5 Earnings Previews For Value Investors

Includes: AEO, BIG, GES, MDT, SIGM
by: Vince Martin

Earnings season has pretty much come to an end, but there are still a few companies reporting earnings this week. Below are 5 companies reporting earnings this week that I follow through my value investing screens. Value investors may want to check back on the stocks this week to see if there is any news -- good or bad -- to consider these stocks as investments or remove them from their watchlists.

Medtronic (NYSE:MDT): The stock has bounced off a 52-week low of $30.05 reached last week to close Friday at $31.29. Medtronic reports before the bell on Tuesday, with analysts expecting 79 cents per share on $4 billion in revenue.

MDT's recent slide has pushed its yield above 3%, and its trailing P/E below 11. The medical appliance maker has been buffeted by uncertainty in the US health care sector, yet has grown revenues and earnings strongly over the past three fiscal years. With the stock nearly 30% off its near-term highs set in May, a strong earnings report could start a short-term rally.

American Eagle Outfitters (NYSE:AEO): The retailer reports Wednesday morning before the bell; analysts are seeking 11 cents in earnings on $650MM in revenue, according to Yahoo! Finance. The company offered guidance of 10 to 13 cents in its first quarter earnings press release.

AEO's recent slide has pushed its yield above 4 percent; with more than $3/share in net cash and an acceptable, if unspectacular forward payout ratio of 48%, its dividend seems safe. The company trades at a forward EV/E of 8.4, and recent fears about input costs have been quieted by quickly retreating cotton prices. Those prices won't show up in Wednesday's results, but AEO looks like a strong choice for any investor betting on a near-term rebound in consumer spending and/or the broader economy.

Guess? Inc. (NYSE:GES): Guess reports Wednesday after the bell; analysts are expecting 81 cents per share on $656.4 million in revenue.

The stock could certainly use some good news, as it closed Friday at a 52-week low of $30.32. The near-term lows may present a buying opportunity. With nearly $3/share in cash net of liabilities, and company earnings guidance of $3.30-$3.50 for the year ending January 2012, GES has an enterprise value to earnings ratio just above 8. In addition, its dividend yield has reached 2.64%.

Sigma Designs (NASDAQ:SIGM): The maker of chips for set-top boxes and home entertainment devices reports Wednesday after the market close. I wrote earlier this month about the bull case for SIGM, and the strategy of using cash-secured puts as a hedged way to play the stock. Traders may look to the company post-earnings to make similar plays, exchanging smaller short-term premiums for avoiding the volatility caused by earnings reports. (The October 7.5 is currently bid at 40 cents; even with a drop post-earnings, it should provide 4 or 5 percent returns on a 1-month trade).

SIGM, despite the macro headwinds facing the semiconductor business, offers a good deal of value. Cash on hand is nearly 60% of market cap, and trailing 12-month cash flow was over 20% of enterprise value before a weak first quarter. Investors should look for signs of a rebound in this quarter's earnings report, or perhaps signs of danger -- such a repeat of negative operating cash flow -- that might push SIGM onto the back burner until it can rebound.

Big Lots (NYSE:BIG): The discount retailer reports Thursday before the market opens. Analysts are looking for 45 cents a share. Investors might also be interested to listen to the conference call to learn about the company's new international strategy, after its July takeover of Canada's Liquidation World gave the company its first presence outside the U.S.

BIG is trading just above year-to-date lows; with a trailing EV/E under 10, and analysts still expecting earnings growth moving forward, BIG may offer value at current levels just north of $30/share.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SIGM, AEO, GES over the next 72 hours.