CPB Campbell Soup Co

Earnings Preview 11/18/11

There will only be a handful of firms reporting next week as the third quarter reporting season is almost over. A total of 70 firms are scheduled to report, including 8 of the S&P 500.

The firms reporting next week include: Analog Devices (ADI), Campbell Soup (CPB), Deere (DE), Hewlett-Packard (HPQ), Medtronic (MDT) and Tyson Foods (TSN).

It will be effectively a short week, so all the data is jammed into the first three days. There is enough to keep the markets busy until everyone stops for turkey and football on Thursday.

The key reports start with existing home sales. On Tuesday we get the second look at GDP growth in the third quarter. We will also get the Fed minutes for the November 2 meeting. Things get very busy on Wednesday as initial claims get pushed forward a day and we get data on Personal Income and Spending, as well as new orders for Durable Goods.

While the market will be open on Friday, there will be little buying and selling going on at the corner of Broad and Wall -- the focus will be on all the buying in the malls with Black Friday. Europe does not share this holiday, so we will probably get more drama from that side of the pond as well.

Monday

• In September, existing home sales ran at a 4.91 million annual pace, down 3.0% from August. In October they are expected to slip slightly further to a 4.85 million rate. Of at least equal concern is the level of inventories available for sale relative to the sales pace. In September there were 8.5 months of supply on the market, well above the normal level of about 6 months. That suggests continued 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 mortgages, and thus vulnerable to foreclosure.

Tuesday

• In the first look at GDP it was estimated that the economy grew at a 2.5% pace, 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 1.08% drag from the change in inventories. The overall growth rate is not expected to change, however the quality of the growth probably improved even further, with a higher contribution from net exports and consumer spending, but a bigger drag from inventory investment.
• The Fed decided to do nothing at its 11/2/11 meeting. That satisfied the three members who had objected in the previous two meetings but spurred a new dissent from Charles Evans of Chicago. The minutes to the meeting should provide clues as to why the Fed decided to sit on its hands in the face of 9.0% unemployment when it has a legal mandate to keep unemployment low.

Wednesday

• Weekly Initial Claims for Unemployment Insurance come out a day early. Recently they broke below the psychologically important 400,000 level. Last week they fell by 5,000 to 388,000, but only after the previous week had been revised upward by 3,000, so it was really more like a 2,000 decline. The consensus is looking for 391,000. 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. Keep an eye on the prior week’s revision as well, as the change from the revised number.
• Continuing Jobless Claims have been in a downtrend of late, but the road down has been bumpy. Last week they fell by 57,000 to 3.608 million. That is down 662,000 from a year ago. I would expect a small decline this week. The consensus is looking for a bounce to 3.620 million, a small increase. Federally paid extended claims fell by 70,000 to 3.459 million last week and are down 1.468 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 6.773 million -- which is down 62,000 from last week (there are some timing issues, so the change in continuing and existing claims does not match the change in the total). The total number of people getting benefits is now 2.076 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.
• New Orders for Durable Goods are expected to fall 1.0% in October after falling 0.6% in September. 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 unchanged after being up 1.8% in September. Given the tone of the other data. I will take the over on both headline and ex-transportation.
• Personal Income is expected to rise 0.3% from September, after it rose just 0.1% 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 0.6% in September. Of course, if spending rises by more than income, the savings rate will fall. In September, the savings rate fell to just 3.6% from an already low 4.1% in August. Over the long term, the economy needs a higher savings rate. Short-term, though, a falling savings rate tends to boost the economy.
• The deadline for the “Super Committee” to come up with at least $1.2 Trillion in deficit reduction is hit. I expect total failure and deadlock. That means that we will get $1.2 Trillion in spending cuts in a meat-cleaver fashion starting in 2013. Those cuts fall roughly equally on Defense and non-defense discretionary spending. While there is plenty of fat to cut, doing so in this way could have adverse National Security implications. Nor are meat-cleaver cuts to non-defense discretionary spending wise, particularly when the economy is still soft. However, those are what we will probably get. Look for Congress to spend much of 2012 figuring out how to defuse the “trigger." Given the wide philosophical differences in Washington these days, I also suspect that the efforts to defuse the trigger will fail. The efforts will raise the political heat level.
• The University of Michigan Consumer Sentiment index for November is expected to match its initial read of 64.2. 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.

