Housing in the Spotlight - Earnings Preview
December 15 2011 - 7:00PM
Zacks
Earnings Preview 12/16/11
There will only be a handful of firms reporting next week as the
third quarter reporting season is almost over. A total of just 34
firms are scheduled to report, including 13 of the S&P 500.
Most of the firms reporting have November fiscal period-ends, which
means that they are reporting fourth quarter results.
While few in number, some of the reports come from firms that are
highly significant in that they will give clues to the overall
direction of earnings in the fourth quarter.
The firms reporting next week include:
Bed Bath &
Beyond (BBBY),
Carnival Cruise Lines
(CCL),
ConAgra (CAG),
General
Mills (GIS),
Micron Technology
(MU),
Nike (NKE) and
Walgreens (WAG).
There will, however, be plenty of economic data for the market to
chew on. The theme for the week will be housing. Just about all of
the key housing numbers will come out next week, starting with the
Homebuilders index and followed by Housing Starts and Building
Permits, Existing Home Sales and New Home Sales. Non-housing data
due include the final word on 3rd quarter GDP, Durable Goods Orders
and Personal Income and Spending.
Monday
- The National Association of Homebuilders index is expected to
slip back to a dismal level of 19 in December from 20 in
November. This is a “magic 50” index, so any reading below 50
indicates that homebuilders see conditions as poor. The index had
been mired in the mid-to-low teens for over two years now, but has
lately been trending upwards -- from “atrocious” to just “awful.”
In every previous recovery, residential investment has led the
economy out of the swamp. This time it has been pulling us further
into it, and remains one of the key reasons why the recovery is
anemic.
Tuesday
- We find out if the Homebuilders pessimism is well founded when
the data on Housing Starts are released. In October, they ran
at an annual rate of only 628,000, about a quarter of the level at
the peak of the bubble. They have been extraordinarily distressed
for over two years now and show little sign of improvement.
In some ways, the low level of starts is a blessing in disguise,
since it indicates that few housing units are being added to the
glut of unsold homes. However, that is very cold comfort to the
unemployed construction workers, a group harder hit than almost any
other in the Great Recession. It is hard to see how we have a
robust recovery until housing starts start to rebound
significantly. The consensus is looking for starts to fall edge up
to 631,000 in November. Given that Permits were much higher than
starts last month, I would not be surprised to see things a little
bit higher than that, perhaps a rise towards the 640,000 level, but
that is still downright ugly.
- The best leading indicator of Housing Starts is Building
Permits. In October they ran at an annual rate of only 653,000.
That was higher than the starts rate -- which is one reason that
the starts number is likely to rise in November -- but it is still
a very low level. In November, the consensus is looking for
Permits to fall back to just a 633,000 annual rate, which seems
about right to me.
Wednesday
- In October, Existing Home Sales ran at a 4.97 million annual
pace. In November, they are expected to edge up slightly further to
a 5.04 million rate. However, the National Assoication of Realtors
has indicated that it will be revising several years’ worth of
Sales and Inventory data -- both downward -- so that might be a
bigger story than the rate for November. Of at least equal concern
is the level of inventories available for sale relative to the
sales pace. In Ocober there were 8.0 months of supply on the
market, well above the normal level of about 6 months. That
suggests continued moderate downward pressure on existing home
prices. As sales of used homes are just the transfer of an existing
asset, they do not represent that much in the way of economic
activity. However, as the major store of wealth for the middle
class, existing home prices are vital. Also, the more prices fall,
the greater the number of people who are underwater on their
mortages and thus vulnerable to foreclosure.
Thursday
- Weekly Initial Claims for Unemployment Insurance have been
plunging over the last two weeks. Last week they dropped by 19,000
to 366,000. That is comfortably below the key 400,000 level (which
they were above two weeks ago). The consensus is looking for them
to bounce back to 380,000 this week. A rebound after such a big
drop is reasonable to expect, as this does not tend to move in a
straight line. Even that big a rebound would not be terrible news,
as it would indicate that the last two weeks of declines were not a
fluke. The 400,000 level is important in that it has historically
been the inflection point below which we tend to create enough jobs
to bring down the unemployment rate. The week-to-week numbers can
be very volatile, so the four-week average is the thing to focus on
(it was 387,750 last week). Keep an eye on the prior week’s
revision as well.
