Earnings Preview 3/30/12
We are very much in an earnings season lull, but in a few weeks
things will start to get very busy again. This week, just 35
firms are due to report, but that includes four from the S&P
500.
With so few firms reporting, the focus is more likely to be on the
economic numbers. We have a fairly heavy schedule for the
market to look at, but the really big one is not until Friday when
the employment report comes out. Let's hope that indeed makes
it into a Good Friday.
Monday
- The Institute for Supply Management (
ISM
) Manufacturing index is expected to rise to 53.0 from
52.4. Any reading over 50 means that the manufacturing
economy is expanding, and anything below it reflects
contraction. Thus manufacturing activity is expected to be
somewhat stronger in March than in February, but still at a
moderate pace of growth. The overall index is made up of 10
sub-indexes, and how they are doing can be as instructive as what
the overall index is doing. In particular, pay attention to
the Production, Backlog, New Orders and Employment
sub-indexes.
- Construction Spending is expected to have increased by 0.5%
in February, after it declined 0.1% in January.
Better-than-normal weather may be behind some of the increased
spending expected.
Tuesday
- Factory Orders are expected to rise 1.4% following a 1.0%
decline in January. This is somewhat "old news" since we
already saw a pick up in the most volatile part of Factory
orders, new orders for Durable Goods.
- The minutes to March 13th Federal Reserve Open Market
Committee meeting will be released. That could shed some
light on the future direction of monetary policy and the
probability of another round of quantitative easing.
Wednesday
- The ADP appetizer for the big Friday report is served
up. In February, ADP estimated that 216,000 private sector
jobs were created, a bit more pessimistic than the 233,000 seen
by the BLS. For March, things are expected to be slightly
softer, with the consensus looking for ADP to report a gain of
213,000 private sector jobs.
- The ISM Non-Manufacturing, or Service, index is expected to
slip to 56.9 from 57.3 in February. That is still a very
healthy pace of expansion (anything over 50 means the non
manufacturing economy is growing) but just at a slightly slower
pace than last month. The service index does not have the
long history that the Manufacturing one does, but it covers a
much larger portion of the economy. As with the
Manufacturing Index, the sub Indexes can be as important as the
overall index.
Thursday
- Weekly Initial Claims for Unemployment Insurance were down
5,000 to 359,000 last week. However, that was after a
massive upward revision that came from the annual tweaking of the
seasonal adjustment factors. The consensus is looking for a
slight drop to 355,000 this coming week. The drop in weekly
claims well below the key 400,000 level was the first clue that
the jobs situation is getting significantly better. If they
fall again it would be a powerful sign that the momentum is
continuing. We are actually now well below the average
level of claims for the last 35 years. 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 12,000
to 3.340 million. That is down 954,000, or 22.2% from a year ago.
The consensus is looking for a slight increase to 3.355 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 fell by 74,000 to 3.329 million last week and are
down 1.028 million, or 23.4% 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 7.424 million. The total number of
people getting benefits is now 1.529 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
- Even though it is Good Friday and most people will not be
paying that much attention, the most important report of the week
is due. The consensus is looking for total non-farm
payrolls to rise by 200,000 -- down from 227,000 in February, but
still a pretty solid growth rate. Private payrolls are
expected to do somewhat better, with a rise of 215,000, but that
is down from 233,000 last month. Implicitly the consensus
is looking for government jobs to fall by 15,000, more than
double the drop last month, but still off the average of what we
saw in 2011. The unemployment rate is expected to remain at
8.3% despite the solid job gains as more discouraged workers
re-enter the workforce. Average hourly earnings are
expected to rise by just 0.1%, the same pace as last month.
The average workweek is expected to be unchanged at 34.5
hours. That suggests that the key factor holding back job
growth is lack of overall demand, not excessive regulation.
If employers had the need for more workers, but were afraid of
the costs of bringing on new people due to health insurance or
other regulations, then they would have their current workers put
in more hours. Other things to keep an eye on in the report
is the duration of unemployment metrics, which have finally
started to show some improvement but remain at extremely high
levels.
- Consumer Credit is expected to rise by $14.0 billion in
February, down from a $17.0 billion rise in January. Given
the very strong increase in Consumer Spending (up 0.8%) and the
low rise in Personal Income (up 0.2%) I suspect that the increase
will be higher than the consensus is looking for. The
Consumer Credit numbers do not include mortgages or other real
estate back-debt.
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 potential disappointing earnings
report. Given how few companies are reporting, we omit this
section this week.
