Next Week: Jobs, Jobs, Jobs - Earnings Preview
Earnings Preview 3/26/10
Earnings Season is winding down, but that does not mean it is over. Actually, it is about to start up again.
Next week will bring 79 earnings reports, including 2 members of the S&P 500. We define the first quarter as any fiscal period ending in February, March or April, and 30 of the firms reporting, will actually be reporting first quarter earnings. Some of the higher-profile firms to report will be Research In Motion (RIMM), Micron Technology (MU), Worthington Industries (WOR) and Sealy (ZZ).
The economic data calendar will take center stage. We start out the week with income on personal income and spending, then get data on housing prices, auto sales and finish off the week with the all-important employment report for March. There should be more than enough data to significantly move the market in the next week. Of course, the direction will depend on what the data says, both absolutely and relative to what is expected.
Monday
• Personal income is expected to have risen by 0.1% in February, matching the 0.1% increase in January. That sort of increase is not going to provide a lot of ammunition for a robust recovery. While personal income is expected to have increased only very slightly, personal spending is expected to have risen at a somewhat more robust rate of 0.3%, although that is down from the 0.5% increase in January. If spending is rising faster than income, that means that the savings rate will decline. While the savings rate is higher than it was a few years ago, it is still far too low for the long-term health of the economy. However, in the very short run, a falling savings rate is good news for the economy. Unfortunately there is no way to go from a low savings rate to a high savings rate, without the savings rate rising. Ideally we would see robust increases in personal income and moderate increases in spending, but that does not seem to be happening.
Tuesday
• The Case-Schiller Index, generally considered the best measure of housing prices, is expected to show a year-over-year decline in home prices of just 0.5%, in January, versus a 3.1% decline in December. This data is very important as for the vast majority of people, housing equity is the biggest part of their wealth (or at least that used to be the case before housing prices collapsed). As housing prices rise, some people who were underwater on their mortgages get above the waterline, as they fall more slip below the waves. Being underwater, and how far, is the single biggest variable in if someone will default on their mortgage and end up in foreclosure. Unfortunately the data comes with a big delay, as this is January data we are talking about.
• The Consumer Confidence Index is expected to rise to 49.0 in March from 46.0 in February. This is still a very low level. However, consumer confidence is overrated as an economic indicator. While theoretically if people feel more confident they are more likely to spend in the future, the responses to the survey do not always match consumers actual actions.
Wednesday
• We get the first appetizer on the jobs picture (before the main course on Friday) when ADP releases its data on private sector employment. As the largest processor of payrolls in the country, ADP is in a good position to judge employment trends. The ADP report is expected to show a gain of 45,000 private sector jobs in March versus a loss of 20,000 jobs in February. More jobs, especially private sector jobs, would be very welcome news for the recovery.
• The Chicago Purchasing Managers Index (PMI) is expected to slip to a reading of 61.0 in March from 62.6 in February. Since any reading over 50 indicates expansion, it means that the economy in the Great Lakes region is still moving forward, but at a somewhat slower pace.
Thursday
• Weekly initial claims for unemployment insurance come out. They fell 14,000 in the last week, to 442,000. After a huge downtrend from mid-April through the end of 2009, initial claims started to rise again, up in 7 of the 8 weeks before falling in the last three weeks. Last week was some 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 on balance adding jobs. 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. However, that is in part due to people simply exhausting their regular state benefits, which run out after 26 weeks. If one factors in the extended claims paid by the Federal government as part of the Stimulus Program, claims soared last week. 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. Last week regular continuing claims were 4.648 million, down 54,000 from the previous week. Extended claims (paid from Federal ARRA funds) were 5.698 million, a decrease of 346,000. Make sure to look at both sets of numbers! Many of the press reports will not, but we will here at Zacks.
• Construction Spending is expected to have declined by 1.0% in February, on top of a 0.6% decline in January. Given the bad weather in February, I think it might come in even worse than that. However even if the weather were balmy, construction spending would still be an overall drag on the economy given the very weak levels of housing starts and very high vacancy rates in most types of commercial real estate, meaning there is very little reason to build new office buildings or strip malls. Public construction spending on things like roads and schools will be only a partial offset.
• The Institute for Supply Management’s Manufacturing Index is expected to rise to 57.0 for March from 56.5 in February. Any reading over 50 indicates expansion, so if the consensus estimate is hit, it will mean that the manufacturing sector’s expansion is accelerating slightly. The overall index is made up of ten sub-indexes. The ones on production, new orders and employment will be of particular interest.
• Auto and Truck sales for march will be released. Sales have been recovering from extraordinarily low levels of below 10 million vehicles per year, but remain far below the 16 million rate that was often seen before the economy fell off a cliff. The recovery will probably continue in March, but it will be gradual, probably at an annual rate below 11 million (seasonally adjusted).
Friday
• The number everyone is waiting for will come out. Non-farm payrolls are expected to have increased by 200,000, the first robust increase since December of 2007 (although we did have a small 11,000 increase in November). However, there are two important special factors at play. First is a snap-back from any jobs that might have been lost in February due to the snowstorms. The second is the Government adding workers for the Census. Those jobs will only last for about six months or so, although it is better than being unemployed. The unemployment rate (derived from a separate survey) is expected to hold steady at 9.7%. In addition to those two headline numbers there is much more to consider in the report.
