Benzinga Weekly Preview: Earnings Season Wraps Up

The week of many hot companies reporting has come and gone; the upcoming week will be much less exciting. 69 percent of the S&P 500 has reported thus far, with a majority of beats.

Earnings

Barrick Gold

Barrick’s ABX earnings report and guidance will be interesting, as the price of gold appears to have bottomed and the company recently announced the sale of its stake in Marigold.

Bank of America, who has a neutral rating on the company, commented, “The disposal of the Marigold mine is part of Barrick's ongoing portfolio optimization process to maximize free cash flow in line with its disciplined capital allocation framework. On a pro forma basis, Barrick has now received around $940 million from the disposal of non-core assets.” BoA has a $19.25 price target on Barrick on the assumption that the stock should be trading at 1.75 times net asset value.

Similarly, S&P Capital IQ has a neutral rating on the company, but a price target of $22. Analysts cite gold price uncertainty as a reason for concern: “Despite ABX's modest valuation (6X our 2013 EPS estimate), we see a balance of risk/reward at present. Our foremost concern comes from the gold price volatility that we have witnessed and expect to continue given the metal's close correlation with macroeconomic trends. Against this, though, we see support from the recent share issue, which, together with the Pascua-Lama suspension, has removed ABX's near-term financing risk. In fact, we believe ABX now has no debt obligations through 2015,
which we see as a positive at a time of gold price uncertainty.”

Sprint

Sprint S is expected to report an EPS loss of $0.33, up from $0.44 year over year.

Most analysts are bearish on the company, including Credit Suisse. “From late November to early January, we conducted a series of channel checks, contacting over 100 wireless retail stores. Based on these checks, we continue to believe Sprint is struggling to gain traction with customers. As such, we are raising our 4Q13 branded postpaid net loss forecast to 150k from 75k. We're also reducing our revenue and EBITDA ests. by 0.1% and 0.4%, respectively (Exhibit 1). 2014 remains largely unchanged. See our accompanying note, "4Q13 Checks Indicate More of the Same," published today for more details.” Credit Suisse has an underperform rating and $5.50 price target on Sprint.

Deutsche Bank, S&P Capital IQ, Cowen & Company, and Macquarie have all downgraded the stock over the past two months.

Zillow

Zillow Z shares are up fiver percent this year versus a 2.8 percent drop in the S&P 500. Zillow is expected to post EPS of $0.07 after a $0.03 drop last quarter.

Almost all analysts are bullish into earnings. CRT Capital noted, “Zillow reported a strong beat and raise in 3Q13, continued to demonstrate consistent 50%+ YoY growth in unique users to the site, and showed financial prudence by guiding to lower TV ad spend in 4Q (a seasonally light quarter). Moving into 2014, we believe Z has a unique opportunity to continue to take advantage of several key opportunities: 1) strength in the general housing market; 2) capitalizing on strong user trends across PC+Mobile; and 3) new monetization opportunities like Mortgages, Rentals and Home Services. Our $95 target price is based on 40x our 2015 EV/EBITDA of $94M and our DCF valuation.”

CVS

After CVS CVS announced it would end tobacco sales in its stores, it will be interesting to see what other changes the pharmaceutical giant announces. The company is currently trying to reposition itself as a health provider.

Bank of America has a buy rating on the stock with a $77 price target. “Effective October 1, CVS is dropping tobacco from its stores like a bad habit. Sales of cigarettes, cigars, and chewing tobacco amount to approximately $2 billion annually, but at low profit margins relative to the consolidated business. We have adjusted our forecasts to account for the reduction in revenues, but we are maintaining our 2014 and 2015 EPS estimates on a higher margin trend and continuing aggressive share repurchases… All told, the strategy supports our view that CVS faces fewer operating challenges near term and it is better positioned to act on a number of differentiated alternatives to enhance its positioning in the health care arena.”

S&P Capital IQ on the other hand downgraded the stock to hold from strong buy, but has a $75 price target. “All told, the strategy supports our view that CVS faces fewer operating challenges near term and it is better positioned to act on a number of differentiated alternatives to enhance its positioning in the health care arena.”

Economics

After last week’s job data (ADP employment change, initial and continuing claims, and nonfarm payrolls), econ data will be much less significant next week.

The two releases to pay attention to are initial and continuing claims, and retail sales. Initial and continuing claims will be announced Thursday. Initial jobless claims are supposed to be 335,000 versus 331,000 for the previous week. Continuing claims are expected to be 2.98 million, up slightly from 2.96 the previous week.

Investors will be paying far less attention to retail sales than usual because most companies have already reported earnings and traders are not yet preparing for the next report.

Daily Schedule
Monday

• Earnings Releases Expected: Avis Budget Group, Hasbro, and Masco

Tuesday

• Earnings Expected: CVS CAR, Jive JIVE, and Sprint S
• Economic Releases Expected: JOLTS job openings, Wholesale inventories

Wednesday

• Earnings Expected: Cisco CSCO, Deere & Co DEER, Dr Pepper Snapple DPS, Leapfrog LF, Metlife MET, Skechers SKX, The Cheesecake Factory CAKE, Vonage VG, and Zillow Z
• Economic Releases Expected: Crude inventories, Treasury budget

Thursday

• Earnings Expected From: Barrick Gold ABX, Burger King BKW, Cabelas CAB, Cliffs Natural Resources CLF, Discovery Communications DISCA, Kraft Foods KRFT, Molson Coors TAP, and Pepsico PEP
• Economic Releases Expected: Initial and continuing jobless claims, Retail sales, Natural gas inventories

Friday

• Earnings Expected From: VF Corp VFC
• Economic Releases Expected: Industrial production, Michigan sentiment