Thursday

• Everyone eats lots of turkey, stuffing, mashed potatoes, etc. then sits down and watches football and perhaps a parade. Happy Thanksgiving to all, and I hope you have a tasty turkey.

Friday

• The stock market will be open, but traditionally it is the lightest volume trading day of the year. Instead of buying and selling on Wall Street the focus will be on the buying at the malls on Black Friday, the traditional start of the Holiday shopping season.

Given the very small number of firms reporting next week, there are few good cadidates to make good predicitions of potential positive or negative surprises and thus I omit this section this week.

In the Earnings Calendar below, $999.00 should be read as N.A.

If you want to follow me on Twitter, I am @DirkHvanDijk

Company	Ticker	Qtr End	EPS Est	Year Ago EPS	Last EPS Surprise %	Next EPS Report Date	Time	Daily Price
ANALOG DEVICES	ADI	201110	0.63	0.73	-2.74	20111121	AMC	$35.50
BROCADE COMM SY	BRCD	201110	0.06	0.08	0	20111121	AMC	$4.70
BROWN SHOE CO	BWS	201110	0.51	0.45	-200	20111121	AMC	$8.80
CHIMERA INVEST	CIM	201109	0.14	0.16	N/A	20111121	AMC	$2.68
CHINACACHE INTL	CCIH	201109	0.04	-0.69	-233.33	20111121	AMC	$5.10
CHINAEDU CP-ADR	CEDU	201109	0.08	0.11	100	20111121	AMC	$5.60
CNINSURE IN-ADR	CISG	201109	0.18	0.32	3.45	20111121	AMC	$7.45
COLLECTIVE BRND	PSS	201110	0.51	0.75	45.45	20111121	AMC	$13.53
DYCOM INDS	DY	201110	0.3	0.18	58.33	20111121	AMC	$20.14
GALAXY GAMING	GLXZ	201109	0	999	N/A	20111121		$0.21
GLOBUS MARITIME	GLBS	201109	0.15	999	166.67	20111121	BTO	$4.14
GOLAR LNG PARTN	GMLP	201109	0.4	999	2.63	20111121	AMC	$27.85
HASTING ENTMT	HAST	201110	-0.56	-0.35	-1466.67	20111121	BTO	$1.90
HEWLETT PACKARD	HPQ	201110	1.13	1.33	0	20111121	AMC	$27.29
JACK IN THE BOX	JACK	201109	0.41	0.4	-5	20111121	AMC	$20.29
JINKOSOLAR HLDG	JKS	201109	0.44	1.75	30.94	20111121	AMC	$6.19
MOBILE TELE-ADR	MBT	201109	0.29	0.5	-18.18	20111121		$13.85
NORTHWEST PIPE	NWPX	201109	0.44	0.07	147.83	20111121	AMC	$23.47
PAC SUNWEAR CAL	PSUN	201110	-0.14	-0.07	25	20111121	AMC	$1.29
PERFECT WORLD	PWRD	201109	0.63	0.6	61.4	20111121	AMC	$12.30
PHOENIX NEW MED	FENG	201109	0.05	999	-2350	20111121	AMC	$5.34
SHANGPHARMA-ADR	SHP	201109	0.18	0.22	-14.29	20111121	BTO	$8.25
SHIP FIN INTL	SFL	201109	0.4	0.46	4.44	20111121		$14.45
TECH DATA CORP	TECD	201110	1.27	1.07	15.79	20111121	BTO	$48.66
TRINA SOLAR LTD	TSL	201109	0.06	1.08	-63.04	20111121	AMC	$6.54
TYSON FOODS A	TSN	201109	0.31	0.64	15	20111121	BTO	$19.34
VALSPAR CORP	VAL	201110	0.7	0.56	0	20111121		$34.61
ZALE CORP NEW	ZLC	201110	-1.42	-1.59	8.93	20111121	AMC	$3.47
AMER WOODMARK	AMWD	201110	-0.22	-0.52	-11.76	20111122	BTO	$12.93
CAMPBELL SOUP	CPB	201110	0.8	0.82	16.22	20111122	BTO	$33.41
