Earnings Preview: Five Companies That Could Suprise

First-quarter earnings season is off to a good start from the standpoint of earnings surprises. Among the 249 companies within the S&P 1500 (S&P 500, S&P Midcap 400 and S&P Smallcap 600) to have reported as of last Thursday evening, 151 have exceeded expectations and 64 have missed estimates.

The rest have matched forecasts. This equates to a surprise ratio of 2.4, which is better than the 1.88 ratio we saw about the same time during fourth-quarter earnings season.

Growth rates, however, have been notably slower. Average growth, excluding outliers, has been running at 4.3% versus 14.1% in the fourth-quarter. Banking and semiconductor companies have been a drag on the average growth rate. Investors should keep in mind that less than a quarter of companies have reported, so both the surprise and growth numbers are not fully representative of all industries. The expectation is that the average growth rate will rise as more reports come in.

Nearly 850 companies are confirmed to report during the week of Apr 23 - 27, 174 of which are members of the S&P 500. Dow components 3M (MMM), Boeing (BA), Du Pont (DD), Exxon Mobil (XOM) and Microsoft (MSFT) are on deck.

The economic calendar only has a few reports. March existing home sales and the Conference Board's April consumer confidence index will be released on Tuesday. Wednesday features March durable goods orders and new home sales data. Thursday features the weekly initial jobless claims report. Nothing is scheduled for Friday.

Companies That Could Issue Positive Earnings Surprises During the Week of Apr 23 - 27
Black & Decker (BDK) raised its guidance last Monday. Crediting "better-than-expected sales and operating margin," the company expects to report profits of about $1.60 per share. BDK had previously forecast earnings to be in a range of $1.25 to $1.30 per share. Six brokerage analysts adjusted their projections in response, causing the consensus to rise to $1.60 per share. BDK could still surprise, if past trends hold. The company has topped estimates during three out of the past four quarters. Black & Decker is scheduled to report on Wednesday, Apr 25, before the start of trading.

Silicon Motion Technology (SIMO) raised its sales guidance in late-March, crediting what it described as "unexpected strength". The company is benefiting from use of its controllers by Samsung, demand in China for SD and micro SD controllers and a broader product offering. All four covering brokerage analysts raised their forecasts in response, pushing the consensus earnings estimate up three cents to 30 cents per share.

Tractor Supply (TSCO) recently raised its first-quarter guidance. Demand for winter-related merchandise received a boost from cold weather and helped lead to same-store sales growth of 8.5%. As a result, the company expects that quarterly profits will be in a range of 10 to 12 cents per share. All of the covering brokerage analysts took notice and pushed the consensus estimate up 10 cents to 11 cents per share. TSCO exceeded estimates by a penny last quarter. Tractor Supply is scheduled to report on Wednesday, Apr 25, after the close of trading.

Refining company Valero Energy (VLO) could give investors a chance to make back some of the money they have been spending on gasoline. Nearly half of the covering brokerage analysts have raised their profit predictions within the past 30 days, causing the consensus estimate to jump by 18 cents to $1.72 per share. The Most Recent Consensus is even more bullish at $1.83 per share. VLO has exceeded expectations during each of the past three quarters by an average margin of 13.7 cents per share. Valero Energy is scheduled to report on Thursday, Apr 26.

Companies That Could Issue Negative Earnings Surprises During the Week of Apr 23 - 27
Goodyear (GT) missed fourth-quarter expectations by three cents per share. It was the second miss in four quarters for the tire company. Ahead of GT's first-quarter report, brokerage analysts have been lowering their profit projections. The current consensus forecast, which calls for a loss of two cents per share, is six cents below the forecast of a month ago and 25 cents below the forecast of two months ago. The Most Recent Consensus is even more bearish; it calls for a loss of 30 cents per share. Goodyear is scheduled to report on Friday, Apr 27, before the start of trading