Earnings Preview 2/3/12
Earnings season will be in full swing next week, with 507 firms
scheduled to report, and 69 of those will be members of the S&P
500. By the end of the week we will be almost three quarters
done with earnings season.
Many large and significant companies will be reporting. They
include
Cisco
(
CSCO
),
CVS
(
CVS
),
Disney
(
DIS
),
Humana
(
HUM
),
Coca-Cola
(
KO
),
PepsiCo
(
PEP
),
Time Warner
(
TWX
) and
Yum Brands
(
YUM
).
Unlike last week, it will be a relatively quiet week for economic
data. We will get the Job Opening and Labor Turnover Survey
(JOLTS), which will provide some more detail to the December jobs
picture. We will also find out if Consumer Credit (not
including mortgages) expanded in December. The only other
reports of significance, other than the jobless claims numbers that
come out every week, are both deficit reports on Friday.
Monday
- Water cooler conversation will be dominated by discussion of
the Super Bowl.
Tuesday
- It is expected that Consumer Credit expanded by $8.5 billion
in December after a surprisingly large $20.8 billion rise in
November. Given the strong auto sales numbers, I suspect
the number will be higher than that, with most of the increase
coming from the non-revolving side. Revolving credit (i.e.
credit card) balances probably expanded moderately.
- The JOLTS report, showing the numbers of hirings, job losses
and job openings will be released. This is important
detail, as the big employment report only shows the difference
between hirings and job separations. However, the data will
be for December, not January.
Wednesday
- Nothing of particular significance.
Thursday
- Weekly Initial Claims for Unemployment Insurance fell by
12,000 to 367,000 last week. The consensus is looking for a
slight rebound to 370.000. The drop in weekly claims to
well below the key 400,000 level was the first clue that the jobs
situation was getting significantly better. If weekly
claims fall again it would be a powerful sign that the momentum
is continuing. The big seasonal adjustments are all in the
rearview mirror, so last week's level is probably about right,
but we have recently seen a lot of volatility in the weekly
numbers. Thus the four-week average is the thing to focus
on (which totaled 375,750 last week). 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 fell by 130,000
to 3.437 million. That is down 536,000, or 13.5% from a year ago.
The consensus is looking for a bounce to 3.475 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 rose by 43,000 to 3.497 million last week and are
down 1.058 million, or 25.2% 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 7.670 million. The total number of
people getting benefits is now 1.632 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.
Friday
- The Trade Deficit is expected to rise slightly to $48.2
billion from $47.8 billion in November. That was up sharply from
$3.27 billion in October. For the first eleven months of
2011, the trade deficit has totaled $512.78 billion, up from
$459.57 billion in the first eleven months of 2010. A
rising trade deficit lowers GDP growth on a dollar-for-dollar
basis. We have been doing a good job at increasing exports
(although not in November) but our imports are much larger and
have been increasing almost as quickly. It is the trade
deficit, not the budget deficit which causes the country to be in
debt to places like China. As more than half of the trade
deficit can be attributed to our oil addiction, this addiction
must be cured before we can solve this serious economic
problem.
- We also get the Budget Deficit for January. While it is
still very high, it has been coming down. In the first
three months of fiscal 2012, the Government has spilled $321.74
billion worth of red ink, down from a deficit of $368.96 billion
in the first three months of fiscal 2011. That trend is
expected to continue, with the January deficit coming in at $40.0
billion versus $49.8 billion in January 2011. If the good
news on the jobs front can continue, the downward trend is likely
to accelerate.
- The University of Michigan Consumer Sentiment index is
expected to dip to 74.0 from 75.0. Since what consumers say
in these surveys is often very different from how they actually
act, this is a very overrated economic indicator.
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 potentially disappointing
earnings report.
In the Earnings Calendar below, $999.00 should be read as N.A.
Potential Positive Surprises:
-
Humana
(
HUM
) is expected to earn $1.20, down from $1.65 a year ago.
Last time out, it had a positive surprise of 25.74%, and over the
last four weeks analysts have raised their estimates for the
quarter by 0.52%. HUM is a Zacks #1 Rank stock.
-
Cisco Systems
(
CSCO
) is expected to earn $0.38, up from $0.31 a year ago. Last
time out, it had a positive surprise of 11.76%, and over the last
four weeks analysts have raised their estimates for the quarter
by 0.22%. CSCO is a Zacks #2 Rank stock.
-
Pioneer Natural Resources
(
PXD
) is expected to earn $1.01, up from $0.51 a year ago. Last
time out, it had a positive surprise of 51.69%, and over the last
four weeks analysts have raised their estimates for the quarter
by 6.31%. PXD is a Zacks #2 Rank stock.
Potential Negative Surprises:
-
Constellation Energy
(
CEG
) is expected to earn $0.63, up from $0.42 a year ago. Last
time out, it had a negative surprise of 23.6%, and over the last
four weeks analysts have cut their estimates for the quarter by
11.81%. CEG is a Zacks #5 Rank stock.
-
International Flavors
(
IFF
) is expected to earn $0.71, up from $0.69 a year ago. Last
time out, it had a negative surprise of 3.85%, and over the last
four weeks analysts have slashed their estimates for the quarter
by 0.2%. IFF is a Zacks #4 Rank stock.
-
Montpelier Re
(
MRH
) is expected to earn $0.20, down from $0.81 a year ago.
Last time out, it had a negative surprise of 73.91%, and over the
last four weeks analysts have cut their estimates for the quarter
by 67.0%. MRH is a Zacks #5 Rank stock.
Earnings Calendar
CISCO SYSTEMS (
CSCO
): Free Stock Analysis Report
DISNEY WALT (
DIS
): Free Stock Analysis Report
HUMANA INC NEW (
HUM
): Free Stock Analysis Report
COCA COLA CO (
KO
): Free Stock Analysis Report
PEPSICO INC (
PEP
): Free Stock Analysis Report
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