HNZ H.J. Heinz Company

Earnings Preview 5/20/11

Earnings season is starting to wind down, with just a few stragglers left. A total of 99 firms are due to report, including 13 from the S&P 500. Mostly we are down to the retailers, many of which have fiscal period ends a month later than everyone else.

The firms reporting this week include AutoZone (AZO), Applied Materials (AMAT), Costco (COST), Heinz (HNZ) and Medtronic (MDT). North of the border, the major Canadian banks will all be reporting, including Toronto Dominion (TD), Bank Of Montreal (BMO) and Royal Bank of Canada (RY).

It will be an average week for economic data. We start off with New Home Sales and Durable Goods orders on Tuesday, followed by the second look at first quarter GDP on Wednesday, and finish up the week on Friday with data on Personal Income and Spending, as well as the Fed’s favorite measure of inflation, the core PCE index.

Monday

• Nothing of significance.

Tuesday

• New Home Sales are expected to remain at the 300,000 rate they were at in March. 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 300,000, 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.
• New Orders for Durable Goods are expected to drop by 2.0% after rising 2.5% in March. Previous months are often revised significantly for this data, and the recent trend has been for upward revisions, so it would not be surprising to see March revised up to about 2.9%. Much of the weakness expected comes 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 rise 0.6% down from an increase of 1.3% last month. Thus, with the exception of transportation equipment, things are slowing down, but not headed down.

Wednesday

• The second look at GDP growth in the first quarter is released. The initial read was a disappointing growth rate of just 1.8%, down from growth of 3.1% in the fourth quarter. The consensus is looking for a slight upward revision to 2.0% growth. That is still quite anemic, particularly coming out of a deep recession. The composition of the growth rate is just as important as the overall growth rate itself. Growth that comes from the build-up of inventories for example is of much lower quality than business investment in new equipment and software. We will provide a complete breakdown of which parts of the economy are adding to growth, and which are serving as brakes on economic growth, and how the contributions have changes since the first look at the numbers last month.

Thursday

• Weekly initial claims for unemployment insurance come out. They had a very nice decline early in they year, but then had a very rough month or so in March and April. The last two weeks have been much more encouraging. Last week they fell sharply, by 29,000 to 409,000. A further decline is expected next week, getting us back below the psychologically important 400,000 level. The four week moving average will probably stay well above the 400,000 level.
• Continuing claims have also in a downtrend of late, but the road down has been bumpy. Last week they fell by 81,000 to 3.711 million. That is down 937,000 from a year ago. I would expect a decline this week. The consensus is looking for a level of 3.700 million. Some 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 4,000 to 4.109 million, and are down by 1.278 million 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 7.937 million, which is down 47,000 from last week (there are some timing issues so the change in continuing and existing claims does not exactly match the change in the total). The total number of people getting benefits is now 2.120 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. Given the differential between job growth and the decline in total people getting benefits, it looks like about 1 million people have simply run out of benefits, and have not found new work. Make sure to look at both sets of numbers! Many of the press reports will not, but we will here at Zacks.

Friday

• Personal Income is expected to have increased by 0.4% in April, down from a 0.5% increase in March. This is a broad measure of income, not just wages and salaries. The composition is important, as over the last year or so, much of the growth in income has come from transfer payments, not from wage growth. Personal Spending is expected to have slowed to an increase of 0.5% from 0.6% last month. That is still more than the increase in income -- meaning some more downward pressure on the savings rate. A falling savings rate boosts the economy in the short term, but a low savings rate is not healthy over the long term. The U.S. still has a very low savings rate relative to both history and the rest of the world, although it is significantly higher than it was a few years ago.
• The University of Michigan consumer sentiment survey is expected to be unchanged at 72.4. That is a lot better than where it was a year ago, but not exactly a robust reading.

Potential Positive or Negative Surprises

Historically, the best indicators of firms likely to report positive surprises are a recent history of positive surprises and rising estimates going into the report. The Zacks Rank is also a good indicator of potential surprises. Similarly a recent history of earnings disappointments, cuts in the average estimate for the quarter in the month before the report is due and a poor Zacks Rank (#4 or #5) are often red flags pointing to a potential disappointing earnings report.

