Earnings Preview: Four Companies That Could Surprise

Earnings season has officially kicked off, with Aloca (AA) posting first-quarter earnings per share of 79 cents. The result beat analysts’ expectations by two cents. Saying that this week will be a busy one, when it comes to earnings reports, is a definite understatement. 253 companies are scheduled to report.

Looking at the full expectations for the quarter, a substantial slowdown in year-over-year earnings growth is expected in the first quarter, almost across the board. The median firm in the S&P 500 is expected to post earnings that are just 7.1% higher than a year ago, well below the 12.7% growth posted in the fourth quarter.

This week's calendar of economic events is a little on the heavy side as well. On Monday, March retail sales will be released. They rose 0.1% in February. Tuesday brings March CPI (February CPI jumped 0.4%) and last month’s housing starts. Starts of new homes jumped to an annual rate of 1.53 million last month from the revised 1.40 million pace in January, the lowest in nine years. Industrial production/capacity utilization data is also on the Tuesday docket. There are no economic indicators scheduled for either Wednesday or Friday.

Companies That Could Surprise During the Week of Apr 16 to Apr 20
When it comes to topping the consensus earnings estimate, Piper Jaffray Companies (PJC) usually comes through in a big way. PJC beat the Street’s estimate in seven consecutive quarters by an average margin of 39.6%. In six out of the seven quarters, the company managed to surprise to the upside by a double-digit percentage. Analysts are calling for first-quarter profits of 78 cents per share. This marks a five-cent jump over the past 30 days and a three-cent improvement over the past week. Upward revisions were submitted by two of the four covering analysts over the past month. One analyst upped his estimate in the past seven days. PJC recently announced that it will purchase Fiduciary Asset Management LLC for $66 million in cash in a move to enter the asset management business. PJC is scheduled to report its first-quarter results on Wednesday, Apr 18.

As the airline industry heads into the strong spring season, many carriers will begin to reap the rewards associated with cost cutting measures they have been undertaking. Consensus earnings estimates have shot upward for Continental Airlines, Inc. (CAL). Profit forecasts for this quarter currently sit at eight cents per share. This marks a 12-cent improvement when compared to the consensus of 60 days prior. Last week, estimates rose by two cents. Seven of the 11 covering analysts boosted their estimates over the past 30 days.

CAL exceeded analysts’ earnings expectations over the past four quarters by an average margin of 26.7%. In its most recent quarter, the Street was calling for a loss of 15 cents per share. CAL wound up losing four cents, equating to an impressive 73.3% positive earnings surprise. The company recently reported that its March traffic climbed 3.4% on stronger trans-Atlantic travel. CAL is scheduled to report its first-quarter results on Thursday, Apr 19.

Over the past 16 quarters, Merrill Lynch & Co., Inc. (MER) missed analysts’ earnings expectations on only one occasion. In 10 out of the 15 quarters that the company surprised to the upside, it managed to do so by a double-digit percentage. In the fourth quarter of 2005, MER crushed the Street’s estimate of $1.89 by 27.5% when it reported profits of $2.41 per share. The result also represented a 59.6% year-over-year improvement for the financial powerhouse. Over the past 30 days, five analysts boosted their first-quarter profit forecasts, causing the consensus estimate to rise by eight cents to $1.96. MER is scheduled to report its first-quarter results on Apr 19.

Analysts have been growing increasingly pessimistic on Motorola, Inc. (MOT). The company is projected to report first-quarter profits of only a penny per share. The consensus estimate of 30 days prior called for earnings per share of 18 cents. Going back 90 days, the consensus sat at 27 cents. Over the past month, 21 of the 25 covering analysts revised their estimates downward. On Mar 21, MOT lowered its first-quarter revenue guidance. Moreover, for the full year of 2007 the company expects overall sales, profitability and operating cash flow to be substantially below prior guidance. MOT missed analysts’ earnings expectations for the past two quarters. This Zacks #4 Rank stock (sell) will report its first-quarter financial results on Apr 18.