Earnings Preview for May 11-15

Wal-Mart (WMT), Applied Materials (AMAT), J.C. Penney Company (JCP) and Kohl’s Corporation (KSS) could top expectations. TW Telecom (TWTC) could disappoint.

Retailers will step into the spotlight this week with their first-quarter results. Joining Dow component Wal-Mart (WMT) will be Abercrombie & Fitch (ANF), J.C. Penney (JCP), J.W. Nordstrom (JWN), Kohl’s (KSS), and Macy’s (M).

Overall, we have confirmed scheduled reports from 255 companies, 16 of which are in the S&P 500.

The economic calendar will also shine the light on consumer spending with April retail sales and the preliminary University of Michigan consumer confidence survey.

* Tuesday: March trade balance, April Treasury budget
* Wednesday: April retail sales, March business inventories, weekly crude inventories
* Thursday: April producer prices (PPI), weekly initial jobless claims
* Friday: April consumer prices (CPI), May Empire State (New York) manufacturing survey, April industrial production and capacity utilization, preliminary University of Michigan consumer confidence survey

Fed Chairman Ben Bernanke will speak at an Atlanta Fed conference on Monday evening. His speech is entitled “Supervisory Capital Assessment Program”.

May options expire on Friday.

With earnings season nearing a close and the results of the stress test out, there are fewer catalysts to move the markets. This could set the stage for a pullback, or a prolonged trading range.

What will be interesting this week, however, is whether positive earnings surprises from retailers give the rally one last boost or if a “sell on the news” scenario develops.

Companies That Could Issue Positive Earnings Surprises
Yesterday, J.C. Penney Company (JCP) said April same-store sales fell 6.6%, far better than the company’s guidance for a 9% to 12% drop. Based on the April sales numbers, and cost-cutting measures, the company now anticipates profits between 9 and 11 cents per share. This is far above the consensus estimate of 2 cents per share. (Most brokerage analysts have yet to adjust their projections.) JCP has topped expectations for 6 consecutive quarters. J.C. Penney is scheduled to report on Friday, May 15, before the start of the trading.

Kohl’s Corporation (KSS) also used better-than-feared same-store sales as a reason to raise its guidance. The 6.2% decline in comparable store sales, combined with higher margins, should lead to first-quarter profits of 43 to 44 cents per share. (Previously, the company guided for profits of 27 and 34 cents per share.) Recent revisions have the consensus earnings estimate at 43 cents per share. KSS has topped expectations nearly every quarter during the past 3 years. Kohl’s is scheduled to report on Thursday, May 14, before the start of trading.

Wal-Mart (WMT) did not provide updated guidance, but it did say that April same-store sales rose 5%, excluding fuel. A recent revision has the most accurate estimate suggesting some upside with projected profits of 77 cents per share, a Penney above the consensus estimate. The discount retailer has topped expectations for 3 consecutive quarters. Wal-Mart is scheduled to report on Thursday, May 14, before the start of trading.

Moving out of the retail sector, Applied Materials (AMAT) could be a stock to keep an eye on. The company has beat expectations during 7 out of the last 8 quarters. Though the consensus estimate has not changed ahead of the company’s fiscal third-quarter report, the most accurate estimate is slightly more bullish and calls for a loss of 9 cents per share. (The consensus estimate projects a loss of 10 cents per share.) AMAT is scheduled to report on Tuesday, May 12, after the close of trading.

Companies That Could Issue Negative Earnings Surprises
TW Telecom (TWTC) has missed expectations for 3 consecutive quarters. The most accurate estimate is a penny worse than the consensus estimate and calls for a loss of 2 cents per share. This is a sign that the company could disappoint investors again. TW Telecom is scheduled to report on Tuesday, May 12, before the start of trading.

Charles Rotblut is the Vice President of Web Content for Zacks Investment Research and the Senior Market Analyst for Zacks.com. He oversees the editorial staff, manages the market-beating Focus List, Timely Buys and Top 10 portfolios, and plays an instrumental role in the development of new products. For more information, visit http://www.zacks.com.

Article Source: Earnings Preview for May 11-15

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Earnings Preview for May 11-15

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