Given the small number of firms reporting this week, there are not many candidates for potential positive or negative surprises, and so I will omit this section. In the Earnings calendar below, $999.00 should be read as N.A.

Earnings Calendar

Company	Ticker	Qtr End	EPS Est	Year Ago EPS	Last EPS Surprise %	Next EPS Report Date	Time	Daily Price
CAMPBELL SOUP	CPB	201104	$0.52	$0.52	0	20110523	BTO	$35.34
CHINA MASS-ADR	CMM	201103	$0.06	$0.06	-42.86	20110523	BTO	$1.70
CHINA SUNERGY	CSUN	201103	$0.13	$0.13	12.12	20110523	BTO	$2.92
CNINSURE IN-ADR	CISG	201103	$0.23	$0.21	8.82	20110523	AMC	$16.22
COSTAMARE INC	CMRE	201103	$0.43	$999.00	-66.67	20110523	AMC	$17.06
GLADSTONE INVES	GAIN	201103	$0.12	$0.12	209.09	20110523	AMC	$7.21
GT SOLAR INTL	SOLR	201103	$0.34	$0.23	21.05	20110523	AMC	$12.37
HISOFT TECH-ADR	HSFT	201103	$0.12	$999.00	100	20110523	AMC	$14.86
JAMBA INC	JMBA	201103	($0.07)	($0.13)	-13.33	20110523	AMC	$2.40
KRISPY KREME	KKD	201104	$0.09	$0.06	-125	20110523	BTO	$6.40
LONGTOP FIN-ADR	LFT	201103	$0.38	$0.24	5.77	20110523		$18.93
ORCKIT COMM	ORCT	201103	($0.29)	($0.37)	N/A	20110523	BTO	$2.54
PERFECT WORLD	PWRD	201103	$0.54	$0.84	-32.08	20110523	AMC	$24.02
PERRY ELLIS INT	PERY	201104	$0.98	$0.81	2.99	20110523	BTO	$30.53
QR ENERGY LP	QRE	201103	$0.28	$999.00	-186.96	20110523	BTO	$21.01
SHIP FIN INTL	SFL	201103	$0.51	$0.55	4.26	20110523		$20.17
SKYSTAR BIO-PHA	SKBI	201103	$0.19	$0.20	97.87	20110523	BTO	$4.54
TECH DATA CORP	TECD	201104	$1.06	$0.88	13.99	20110523	BTO	$53.35
VERIGY LTD	VRGY	201104	$0.02	$0.05	600	20110523	AMC	$14.10
APPLD MATLS INC	AMAT	201104	$0.37	$0.22	9.09	20110524		$14.33
AUTOZONE INC	AZO	201105	$4.98	$4.12	9.91	20110524	BTO	$277.15
AVAGO TECHNOLOG	AVGO	201104	$0.59	$0.45	18.87	20110524	AMC	$34.81
BLUEPHOENIX SOL	BPHX	201103	($0.02)	($0.03)	-300	20110524	BTO	$1.49
COLLECTIVE BRND	PSS	201104	$0.82	$0.83	25	20110524	AMC	$19.13
COMPUWARE CORP	CPWR	201103	$0.14	$0.16	0	20110524	AMC	$10.97
CRACKER BARREL	CBRL	201104	$0.67	$0.61	0	20110524	BTO	$53.05
DSW INC CL-A	DSW	201104	$0.74	$0.67	-6.82	20110524	BTO	$44.39
DYCOM INDS	DY	201104	$0.05	$0.02	-400	20110524	AMC	$14.98
EDAP TMS SA-ADR	EDAP	201103	($0.10)	($0.32)	-12.5	20110524	BTO	$3.91
EXPRESS INC	EXPR	201104	$0.40	$0.39	12.24	20110524	AMC	$23.05
FOCUS MEDIA HLD	FMCN	201103	$0.19	$0.07	28.57	20110524	AMC	$32.92
