Earnings Preview: Three Companies That Could Surprise This Week

Includes: AA, AGE, KMX, LEN, RHT, TIF
by: Zacks Investment Research

Just 56 companies are confirmed to be report earnings. Seven of these are in the S&P 500.

While we hope Tiffany & Co. (NYSE:TIF) gives its shareholders a little blue box, the only company likely to have any influence on market direction is homebuilder Lennar (NYSE:LEN). Even then, it's hard to imagine what the company could say that would sway current attitudes about the housing market.

First-quarter earnings season will not "officially" start until Apr 10, when Alcoa (NYSE:AA) is scheduled to report. Nonetheless, 41 companies in the Zacks Rank universe1 have reported first-quarter results. Positive surprises are leading negative surprises by a margin of about 2:1 and earnings growth is running at 9.8%. A decent start, but given the small size of the group, investors should refrain from drawing any conclusions.

Economic data next week will feature consumer confidence (Conference Board on Tuesday and University of Michigan on Friday), durable goods orders (Wednesday), final fourth-quarter GDP (Thursday), personal income and spending (Friday) and Chicago PMI (Friday).

Sorry baseball fans, but opening day is still nine days away.

So what will move the markets this week? Look for daily news (e.g. mergers) and sentiment to move stocks prices. The tail end of the quarter may bring some earnings preannouncements, but the number of earnings estimate revisions has been dropping significantly over the past several weeks.

Companies That Could Issue Positive Earnings Surprises During the Week of Mar 26 - 30

A.G. Edwards (AGE) has given shareholders a positive earnings surprise during three out of the past four quarters. Most recently, the brokerage firm's fiscal third-quarter earnings were 12 cents above forecasts. Heading into AGE's fiscal fourth-quarter report, analysts are raising their projections. Over the past 30 days, the consensus estimate has been revised upwards by two cents to $1.04 per share. The Most Recent Consensus is more bullish at $1.06 per share. A.G. Edwards is scheduled to report on Thursday, Mar 29, before the start of trading.

CarMax (NYSE:KMX), which recently completed a 2-1 stock split, has topped analysts expectations by an average margin of 10 cents per share over the past four quarters. Ahead of the car dealer's fiscal fourth-quarter report, one analyst raised his forecast. The revision pushed the consensus estimate up by a penny to 41 cents per share. The Most Recent Consensus is more bullish at 42 cents per share. CarMax is scheduled to report on Thursday, Mar 29, before the start of trading.

Three analysts have raised their fiscal fourth-quarter profit forecasts on Red Hat (NYSE:RHT) within the past 30 days, causing the consensus estimate to rise to eight cents per share (a one-cent increase). The open source software provider topped third-quarter expectations by a penny after matching estimates the past two quarters. The one caveat that investors should note, however, is that two analysts have lowered their forecasts within the past 30 days - so the signal for a positive surprise is not as strong as I prefer. Red Hat is scheduled to report on Thursday, Mar 29, after the close of trading.

This week's Earnings Preview was provided by Charles Rotblut, CFA, Senior Market Analyst for Zacks.com.