 20100622 | BTO | 5.31 |
| Commercial Metl | CMC | 201005 | -0.12 | -0.1 | -26.60% | 20100622 | BTO | 15.87 |
| Fuller(Hb) Co | FUL | 201005 | 0.38 | 0.36 | 35.71% | 20100622 | AMC | 21.91 |
| Gerber Scientif | GRB | 201004 | 0.04 | -0.09 | 25.00% | 20100622 | BTO | 5.73 |
| Jabil Circuit | JBL | 201005 | 0.26 | -0.02 | -22.73% | 20100622 | AMC | 13.87 |
| Progress Softwa | PRGS | 201005 | 0.47 | 0.29 | 36.84% | 20100622 | AMC | 33.22 |
| Red Hat Inc | RHT | 201005 | 0.13 | 0.12 | 16.67% | 20100622 | AMC | 32.13 |
| Walgreen Co | WAG | 201005 | 0.57 | 0.53 | -4.23% | 20100622 | BTO | 29 |
| Amer Apparel | APP | 201003 | -0.22 | -0.13 | 0.00% | 20100623 | BTO | 1.86 |
| Amer Software A | AMSWA | 201004 | 0.07 | 0.06 | 0.00% | 20100623 | AMC | 5.63 |
| Bed Bath&Beyond | BBBY | 201005 | 0.48 | 0.34 | 19.44% | 20100623 | AMC | 41.7 |
| Canadian Solar | CSIQ | 201003 | 0.08 | -0.13 | -31.37% | 20100623 | BTO | 11.8 |
| Carmax Gp (Cc) | KMX | 201005 | 0.33 | 0.11 | 4.00% | 20100623 | BTO | 20.82 |
| Cke Restaurants | CKR | 201004 | 0.17 | 0.29 | 133.33% | 20100623 | AMC | 12.49 |
| Herman Miller | MLHR | 201005 | 0.18 | 0.2 | -11.76% | 20100623 | AMC | 19.98 |
| Nike Inc-B | NKE | 201005 | 1.05 | 0.99 | 13.48% | 20100623 | AMC | 74.57 |
| Niska Gas Strg | NKA | 201003 | N/A | N/A | N/A | 20100623 | BTO | 18.07 |
| Paychex Inc | PAYX | 201005 | 0.31 | 0.32 | 3.03% | 20100623 | AMC | 28.67 |
| Rite Aid Corp | RAD | 201005 | -0.14 | -0.11 | -26.32% | 20100623 | BTO | 1.1 |
| Somanetics Corp | SMTS | 201005 | 0.12 | 0.14 | 100.00% | 20100623 | BTO | 24.83 |
| Spectrum Contrl | SPEC | 201005 | 0.22 | 0.18 | -5.00% | 20100623 | AMC | 14.71 |
| Techprecision | TPCS | 201003 | N/A | 0.04 | N/A | 20100623 | AMC | 0.81 |
| Accenture Plc | CAN | 201005 | 0.69 | 0.68 | -1.64% | 20100624 | AMC | 38.49 |
| Block H & R | HRB | 201004 | 2.04 | 2.09 | 14.29% | 20100624 | AMC | 15.93 |
| Conagra Foods | CAG | 201005 | 0.4 | 0.41 | 0.00% | 20100624 | 25.23 | |
| Darden Restrnt | DRI | 201005 | 0.88 | 0.9 | 3.26% | 20100624 | BTO | 44.54 |
| Discover Fin Sv | DFS | 201005 | 0.11 | -0.18 | -650.00% | 20100624 | BTO | 14.04 |
| Flow Intl Corp | FLOW | 201004 | -0.02 | -0.03 | 0.00% | 20100624 | AMC | 2.86 |
| Fsi Intl | FSII | 201005 | 0.16 | -0.09 | -33.33% | 20100624 | AMC | 4.5 |
| Lennar Corp -A | LEN | 201005 | 0 | -0.11 | 87.50% | 20100624 | BTO | 15.3 |
| Mccormick & Co | MKC | 201005 | 0.44 | 0.42 | 8.51% | 20100624 | BTO | 40.77 |
| Oracle Corp | ORCL | 201005 | 0.52 | 0.44 | 0.00% | 20100624 | AMC | 23.07 |
| Palm Inc | PALM | 201005 | -0.7 | -0.4 | -48.78% | 20100624 | AMC | 5.69 |
| Research In Mot | RIMM | 201005 | 1.34 | 0.98 | -0.78% | 20100624 | AMC | 61.91 |
| Robbins & Myers | RBN | 201005 | 0.22 | 0.26 | -7.14% | 20100624 | BTO | 22.61 |
| Standard Micros | SMSC | 201005 | 0.14 | -0.15 | 600.00% | 20100624 | AMC | 24.09 |
| Synnex Corp | SNX | 201005 | 0.68 | 0.57 | 6.45% | 20100624 | AMC | 26.79 |
| Tibco Software | TIBX | 201005 | 0.1 | 0.09 | 14.29% | 20100624 | AMC | 11.9 |
| Azz Inc | AZZ | 201005 | 0.56 | 0.8 | 4.92% | 20100625 | BTO | 38.57 |
| Finish Line-Cla | FINL | 201005 | 0.15 | -0.01 | 27.08% | 20100625 | BTO | 16.45 |
| Kb Home | KBH | 201005 | -0.32 | -0.6 | -57.78% | 20100625 | BTO | 12.54 |
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market beating Zacks Strategic Investor service.