GLOBAL EDUC&TEC	GEDU	201103	$0.04	$999.00	27.27	20110524	AMC	$5.69
HANWHA SOLARONE	HSOL	201103	$0.29	$0.40	-134.78	20110524	BTO	$5.54
HEICO CORP	HEI	201104	$0.38	$0.30	14.29	20110524	AMC	$50.38
KONGZHONG-ADR	KONG	201103	$0.07	$0.12	87.5	20110524	AMC	$6.18
MEDTRONIC	MDT	201104	$0.93	$0.89	3.61	20110524	BTO	$42.82
ON TRACK INNOV	OTIV	201103	$0.00	($0.02)	200	20110524	BTO	$2.46
PAC SUNWEAR CAL	PSUN	201104	($0.33)	($0.30)	-3.13	20110524	AMC	$3.53
QIHOO 360 TECH	QIHU	201103	$0.07	$999.00	N/A	20110524	AMC	$28.52
SANDERSON FARMS	SAFM	201104	($0.84)	$1.62	-163.64	20110524		$47.30
SOC QUIMICA MIN	SQM	201103	$0.43	$0.29	29.03	20110524	AMC	$57.07
TAKE-TWO INTER	TTWO	201103	($0.47)	$0.23	60.71	20110524	AMC	$17.41
TIVO INC	TIVO	201104	($0.31)	($0.13)	-7.14	20110524	AMC	$9.48
99 CENTS ONLY	NDN	201103	$0.27	$0.27	0	20110525	AMC	$20.44
AFC ENTERPRISES	AFCE	201103	$0.26	$0.23	0	20110525	AMC	$15.57
AMER EAGLE OUTF	AEO	201104	$0.15	$0.17	2.33	20110525		$14.62
ASCENA RETAIL	ASNA	201104	$0.65	$0.60	5.77	20110525	AMC	$31.85
BANK MONTREAL	BMO	201104	$1.34	$1.18	2.31	20110525		$64.27
BROWN SHOE CO	BWS	201104	$0.11	$0.26	-26.67	20110525	BTO	$11.43
CHINA NEPSTAR	NPD	201103	$0.02	$0.00	-33.33	20110525	BTO	$3.17
CHINA NUOKANG	NKBP	201103	$0.05	$0.13	-100	20110525	AMC	$4.07
COMP SCIENCE	CSC	201103	$1.30	$1.66	3.36	20110525	AMC	$44.36
CONNS INC	CONN	201104	$0.09	$0.25	46.15	20110525		$5.39
COSTCO WHOLE CP	COST	201105	$0.77	$0.68	1.28	20110525	BTO	$83.86
FRONTLINE LTD	FRO	201103	($0.20)	$0.90	-150	20110525		$20.66
GUESS INC	GES	201104	$0.44	$0.54	4.72	20110525	AMC	$43.60
HORMEL FOODS CP	HRL	201104	$0.40	$0.34	27.91	20110525	BTO	$30.26
LTX-CREDENCE CP	LTXC	201104	$0.19	$0.15	28.57	20110525	BTO	$8.24
MEDICAL ACTION	MDCI	201103	$0.10	$0.30	16.67	20110525	BTO	$8.78
NETAPP INC	NTAP	201104	$0.43	$0.40	2.44	20110525	AMC	$54.45
PARTNER COMM	PTNR	201103	$0.40	$0.58	0	20110525	BTO	$18.34
POLO RALPH LAUR	RL	201103	$0.76	$1.13	34.37	20110525	BTO	$136.10
RPX CORP	RPXC	201103	$0.16	$999.00	N/A	20110525	AMC	$28.35
SEMTECH CORP	SMTC	201104	$0.34	$0.22	23.53	20110525	AMC	$28.25
SIGMA DESIGNS	SIGM	201104	$0.08	$0.19	-4.35	20110525	AMC	$11.84
SUNTECH PWR HLD	STP	201103	$0.35	$0.11	6.67	20110525	BTO	$7.90
SYCAMORE NTWKS	SCMR	201104	($0.16)	($0.11)	29.41	20110525	BTO	$22.87
