Earnings Preview: 5 Companies That Could Surprise

by Charles Rotblut

Results from the bank stress tests are penciled for Thursday. The release date was pushed back after several banks objected to the initial findings. It's not just the results that will matter, but also how much validity the financial markets give them.

On the earnings front, about 850 companies are confirmed to report, including 86 members of the S&P 500. Dow components Kraft Foods (KFT) and Walt Disney (DIS) are on the schedule, as is Cisco Systems (CSCO).

April employment numbers will be published on Friday. Current estimates call for a loss of 620,000 jobs. This would be a small improvement from March, but inline with what we have seen over the past several months.

• Monday: March construction spending, March pending home sales
• Tuesday: April ISM services index
• Wednesday: ADP employment survey, weekly crude inventories
• Thursday: Preliminary Q1 productivity, March consumer credit, weekly initial jobless claims
• Friday: April nonfarm payrolls and unemployment, March wholesale inventories

Fed Chairman Ben Bernanke will testify before the Joint Economic Committee on Tuesday morning. On Thursday, he'll speak about banking supervision at a Chicago Fed Bank conference.

Richmond Fed President Jeffrey Lacker will give his economic outlook on Monday afternoon. San Francisco Fed Bank President Janet Yellen will speak about the financial crisis on Tuesday.

The rally is losing steam. Though overall April returns were fantastic, the month wasn't as it might seem. From the Apr 16 close to the Apr 30 close, the Dow gained a mere 43 points, or 0.5%.

There will probably be a high amount of volatility during the latter half of the week, with the release of the bank stress results and the employment numbers.

Companies That Could Issue Positive Earnings Surprises

Two weeks ago, Activision Blizzard (ATVI) said that revenues and earnings were "tracking ahead" of its prior outlook. The videogame maker had previously called for GAAP earnings of 8 cents per share, though no new guidance was given. The consensus estimate is a penny lower at 7 cents per share. The most accurate estimate is far more bullish at 11 cents per share. ATVI has a lengthy track record of topping expectations. Activision Blizzard is scheduled to report on Thursday, May 7, after the close of trading.

California Pizza Kitchen (CPKI) recently raised its first-quarter guidance. The restaurant chain expects earnings to total between 9 and 10 cents per share, versus its previous guidance for 3 to 5 cents. The covering brokerage analysts promptly changed their forecasts, sending the consensus estimate 5 cents higher to 10 cents per share. There still could be upside, however, as CPKI has topped expectations during 3 out of the last 4 quarters. California Pizza Kitchen is scheduled to report on Thursday, May 7, after the close of trading.

Earnings estimates for the gold miners have been rising and Goldcorp (GG) is no exception. During the past 30 days, 4 brokerage analysts have revised their first-quarter estimates higher. Though the changes did not move the consensus earnings estimate (it calls for profits of 12 cents per share), they did contribute to a bullish most accurate estimate of 15 cents per share.

This is a risky pick since GG, like other gold miners, has disappointed in the past. Nonetheless, the upward revisions are a reason to at least keep an eye on the stock. Goldcorp is scheduled to report on Thursday, May 7, before the start of trading.

Teva Pharmaceutical Industries Ltd. (TEVA) has delivered 8 consecutive positive earnings estimate surprises. Ahead of the company's first-quarter report, some analysts are anticipating another round of good results. The consensus earnings estimate has improved by 1-cent over the past 30 days to 68 cents per share. The most accurate estimate is more bullish at 70 cents per share. Teva Pharmaceutical is scheduled to report on Tuesday, May 5, before the start of trading.

Companies That Could Issue Negative Earnings Surprises

Walt Disney Company (DIS) has lost some of its magic. The company missed estimates during the past 2 quarters and first-quarter forecasts are falling. Cuts by 8 brokerage analysts have resulted in a 2-cent decline in the consensus earnings estimate to 41 cents per share. The most accurate estimate is even more bearish at 39 cents per share. Disney is scheduled to report on Tuesday, May 5, after the close of trading.