• Among them is the average work week, which is expected to tick up to 33.9 hours from 33.8 hours. While that might not sound like a big deal, it is if you multiply the 0.1 hour (six minutes) by the 129.5 million workers in the country (107.0 million private sector). Average hourly earnings are expected to rise by 0.2% after a 0.1% increase in February. While that acceleration is nice, especially if people are also able to work more hours, 0.2% in a month only translates to 2.4% per year.
• Other key things to look for in the report are the under-employment rate (U-6), the duration of unemployment measures (both the mean and the median ticked down in February, but remain at previously unheard-of levels), the civilian participation rate and the employment rate, also known as the employment-to-population ratio. The last two measures are almost never reported in mainstream reports, or if they are, they are buried about 30 paragraphs into the article. They are FAR more important than that, and are some of the first details about the report that you should want to know about. I plan to have an extensive analysis of the report covering all these issues on Friday.
Potential Positive Surprises
Historically, the best indicators of firms likely to report positive surprises are both a recent history of positive surprises and rising estimates going into the report. The Zacks Rank is also a good indicator of potential surprises. While normally firms that report better-than-expected earnings rise in reaction, that has not been the case so far this quarter. While pickings are getting slim, some of the companies that have these characteristics include:
A. Schulman (SCLM) is expected to report EPS of 0.23, up from a loss of $0.26 per share a year ago. Last time out SCLM posted a positive surprise of 74.4%, and over the last month the mean estimate for its fourth quarter earnings is unchanged. SCLM has a Zacks #1 Rank.
Worthington Industries (WOR) is expected to post EPS of $0.20, up from $0.06 a year ago. Last time WOR beat expectations by 74.4%, and over the last month analysts have raised their estimates for the about to be reported quarter by 0.71%. WOR is a Zacks #1 Ranked stock.
Xyratex (XRTX) is expected to post EPS of $0.70 as opposed to a loss of $0.45 a year ago. While last time out the firm disappointed by 39.4%, the analysts have become far more bullish about the soon-to-be-reported quarter, raising their estimates over the last month by 72.1%.
Potential Negative Surprises
Movado Group (MOV) is expected to post a loss of $0.31 a share, versus a loss of $0.43 a year ago. Last time they reported 80.7% below expectations. For this Zacks #5 Ranked stock, analysts have cut the estimates for this quarter slightly over the last month by 15.1%.
Resources Connection (RECN) is expected to lose $0.02 a share this quarter, versus earnings of $0.05 a share a year ago. They were 300% below expectations last time out (a loss when earnings were expected). Analysts have cut the estimate for this quarter by 23.4% over the last month. The stock holds a Zacks #5 Rank.
Earnings Calendar
| Company | Ticker | Qtr End | EPS Est | Year Ago EPS |
Last EPS Surprise % |
Next EPS Report Date | Time | Daily Price |
| Apollo Group | APOL | 201002 | 0.81 | 0.77 | 1.38% | 20100329 | BTO | 62.43 |
| Cal-Maine Foods | CALM | 201002 | 1.34 | 1.29 | 6.35% | 20100329 | BTO | 37.26 |
| Chinacast Educ | CAST | 200912 | 0.1 | 0.04 | 10.00% | 20100329 | AMC | 7.45 |
| Cosi Inc | COSI | 200912 | -0.04 | -0.05 | 75.00% | 20100329 | AMC | 0.89 |
| Cytomedix Inc | GTF | 200912 | -0.01 | -0.14 | N/A | 20100329 | AMC | 0.51 |
| Gigamedia Ltd | GIGM | 200912 | -0.04 | 0.14 | -140.00% | 20100329 | BTO | 3.19 |
| Kid Brands Inc | KID | 200912 | 0.15 | 1.37 | N/A | 20100329 | BTO | 6.55 |
| Neogen Corp | NEOG | 201002 | 0.16 | 0.13 | 5.26% | 20100329 | BTO | 25.5 |