Earnings Calendar
|
Company
|
Ticker
|
Qtr End
|
EPS Est
|
Year Ago
EPS
|
Last EPS
Surprise %
|
Next EPS Report Date
|
Time
|
Daily Price
|
| DIGITAL DOMAIN |
DDMG |
201112 |
($0.92) |
N/A |
N/A |
20120402 |
BTO |
$5.60 |
| LIFEWAY FOODS |
LWAY |
201112 |
$0.05 |
($0.01) |
50 |
20120402 |
AMC |
$9.41 |
| COMVERSE TECH |
CMVT |
201201 |
$0.05 |
$1.14 |
30 |
20120403 |
BTO |
$6.77 |
| CONNS INC |
CONN |
201201 |
$0.29 |
$0.00 |
-175 |
20120403 |
BTO |
$15.67 |
| ELEPHANT TALK |
ETAK |
201112 |
($0.07) |
($0.30) |
N/A |
20120403 |
|
$2.27 |
| FIBROCELL SCIEN |
FCSC |
201112 |
($0.06) |
N/A |
66.67 |
20120403 |
|
$0.42 |
| GREAT BASIN GLD |
GBG |
201112 |
$0.00 |
$0.02 |
-250 |
20120403 |
BTO |
$0.68 |
| INTL SPEEDWAY |
ISCA |
201202 |
$0.43 |
$0.49 |
6.9 |
20120403 |
BTO |
$27.31 |
| MITCHAM INDS |
MIND |
201201 |
$0.54 |
$0.17 |
100 |
20120403 |
AMC |
$21.95 |
| SMARTHEAT INC |
HEAT |
201112 |
($0.97) |
$1.90 |
-11.11 |
20120403 |
BTO |
$3.06 |
| TEAM INC |
TISI |
201202 |
$0.18 |
$0.08 |
8.16 |
20120403 |
AMC |
$31.43 |
| ACUITY BRANDS |
AYI |
201202 |
$0.61 |
$0.45 |
10.45 |
20120404 |
BTO |
$63.19 |
| ANGIODYNAMICS |
ANGO |
201202 |
$0.08 |
$0.13 |
8.33 |
20120404 |
AMC |
$12.27 |
| BED BATH&BEYOND |
BBBY |
201202 |
$1.34 |
$1.12 |
7.95 |
20120404 |
AMC |
$66.72 |
| GLOBAL PAYMENTS |
GPN |
201202 |
$0.83 |
$0.63 |
0 |
20120404 |
AMC |
$52.23 |
| HARRY WINSTON |
HWD |
201201 |
$0.24 |
$0.12 |
33.33 |
20120404 |
AMC |
$14.09 |
| MATTRESS FIRM |
MFRM |
201201 |
$0.19 |
N/A |
N/A |
20120404 |
AMC |
$38.11 |
| MONSANTO CO-NEW |
MON |
201202 |
$2.11 |
$1.87 |
21.05 |
20120404 |
BTO |
$78.91 |
| MSC INDL DIRECT |
MSM |
201202 |
$0.95 |
$0.80 |
2.15 |
20120404 |
BTO |
$83.54 |
| NATL AMER UNIV |
NAUH |
201202 |
$0.07 |
$0.14 |
0 |
20120404 |
AMC |
$6.71 |
| PEP BOYS M M &J |
PBY |
201201 |
$0.11 |
$0.05 |
0 |
20120404 |
AMC |
$14.91 |
| PRICESMART INC |
PSMT |
201202 |
$0.71 |
$0.60 |
-18.97 |
20120404 |
AMC |
$71.80 |
| RICHARDSON ELEC |
RELL |
201202 |
$0.10 |
$0.01 |
0 |
20120404 |
AMC |
$12.06 |
| RUBY TUESDAY |
RT |
201202 |
$0.16 |
$0.24 |
50 |
20120404 |
AMC |
$9.10 |
| SCHULMAN(
A
) INC |
SHLM |
201202 |
$0.44 |
$0.39 |
23.81 |
20120404 |
AMC |
$27.15 |
| STANDARD MICROS |
SMSC |
201202 |
($0.37) |
$0.07 |
5.88 |
20120404 |
AMC |
$25.85 |
| AZZ INC |
AZZ |
201202 |
$0.81 |
$0.73 |
0 |
20120405 |
AMC |
$51.48 |
| CARMAX GP (CC) |
KMX |
201202 |
$0.40 |
$0.38 |
-5.26 |
20120405 |
BTO |
$34.19 |
| CHINA GERUI ADV |
CHOP |
201112 |
$0.40 |
$0.23 |
5.71 |
20120405 |
BTO |
$3.58 |
| CONSTELLATN BRD |
STZ |
201202 |
$0.38 |
$0.35 |
0 |
20120405 |
BTO |
$23.62 |
| PIER 1 IMPORTS |
PIR |
201202 |
$0.48 |
$0.48 |
0 |
20120405 |
BTO |
$18.23 |
| RPM INTL INC |
RPM |
201202 |
$0.01 |
$0.01 |
-2.63 |
20120405 |
BTO |
$26.25 |
| SCHNITZER STEEL |
SCHN |
201202 |
$0.33 |
$1.10 |
9.02 |
20120405 |
BTO |
$40.00 |
| SEMILEDS CORP |
LEDS |
201202 |
($0.27) |
($0.05) |
6.67 |
20120405 |
BTO |
$3.94 |
| WD 40 CO |
WDFC |
201202 |
$0.54 |
$0.53 |
-22.22 |
20120405 |
AMC |
$45.65 |
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