In the upcoming week, all eyes will be on key economic data both
domestically and around the world and markets will be especially
sensitive to the effect of these data points on Fed policy.
Concerns over Fed tapering its Quantitative Easing program sent
markets whip-sawing in the previous week and these fears should
continue for some time.
This week, the earnings calendar is marked by few companies but
still with some key reports. Discount retailer Dollar General
) is expected to report first quarter results alongside Ciena Corp.
) and Titan Machinery (NASDAQ:
Discount retail chain Dollar General is expected to report its
first quarter operations on Tuesday, June 4. Analysts expect the
company to report earnings per share of $0.71 vs. $0.63 on revenue
of $4.24 billion vs. $3.9 billion a year ago. Importantly, Dollar
General could comment on the state of consumer spending in the
economy as its sales are sensitive to tax refunds, which were
issued late this year, as well as tax rates, which increased in the
Analysts at Wedbush expect a largely positive report next week
as they maintain an outperform rating on the stock. "There is no
specific guidance for Q1, but the company expected 2013 EPS of
$3.15-$3.30 with comps up 4%-6%. Management expected gross margins
to contract at a rate higher than the rest of the year due to
anticipated higher shrinkage, higher markdowns, and lower markups,
which are mostly due to the impact of higher tobacco sales.
However, gross margin erosion was expected to moderate during the
rest of the year."
"We forecast Q1 EPS of $0.70 vs. $0.63 with comps of +2.5% vs.
+6.7%; consensus is at EPS of $0.71 with comps of +2.5%. When it
reported Q4 results on 3/25, management noted that QTD weather had
been unusually cold (and we saw little improvement by the end of
the quarter). However, management expected some eventual benefit
from what it estimated as $18 billion in delayed tax refunds."
"Our $58 price target assumes DG should trade at approximately
15x our 2014 EPS estimate of $3.75. Our target multiple is in line
with our projected L-T earnings growth rate of 15%, given quality
of execution and longer-term organic growth potential."
Bank of America Merrill Lynch also views the company positively
ahead of its earnings release, having increased its price target on
the stock to $60 from $55 earlier this month. The analysts at BAML
have a buy rating on Dollar General.
"We are upgrading Dollar General to Buy from Neutral and raising
our PO to $60 from $55, representing 18x 2013 P/E (16x 2013 prior),
while maintaining our above- guidance 2014E EPS of $3.35. With DG's
recent credit rating upgrade, debt refinancing and near lifting of
the private equity overhang, we expect sentiment toward the name to
continue to strengthen, particularly as DG outperforms Family
Dollar on comps, margins and EPS growth over the coming
"Despite near-term margin and comp headwinds (1Q13 faces a tough
compare), we think DG's longer-term prospects remain compelling:
6-7% square footage growth, 3-5% comp, operating margin expansion
and growing capital return. The initiation of a dividend in the
future would also be a positive catalyst. Strategy and execution
remain very solid, and we expect continued remodels, new services
and cooler door expansion to increase relevancy and ticket."
Communications equipment maker Ciena Corporation is also
expected to report earnings next week. On Thursday, Ciena is
expected to report a second quarter loss per share of $0.01 vs.
earnings per share of $0.04 a year ago. Revenue is expected to grow
to $483.34 million from $477.62 million a year ago.
Morgan Stanley has an equal-weight rating on the stock heading
into earnings. They have a base case target price of $18 on the
stock but see the price target rising to $25 in the bull case
should margins expansion accelerate and the corporate investment
cycle picks up.
"We believe Ciena has increased visibility on revenue this year
and next, as it is now feeling the full weight of the North America
capex upgrade cycle. High margin products are beginning to grow;
although mix remains volatile, product gross margin now has the
potential of hitting the mid-40's vs our prior thesis that it
remains at best 40-42% giving us more confidence in a higher
normalized LT operating margin."
"We are remaining Equal-weight as in the near-term, gross margin
falls again next quarter, while opex goes back up creating
continued margin volatility. In addition, we believe revenue and
EPS growth remains lumpy, as new deals are large and the timing of
revenue recognition is difficult to predict."
Lastly, construction equipment retailer Titan Machinery is
expected to report first quarter results on Thursday as well. The
company is expected to report quarterly EPS of $0.19 vs. $0.36 a
year ago on revenue of $479.98 million vs. $421.72 million a year
Notably, the company lowered quarterly guidance in late May and
analysts reacted to this change. The company attributed the weaker
operations in the quarter to the colder than expected weather
postponing purchases of equipment.
Analysts at M Partners commented on the preliminary operations
and the full quarterly report. "For Q1/F14, Titan expects fully
diluted EPS will be between a loss of $0.01 and a loss of $0.03. We
were expecting fully diluted EPS of $0.22 in Q1/F14; consensus was
$0.18. The consensus range of EPS estimates is $0.13 to $0.22."