CANADIAN SOLAR	CSIQ	201109	-0.51	0.47	-17.24	20111122	BTO	$2.29
CHICOS FAS INC	CHS	201110	0.2	0.16	4.17	20111122	BTO	$11.56
CHINA DIG TV	STV	201109	0.18	0.17	26.67	20111122	AMC	$3.69
CHINA RE IN-ADR	CRIC	201109	0.1	0.07	-14.29	20111122	BTO	$5.11
CHINA XINIYA FS	XNY	201109	0.21	999	25	20111122	BTO	$1.58
CITI TRENDS INC	CTRN	201110	-0.37	-0.03	3.13	20111122	BTO	$10.41
CRACKER BARREL	CBRL	201110	0.97	1.01	10	20111122	BTO	$45.37
DAKTRONICS INC	DAKT	201110	0.13	0.17	-27.27	20111122	BTO	$9.79
DELIAS INC	DLIA	201110	-0.1	-0.07	-7.69	20111122	BTO	$1.37
DIANA CONTAINER	DCIX	201109	0.12	-0.01	-200	20111122	BTO	$4.83
DSW INC CL-A	DSW	201110	0.8	0.79	25.81	20111122	BTO	$44.71
EATON VANCE	EV	201110	0.43	0.41	4	20111122	BTO	$23.54
E-HOUSE CHINA	EJ	201109	0.04	0.1	-25	20111122	BTO	$6.81
FREDS INC	FRED	201110	0.22	0.2	-7.14	20111122	BTO	$12.32
GENESCO INC	GCO	201110	0.95	0.77	120	20111122	BTO	$57.78
GUESS INC	GES	201110	0.74	0.75	3.7	20111122	AMC	$27.95
HANWHA SOLARONE	HSOL	201109	-0.05	0.69	-192.31	20111122	BTO	$1.35
HORMEL FOODS CP	HRL	201110	0.42	0.45	2.86	20111122	BTO	$29.28
JA SOLAR HOLDGS	JASO	201109	-0.02	0.5	-633.33	20111122	BTO	$1.63
LA-Z-BOY INC	LZB	201110	0.14	0.07	-33.33	20111122	AMC	$10.17
LDK SOLAR CO	LDK	201109	-0.36	0.72	-20	20111122	BTO	$3.01
LE GAGA HLD-ADR	GAGA	201109	0.11	13.91	-7.69	20111122	BTO	$4.39
LTX-CREDENCE CP	LTXC	201110	-0.07	0.43	-3.57	20111122	BTO	$6.03
MEDTRONIC	MDT	201110	0.82	0.82	0	20111122	BTO	$33.86
NUANCE COMM INC	NUAN	201109	0.3	0.24	4.35	20111122	AMC	$24.61
PANDORA MEDIA	P	201110	0	999	0	20111122	AMC	$12.26
PATTERSON COS	PDCO	201110	0.47	0.45	-6.67	20111122	BTO	$29.39
QAD INC	QADB	201110	0.13	0.5	137.5	20111122	AMC	$12.09
RAVEN INDS INC	RAVN	201110	0.63	0.63	33.33	20111122	BTO	$61.28
SIGNET GRP PLC	SIG	201110	0.2	0.07	28.81	20111122	BTO	$43.33
SOC QUIMICA MIN	SQM	201109	0.56	0.36	4.17	20111122	AMC	$56.09
SUNTECH PWR HLD	STP	201109	-0.21	0.18	-218.75	20111122	BTO	$2.40
TIVO INC	TIVO	201110	-0.23	-0.18	15	20111122	AMC	$10.12
DEERE & CO	DE	201110	1.44	1.07	0.6	20111123	BTO	$75.02
DIANA SHIPPING	DSX	201109	0.31	0.42	-2.86	20111123	BTO	$7.94
HILLENBRAND INC	HI	201109	0.37	0.4	-2.56	20111123	AMC	$21.00
NJ RESOURCES	NJR	201109	0.04	-0.03	4.55	20111123	BTO	$47.27
PARTNER COMM	PTNR	201109	0.44	0.54	-35.59	20111123	BTO	$10.07
RENESOLA LT-ADR	SOL	201109	-0.16	0.7	-66.67	20111123	BTO	$1.77
YINGLI GREEN EN	YGE	201109	0.03	0.49	13.79	20111123	BTO	$3.42

 
ANALOG DEVICES (ADI): Free Stock Analysis Report
 
CAMPBELL SOUP (CPB): Free Stock Analysis Report
 
DEERE & CO (DE): Free Stock Analysis Report
 
HEWLETT PACKARD (HPQ): Free Stock Analysis Report
 
MEDTRONIC (MDT): Free Stock Analysis Report
 
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