- Continuing Jobless Claims have been in a downtrend of late, but
the road down has been bumpy. Last week they rose by 4,000 to 3.603
million. That is down 563,000, or 13.5%, from a year ago. The
consensus is looking for a bounce to 3.650 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
rose by 293,000 to 3.642 million last week but are down 1.189
million, or 25.4% 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 7.449 million. The total number of people getting benefits is
now 1.743 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 in January. Make sure to look at both sets of numbers! Many of
the press reports will not, but we will here at Zacks.
- In the last look at GDP it was estimated that the economy grew
at a 2.0% pace in the third quarter, well above the 1.3% growth
rate of the second quarter and the nearly non-existent growth of
just 0.4% in the first quarter. The quality of the growth was also
quite high as that growth included a 1.55% drag from the change in
inventories. The overall growth rate is not expected to change;
however, the quality of the growth and the sources of growth might
shift. Put this in the category of old -- but important --
news. Most of the focus is now on fourth quarter growth, and it
looks like it should be substantially higher than in the third
quarter.
- The University of Michigan Consumer Sentement index for Decmber
is expected to rise to 69.0 from 67.7. That is up off the lows of
the summer, but still very depressed by any historical standard.
Personally, I think this is one of the most overrated economic
statistics around, since what consumers say in the survey is often
very different that what they actually do. Still, better seeing it
go up than down.
- The index of Leading Economic indicators is expected to
increase by 0.3% after rising 0.0% for October. While this is the
leading index, most of its components are already known by the time
it is released, so this number does not normally have a major
market impact. Indeed, the stock market itself is one of the key
leading indicators.
Friday
- New Orders for Durable Goods are expected to rise 2.0% in
November after falling 0.5% in October. Previous months are often
revised significantly for this data, and those revisions can be
just as important as the current month’s data. The weakness last
month came from the highly volatile transportation equipment
segment. Since they are so high-priced, a few orders for jetliners
can really push around the total number, but the orders tend to be
lumpy. Excluding transportation equipment, new orders are expected
to be up 0.3% after being up 1.1% in October due to some large
orders at Boeing (BA). Given the tone of the
other data, I will take the “over” on both headline and
ex-transportaion.
- Personal Income is expected to rise 0.2% In November, after it
rose 0.4% last month. Just as important as the total amount of
personal income is the source of that income. Recently, growth in
income from wages and salaries has been very weak, with most of the
growth we have seen coming from with rental income and higher
dividends. That suggests that most of the meager total income
growth is going to the top of the income distribution. Personal
Spending is expected to rise 0.3% after rising just 0.1% in
October. Of course, if spending rises by more than income, the
savings rate will fall. In October, the savings rate rose, but to
just 3.5% from a very low 3.3% in September. Over the long term,
the economy needs a higher savings rate. Short-term, though, a
falling savings rate tends to boost the economy.
- New Home Sales are expected to rise to a 314,000 rate from a
very weak 307,000 in October. That is simply a pathetic level, even
if it is slightly off the record low set in January. The records go
back to the Kennedy administration. If we do come in at 314,000,
that is still lower than any month prior to 2010. Unlike used home
sales, each new home sold represents a lot of economic activity.
Thus this is a very important report. Normally, new home sales are
what leads the economy out of recessions, but they have been a huge
drag this time around.
In the Earnings Calendar below, $999.00 should be read as N.A.