"Titan expects revenue in Q1/F14 to be $440.0 million. We were
expecting revenue of $480.4 million in Q1/F14 (consensus was $478.3
million), up from $421.7 million in Q1/F13 with about half of the
revenue increase stemming from acquisitions made in the 12 months
ending April 30, 2013." M Partners expects a loss of $0.03 per
share for the quarter following the guidance.
Piper Jaffray also cut estimates after the guidance came out and
commented on the stock ahead of earnings. "We are lowering our
estimates following management's below consensus 1Q14 pre-release
and downward revision to FY14 EPS guidance. As we expected, Titan's
April ending quarter was negatively impacted by the late spring in
both agriculture and construction. Management expects 1Q revenue of
$440 mil and an EPS loss in the range of ($0.03) - ($0.01), both
falling below our previous street low estimates."
"Our FY14 EPS estimate of $1.82 is near the midpoint of
management's revised guidance range of $1.70 - $2.00, which is down
from the previous range of $2.00 - $2.30. We are also lowering our
FY15 EPS estimate to $2.09 on continued difficulties in the
construction segment and a shift in mix of lower margin sales."
"Price target drops to $21; Neutral. We are applying a lower
valuation multiple of 10x CY14 (11x prior) as we believe shares of
TITN will trade more in-line with the peer group multiple. With
expectations that 97+ mil acres of corn will get planted in time
and minimal visibility into improvements in construction we do not
see any catalysts in the near-term that will expand valuation
Key Economics Releases
Next week, the real focus of markets will be on the economics
calendar and how the various reports will affect Fed policy. Monday
begins with U.S. vehicle sales and Manufacturing PMI for major
Eurozone economies as well as the U.K. Later, the U.S.
Manufacturing PMI and the ISM Manufacturing Index are expected to
Tuesday, the RBA is set to release its latest rate decision and
the British Construction PMI is due out pre-market. During the U.S.
session, the U.S. trade balance is expected to be released as well
as the New York NAPM Index and the IBD/TIPP Economic Optimism
Index. Overnight, Australian GDP is set to be released.
Wednesday brings more data pre-market including the Services
PMIs for major Eurozone economies and the U.K. as well as the
latest revision to GDP for the Eurozone. Later, the ADP Employment
report is set to be released followed by non-farm productivity,
factory orders, and the ISM Non-Manufacturing Index.
On Thursday, the Bank of England's interest rate decision is due
out and German factory order data is set to be released pre-market.
Later, the Challenger Job Cut report is due out followed by the ECB
interest rate decision.
Friday is the big day on the calendar as the Non-Farm Payrolls
report is due out in the U.S. alongside the Canadian employment
change report. Economists expect that Non-Farm payrolls rose 165
thousand in May, the same as in April, and that the unemployment
rate stayed flat at 7.5 percent.
Earnings Expected From: ABM Industries (NYSE:
), Cracker Barrel (NASDAQ:
), SAIC (NYSE:
), and Verint Systems (NASDAQ:
).Economic Releases Expected: Total Vehicle Sales, Eurozone,
French, Italian, German, U.K., and the U.S. Manufacturing PMIs,
Construction Spending, and the ISM Manufacturing Index.
Earnings Expected From: Air T Inc. (NASDAQ:
), Analogic Corporation (NASDAQ:
), Ambarella (NASDAQ:
), Bob Evans Farms (NASDAQ:
), Dollar General (NYSE:
), and Shuffle Master (NASDAQ:
).Economic Releases Expected: RBA Rate Decision, U.S. Trade
Balance, New York NAPM, IBD/TIPP Economic Optimism Index,
Australian GDP, and HSBC China Non-Manufacturing PMI.
Earnings Expected From: Cyberonix (NASDAQ:
), Nordion (NYSE:
), Verifone Systems (NYSE:
), and Sigma Designs (NASDAQ:
).Economic Releases Expected: Spanish, Italian, French, German,
Eurozone, U.K., and U.S. Services PMIs, ADP Employment Change,
non-farm productivity, and the ISM Non-Manufacturing Index.
Earnings Expected From: Ciena Corp. (NASDAQ:
), Conn's Inc. (NASDAQ:
), Cooper Companies (NYSE:
), Vail Resorts (NYSE:
), J.M. Smucker Co. (NYSE:
), and Titan Machinery (NASDAQ:
).Economic Releases Expected: French Unemployment Rate, German
Factory Orders, Bank of England Interest Rate Decision, European
Central Bank Interest Rate Decision, Challenger Job Cuts, and the
Canadian Ivey PMI.
Earnings Expected From: Christopher and Banks Corp. (NYSE:
).Economic Releases Expected: British Trade Balance, German
Industrial Production, Non-Farm Payrolls, Unemployment Rate,
Canadian Employment Change, and the Chinese Trade Balance.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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