Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Big Lots (NYSE: BIG), Dollar Tree (Nasdaq: DLTR), Joy Global (Nasdaq: JOYG) and Sanderson Farms (Nasdaq: SAFM). To see more earnings analysis, visit http://at.zacks.com/?id=3207.
Earnings Preview is written by Charles Rotblut, CFA, Senior Market Analyst for Zacks.com.
The U.S. stock markets are attempting to recover from the credit worries and appear on track to post modest gains for the third full week of August as I write this on Friday morning. The monthly performance is still in doubt, however, with the major indexes only a day’s move away from being up or down. More telling, perhaps is the technical picture with the Dow, S&P 500 and the Nasdaq trading just below the 90-day moving average and the 200-day moving average showing signs of flattening.
So will the final five days of August provide the much needed boost?
Computer maker Dell (Nasdaq: DELL) might provide some optimism when it reports on Thursday after the close. However, it is just one of six S&P 500 companies scheduled to report and the others are not bellwethers. Overall, we have confirmed that 80 companies will report.
July existing home sales data will be released on Monday, possibly setting an early tone for the week. New home sales rose last month and prices were mixed (median prices rose, but average prices declined). The Conference Board will publish its August consumer confidence index on Tuesday. Thursday features preliminary second-quarter GDP growth estimates. Friday will be busy with July personal income and spending, July factory orders, August Chicago PMI and the final August University of Michigan consumer confidence index being released. The data will need to be mostly inline with expectations to lend support to the equity markets: better-than-expected numbers will diminish hopes for a rate cut at the September meeting, while weaker-than-expected numbers will fuel worries about the impact the credit crunch is having on the markets.
Although the Fed has been actively trying to encourage lending, there is little sign that credit standards have loosened from a few weeks ago. Rather, I would expect fears about the credit crisis to continue to hang over the markets. The Federal Reserve is not meeting until Sep 18 and there remains uncertainty about what exactly the Fed will do with both the discount and the fed funds rate. (I do expect the Fed to lower both rates as a measure to provide confidence to the markets.) This uncertainty should result in continued volatility within the equity markets. Active traders should also note that Friday, Aug 31, leads into a holiday weekend, meaning volume could be reduced with the possibility of selling pressure ahead of the Labor Day break.
Companies That Could Issue Positive Earnings Surprises during the Week of Aug 27 - 31
Two brokerage analysts have raised their quarterly projections on Big Lots (NYSE: BIG) within the past 30 days. The revisions were in response to a 5.2% increase in July same-store sales. Although the second-quarter consensus earnings estimate is unchanged at 10 cents per share, the most accurate estimate is calling for the company to report 12 cents per share. BIG has surpassed expectations during each of the past four quarters by an average margin of 10 cents per share. Big Lots is scheduled to report on Wed, Aug 29, before the start of trading.
Dollar Tree (Nasdaq: DLTR) recently raised its second-quarter guidance. Based on the 4.4% increase in second-quarter same-store sales, the company said that expects profits to have totaled between 32 and 33 cents per share versus the previous guidance for 29 to 32 cents per share. The majority of the covering brokerage analysts raised their forecasts in response, pushing the consensus estimate up by a penny to 33 cents per share. DLTR has topped expectations during three out of the last four quarters. Dollar Tree is scheduled to report on Wednesday, Aug 29, before the start of trading.
Higher chicken prices are leading to raised expectations for Sanderson Farms (Nasdaq: SAFM). One brokerage analyst raised his forecast for fiscal third-quarter earnings, causing the consensus estimate to rise by four cents to $1.93 per share. SAFM has topped expectations during three out of the past four quarters, though its fiscal first-quarter earnings missed analysts’ estimates. Sanderson Farms is scheduled to report on Tuesday, Aug 28, before the start of trading.
Companies That Could Issue Negative Earnings Surprises during the Week of Aug 27 - 31
Joy Global (Nasdaq: JOYG) warned last month that “sustained weakness in the U.S. coal market” would cause fiscal 2007 earnings to be well below the guidance provided in December 2006. (The company had forecast full-year earnings of $2.85 to $3.25 per share). The warning caused the majority of the covering brokerage analysts to lower their projections. These revisions caused the consensus estimate for fiscal third-quarter earnings to drop by seven cents to 71 cents per share. The most accurate consensus is more bearish at 69 cents per share. The manufacturer of mining equipment has missed expectations for two consecutive quarters. Joy Global is scheduled to report on Wednesday, Aug 29, before the start of trading.
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Email: pr@zacks.com
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