Company |
Ticker |
Qtr End |
EPS Est |
Year Ago
EPS |
Last EPS
Surprise % |
Next EPS Report Date |
Time |
Daily Price |
NORTHWEST PIPE |
NWPX |
201109 |
$0.44 |
$0.07 |
147.83 |
20111219 |
AMC |
$23.63 |
OXYGEN BIOTHERA |
OXBT |
201110 |
($0.10) |
($0.09) |
-230 |
20111219 |
BTO |
$1.90 |
RED HAT INC |
RHT |
201111 |
$0.19 |
$0.15 |
15.79 |
20111219 |
AMC |
$46.23 |
CARNIVAL CORP |
CCL |
201111 |
$0.28 |
$0.31 |
4.91 |
20111220 |
BTO |
$33.07 |
CINTAS CORP |
CTAS |
201111 |
$0.48 |
$0.38 |
10.64 |
20111220 |
AMC |
$30.52 |
CONAGRA FOODS |
CAG |
201111 |
$0.43 |
$0.45 |
-6.45 |
20111220 |
BTO |
$25.55 |
CPI CORP |
CPY |
201110 |
($0.95) |
($1.05) |
-97.37 |
20111220 |
BTO |
$5.26 |
FSI INTL |
FSII |
201111 |
($0.06) |
($0.06) |
-28.57 |
20111220 |
AMC |
$3.24 |
GENL MILLS |
GIS |
201111 |
$0.79 |
$0.76 |
3.23 |
20111220 |
BTO |
$39.96 |
JABIL CIRCUIT |
JBL |
201111 |
$0.58 |
$0.52 |
10.2 |
20111220 |
AMC |
$19.51 |
JEFFERIES GP-NW |
JEF |
201111 |
$0.14 |
$0.31 |
-56.52 |
20111220 |
BTO |
$12.36 |
NAVISTAR INTL |
NAV |
201110 |
$3.21 |
$0.68 |
-41.48 |
20111220 |
BTO |
$37.35 |
NIKE INC-B |
NKE |
201111 |
$0.97 |
$0.94 |
12.4 |
20111220 |
AMC |
$94.08 |
ORACLE CORP |
ORCL |
201111 |
$0.55 |
$0.49 |
2.27 |
20111220 |
AMC |
$29.03 |
PAYCHEX INC |
PAYX |
201111 |
$0.38 |
$0.37 |
7.89 |
20111220 |
AMC |
$29.35 |
SANDERSON FARMS |
SAFM |
201110 |
($0.71) |
$2.08 |
-113.79 |
20111220 |
BTO |
$51.51 |
SHUFFLE MASTER |
SHFL |
201110 |
$0.17 |
$0.14 |
13.33 |
20111220 |
AMC |
$11.52 |
ACTUANT CORP |
ATU |
201111 |
$0.43 |
$0.36 |
6.38 |
20111221 |
BTO |
$20.57 |
BED BATH&BEYOND |
BBBY |
201111 |
$0.88 |
$0.74 |
10.71 |
20111221 |
AMC |
$61.17 |
CARMAX GP (CC) |
KMX |
201111 |
$0.38 |
$0.36 |
-3.92 |
20111221 |
BTO |
$30.05 |
FINISH LINE-CLA |
FINL |
201111 |
$0.11 |
$0.08 |
2.63 |
20111221 |
AMC |
$20.66 |
HERMAN MILLER |
MLHR |
201111 |
$0.41 |
$0.29 |
27.27 |
20111221 |
AMC |
$20.57 |
KB HOME |
KBH |
201111 |
$0.04 |
$0.20 |
23.53 |
20111221 |
BTO |
$7.27 |
LINDSAY CORP |
LNN |
201111 |
$0.46 |
$0.34 |
-28.13 |
20111221 |
BTO |
$50.34 |
LUBY'S INC |
LUB |
201111 |
($0.05) |
($0.06) |
150 |
20111221 |
AMC |
$4.40 |
SHAW GROUP INC |
SHAW |
201111 |
$0.43 |
$0.26 |
-174.58 |
20111221 |
BTO |
$22.53 |
STEELCASE INC |
SCS |
201111 |
$0.19 |
$0.18 |
-11.76 |
20111221 |
AMC |
$6.80 |
TIBCO SOFTWARE |
TIBX |
201111 |
$0.30 |
$0.26 |
6.25 |
20111221 |
AMC |
$23.60 |
WALGREEN CO |
WAG |
201111 |
$0.67 |
$0.62 |
3.64 |
20111221 |
BTO |
$34.11 |
AMER GREETINGS |
AM |
201111 |
$0.81 |
$0.78 |
2.63 |
20111222 |
BTO |
$16.60 |
CALAMP CORP |
CAMP |
201111 |
$0.03 |
$0.00 |
100 |
20111222 |
AMC |
$4.69 |
CHRISTOPHER&BNK |
CBK |
201111 |
($0.34) |
$0.00 |
2.63 |
20111222 |
AMC |
$2.48 |
MICRON TECH |
MU |
201111 |
($0.06) |
$0.24 |
-1400 |
20111222 |
AMC |
$5.55 |
NEOGEN CORP |
NEOG |
201111 |
$0.27 |
$0.26 |
-3.85 |
20111222 |
BTO |
$34.24 |
BED BATH&BEYOND (BBBY): Free Stock Analysis Report
CONAGRA FOODS (CAG): Free Stock Analysis Report
CARNIVAL CORP (CCL): Free Stock Analysis Report
GENL MILLS (GIS): Free Stock Analysis Report
MICRON TECH (MU): Free Stock Analysis Report
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