| Oxford Inds Inc | OXM | 201001 | 0.16 | 0.06 | 50.00% | 20100329 | AMC | 22.61 |
| Sorl Auto Parts | SORL | 200912 | 0.2 | 0.1 | 31.25% | 20100329 | BTO | 9.04 |
| The9 Ltd-Adr | NCTY | 200912 | -0.53 | 0.36 | 25.53% | 20100329 | AMC | 6.88 |
| Charming Shoppe | CHRS | 201001 | -0.16 | -0.34 | -100.00% | 20100330 | BTO | 6.63 |
| Chunghwa Telecm | CHT | 200912 | 0.36 | 0.24 | 13.79% | 20100330 | AMC | 19 |
| Cobalt Intl Egy | CIE | 200912 | -0.05 | 999 | N/A | 20100330 | BTO | 13.56 |
| Dover Saddlery | DOVR | 200912 | 0.07 | 0.07 | 25.00% | 20100330 | 3.68 | |
| Edap Tms Sa-Adr | EDAP | 200912 | -0.01 | 0.01 | -566.67% | 20100330 | BTO | 3.31 |
| Exfo Inc | EXFO | 201002 | 0.05 | 0.06 | 0.00% | 20100330 | AMC | 5.95 |
| Firstcity Finl | FCFC | 200912 | 0.21 | -1.49 | N/A | 20100330 | DMT | 5.84 |
| Fsi Intl | FSII | 201002 | 0.03 | -0.21 | 100.00% | 20100330 | AMC | 3.66 |
| Fuller(Hb) Co | FUL | 201002 | 0.28 | 0.14 | 19.05% | 20100330 | AMC | 22.77 |
| Gammon Gold Inc | GRS | 200912 | 0.1 | 0.18 | 0.00% | 20100330 | BTO | 8.08 |
| Hong Kong Highp | HPJ | 200912 | 0.09 | 0.02 | 100.00% | 20100330 | BTO | 6.3 |
| Immersion Corp | IMMR | 200912 | -0.22 | -0.26 | -13.04% | 20100330 | AMC | 4.14 |
| Kingsway Finl | KFS | 200912 | -0.3 | -4.98 | -973.91% | 20100330 | 1.73 | |
| Kit Digital Inc | KITD | 200912 | -0.12 | 999 | -12.50% | 20100330 | 12.76 | |
| Landec Corp | LNDC | 201002 | 0.08 | 0.06 | -14.29% | 20100330 | AMC | 7.07 |
| Layne Christens | LAYN | 201001 | 0.27 | 0.25 | 61.90% | 20100330 | BTO | 27.56 |
| Ldk Solar Co | LDK | 200912 | 0.12 | -1.25 | 437.50% | 20100330 | BTO | 6.81 |
| Nexxus Lighting | NEXS | 200912 | -0.17 | -0.32 | -10.53% | 20100330 | BTO | 3.49 |
| Saic Inc | SAI | 201001 | 0.32 | 0.3 | 3.03% | 20100330 | AMC | 19.1 |
| Sealy Corp | ZZ | 201002 | 0.04 | 0.04 | 100.00% | 20100330 | AMC | 3.73 |
| Team Inc | TISI | 201002 | 0.12 | 0.11 | 13.33% | 20100330 | AMC | 16.48 |
| Willdan Group | WLDN | 200912 | -0.03 | -0.17 | -200.00% | 20100330 | AMC | 2.4 |
| Wsp Holding-Adr | WH | 200912 | -0.07 | 0.27 | -157.89% | 20100330 | BTO | 2.9 |
| Acuity Brands | AYI | 201002 | 0.39 | 0.42 | 6.00% | 20100331 | BTO | 41.12 |
| Air Transpt Svc | ATSG | 200912 | 0.2 | -0.08 | -61.54% | 20100331 | AMC | 2.27 |
| Angiodynamics | ANGO | 201002 | 0.12 | 0.15 | 18.18% | 20100331 | AMC | 15.73 |
| A-Power Energy | APWR | 200912 | 0.39 | 0.3 | -12.90% | 20100331 | BTO | 11.53 |
| Bpz Resources | BPZ | 200912 | -0.02 | -0.08 | -166.67% | 20100331 | BTO | 7.05 |
| Cascade Corp | CASC | 201001 | -0.32 | 0.1 | 211.11% | 20100331 | AMC | 33.73 |
| China Grenrech | GRRF | 200912 | 0.05 | -0.31 | 71.43% | 20100331 | AMC | 3.36 |
| China Xd Plastc | CXDC | 200912 | 0.12 | 0.06 | -9.09% | 20100331 | BTO | 6.1 |
| Cypress Biosci | CYPB | 200912 | -0.13 | -0.19 | 30.00% | 20100331 | BTO | 4.95 |
| Demandtec Inc | DMAN | 201002 | -0.06 | 0.04 | 16.67% | 20100331 | AMC | 6.68 |
| Dollar General | DG | 201001 | 0.42 | 999 | 4.35% | 20100331 | BTO | 24.43 |
| Flotek Indu Inc | FTK | 200912 | -0.26 | 0.11 | -216.67% | 20100331 | BTO | 1.33 |
| Glg Life Tec Cp | GLGL | 200912 | 0.04 | -0.08 | N/A | 20100331 | BTO | 7.31 |
| Global Payments | GPN | 201002 | 0.53 | 0.46 | 16.39% | 20100331 | AMC | 45.45 |
| Harry Winston | HWD | 201001 | 0.12 | 0.19 | 100.00% | 20100331 | AMC | 9.72 |
| Immucor | BLUD | 201002 | 0.28 | 0.27 | 7.69% | 20100331 | AMC | 21.71 |
| Lihua Intl Inc | LIWA | 200912 | 0.22 | 999 | N/A | 20100331 | BTO | 9.02 |
| Lindsay Corp | LNN | 201002 | 0.33 | 0.01 | 120.83% | 20100331 | BTO | 41.71 |
| Micron Tech | MU | 201002 | 0.22 | -0.81 | 114.29% | 20100331 | 10.38 | |
| Mobile Tele-Adr | MBT | 200912 | 1.29 | 0.39 |
The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited. © 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved. 
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