SYNOVIS LIF TEC	SYNO	201104	$0.14	$0.11	40	20110525	BTO	$19.12
TOLL BROTHERS	TOL	201104	($0.05)	($0.24)	-25	20110525	BTO	$20.61
UROPLASTY INC	UPI	201103	($0.08)	($0.04)	0	20110525	AMC	$7.51
VALENCE TECH	VLNC	201103	($0.01)	($0.04)	50	20110525	AMC	$1.18
ZALE CORP NEW	ZLC	201104	($0.49)	($0.76)	-40.32	20110525	BTO	$3.53
AMERICAS CAR-MT	CRMT	201104	$0.68	$0.62	-3.51	20110526	AMC	$24.58
ANGEION CORP	ANGN	201104	$0.04	($0.13)	-66.67	20110526	AMC	$4.62
BLUE COAT SYS	BCSI	201104	$0.25	$0.30	-3.33	20110526	AMC	$24.38
CDN IMPL BK	CM	201104	$1.84	$1.55	14.53	20110526	BTO	$87.11
CROSSROADS SYS	CRDS	201104	($0.02)	($0.01)	N/A	20110526	AMC	$1.20
DELIAS INC	DLIA	201104	($0.15)	($0.15)	133.33	20110526	BTO	$1.85
FREDS INC	FRED	201104	$0.24	$0.21	4.76	20110526	BTO	$13.89
HEINZ (HJ) CO	HNZ	201104	$0.72	$0.60	3.7	20110526		$53.85
HHGREGG INC	HGG	201103	$0.29	$0.25	1.54	20110526	BTO	$13.00
ITERIS INC	ITI	201103	$0.02	$0.02	50	20110526	AMC	$1.35
MAGMA DESIGN	LAVA	201104	$0.08	($0.01)	-57.14	20110526	AMC	$6.46
MARVELL TECH GP	MRVL	201104	$0.26	$0.34	-2.7	20110526		$14.43
OMNIVISION TECH	OVTI	201104	$0.56	$0.07	50	20110526	AMC	$34.77
PATTERSON COS	PDCO	201104	$0.51	$0.52	-2.08	20110526	BTO	$36.80
PNI DIGITAL MED	PNDMF	201103	$0.00	$0.00	-50	20110526	AMC	$1.35
QAD INC	QADB	201104	$0.14	($0.40)	-66.67	20110526		$10.17
RBC BEARINGS	ROLL	201103	$0.43	$0.37	-9.76	20110526	BTO	$37.75
RUE21 INC	RUE	201104	$0.29	$0.26	4.76	20110526	AMC	$30.62
SENECA FOODS-A	SENEA	201103	$0.07	$0.40	176.47	20110526	AMC	$26.71
SIGNET GRP PLC	SIG	201104	$0.73	$0.60	0.65	20110526	BTO	$42.84
SONY CORP ADR	SNE	201103	($0.57)	($0.61)	400	20110526		$27.22
TIFFANY & CO	TIF	201104	$0.56	$0.48	3.6	20110526		$70.26
TORONTO DOM BNK	TD	201104	$1.61	$1.33	18.54	20110526		$86.67
GRAHAM CORP	GHM	201103	$0.19	$0.06	100	20110527	BTO	$22.11
MENTOR GRAPHICS	MENT	201104	$0.14	($0.09)	26.47	20110527	BTO	$14.73
ROYAL BANK CDA	RY	201104	$1.16	$0.88	25.74	20110527	BTO	$61.87
SEADRILL LTD	SDRL	201103	$0.67	$0.49	-14.29	20110527	BTO	$34.93

 
APPLD MATLS INC (AMAT): Free Stock Analysis Report
 
AUTOZONE INC (AZO): Free Stock Analysis Report
 
COSTCO WHOLE CP (COST): Free Stock Analysis Report
 
HEINZ (HJ) CO (HNZ): Free Stock Analysis Report
 
MEDTRONIC (MDT): Free Stock Analysis Report
 
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