Earnings Preview: 5 Companies that Could Surprise

Investors will be inundated with earnings reports this week. More than 800 companies are scheduled to release third-quarter reports. Within this group are 149 S&P 500 members, including Dow components Chevron (CVX), Exxon Mobil (XOM), Procter & Gamble (PG) and Verizon (VZ).

We'll get our first look at how well the economy fared in the third quarter with the advance GDP report. Economists are expecting a return to growth with a 3.1% expansion. Any number below 3% could cause a negative reaction in the equity markets.

• Tuesday: September Durable Goods Orders, October Conference Board Consumer Confidence, August Case-Shiller housing price index
• Wednesday: September new home sales, weekly crude inventories, weekly mortgage applications
• Thursday: Advance Q3 GDP, weekly initial jobless claims, weekly natural gas inventories
• Friday: September personal income and spending, revised October University of Michigan consumer confidence, October Chicago PMI

No Fed officials are scheduled to speak. The Federal Open Market Committee (FOMC) will hold a 2-day meeting starting on Nov 3. The Treasury Department will sell $121 billion in new debt this week. The auctions will include 5-year TIPS (Monday), 2-year notes (Tuesday), 5-year notes (Wednesday) and 7-year notes (Thursday). Demand has been strong, despite the influx of new debt.

Although third-quarter earnings have been running above expectations, the major indexes have stayed in a relatively narrow range ever since the Dow broke above 10,000. The blue-chip average has found resistance at about 10,160. This sideways action is not surprising given that the rally has lasted for more than 7 months. The only concern is the recent trend of volume being higher on down days than up days. Nonetheless, the bull continues to breathe and a further move upward is still possible.

Companies That Could Issue Positive Earnings Surprises

Jones Apparel Group (JNY) has topped expectations for 5 consecutive quarters. Four of the covering analysts have recently raised their third-quarter profit projections this month, including 2 within the past 7 days. The revisions have pushed the Zacks Consensus Estimate 2 cents higher to 27 cents per share. Jones Apparel Group is scheduled to report on Wednesday, Oct 28, before the start of trading.

Recent positive revisions by 5 analysts, including 3 within the past week, have raised the third-quarter Zacks Consensus Estimate on McKesson Corporation (MCK). The average forecast now calls for profits of $1.01 per share, versus 99 cents a week ago. MCK has issued positive earnings surprises for 6 consecutive quarters. McKesson is scheduled to report on Tuesday, Oct 27, after the close of trading.

Owens Corning (OC) has issued positive earnings surprises for 3 out of the last 4 quarters. Judging by the recent trend in estimate revisions, analysts believe the company could surprise again. The third-quarter Zacks Consensus Estimate of 40 cents per share is 7 cents higher than the average forecast of a month ago, reflecting revisions by 3 analysts. The most accurate estimate is more bullish at 42 cents per share. Owens Corning is scheduled to report on Wednesday, Oct 28, before the start of trading.

The third-quarter Zacks Consensus Estimate for Penske Automotive Group (PAG) rose this week to 27 cents per share. Two analysts boosted their forecasts, a sign of optimism about the forthcoming report. The most accurate estimate is even more bullish at 29 cents per share. PAG has topped expectations for 2 consecutive quarters by an average margin of 7.5 cents per share. Penske Automotive Group is scheduled to report on Friday, Oct 30, before the start of trading.

Companies That Could Issue Negative Earnings Surprises

Sprint Nextel (S) has issued 2 negative earnings surprises in the past 4 quarters. The wireless telecom provider's second-quarter results were 11 cents below expectations. Ahead of the company's third-quarter report, 11 analysts have lowered their projections. The revisions have worsened the Zacks Consensus Estimate by 5 cents to a loss of 15 cents per share. Sprint Nextel is scheduled to report on Thursday, Oct 29, before the start of trading