Earnings Preview: Four Companies That Could Surprise

Includes: DE, ICFI, MNT, WMT
by: Zacks Investment Research

Retail sales numbers for April were not very good. The Department of Commerce said sales fell by 0.2% last month, with clothing and department store sales down 2% and 2.1%, respectively. This data followed an average 2.3% drop in April same-store sales reported by 51 stores tracked by the International Council of Shopping Centers.

The data is noteworthy because first-quarter earnings season for the retailers heats up next week with 14 chains on tap - including Dow components Home Depot (NYSE:HD) and Wal-Mart (NYSE:WMT). Other notables include Kohls (NYSE:KSS), J.C. Penny (NYSE:JCP) and Nordstrom (NYSE:JWN). The subpar April performance is being blamed on the timing of Easter and cooler April temperatures, but guidance will be watched for any signs of weakness in consumer spending. Given a relative lack of other catalysts, what the retailers say in their conference calls could impact market direction. (As of Friday morning, we have not seen changes to full-year earnings estimates in reaction to the April sales numbers.)

Outside of the retailers, there is not much on the earnings calendar. Just 104 non-retail companies are confirmed to report including Dow component Hewlett-Packard (NYSE:HPQ) on Wednesday. Other notables are Applied Materials (NASDAQ:AMAT) and Deere & Co (NYSE:DE).

The first economic reports of the week come out on Tuesday with April CPI and the May New York Fed survey being released. April housing starts, industrial production and industrial capacity utilization are due out on Wednesday. Thursday features the weekly initial jobless claims report and the May Philadelphia Fed survey. The week ends with the preliminary University of Michigan consumer confidence index being published on Friday.

Friday, May 18, is also expiration for May option contracts.

Companies That Could Issue Positive Earnings Surprises During the Week of May 14 - 18

One-fifth of the covering brokerage analysts have raised their forecasts on Deere (DE) within the past 30 days. These revisions have pushed the consensus earnings forecast for the fiscal second quarter up by a penny to $2.41 per share. The Most Recent Consensus is more bullish at $2.43 per share. DE exceeded expectations during the past two quarters by an average margin of 23.5 cents and full-year earnings estimates have been rising. Credit the strength in the agriculture sector plus sustained worldwide economic growth for the favorable sentiment towards the company's prospects. Deere is scheduled to report on May 16.

The first-quarter consensus estimate for ICF International (NASDAQ:ICFI) has risen by 10 cents over the past 30 days to 44 cents per share. One of the three covering brokerage analysts materially raised his forecast on the consulting company in late-April. The Most Recent Consensus is more bullish at 45 cents per share. ICF International is scheduled to report on Monday, May 14, after the close of trading.

Companies That Could Issue Negative Earnings Surprises During the Week of May 14 - 18

Mentor Corporation (MNT) warned in late April that slower sales in its breast aesthetics business would cause its fiscal 2007 revenues to be below its previous forecast of $305 to $315 million. The company now anticipates reporting revenues within a range of $300 to $302 million. About half of the covering brokerage analysts cut their forecasts for fiscal fourth-quarter profits, causing the consensus estimate to drop by two cents to 33 cents per share. The Most Recent Consensus is more bearish at 32 cents per share. MNT does have a history of surprising to the upside, however, so there is a possibility of analysts being overly cautious with their estimates. Mentor is scheduled to report on Wednesday, May 16.

Wal-Mart (WMT) reported a 3.5% drop in April same-store sales, led by a 4.6% decline in the company's namesake chain. Notably, five brokerage analysts had cut their first-quarter forecasts prior to the release of the April numbers. The consensus earnings estimate, and the Most Recent Consensus, of 68 cents per share is a penny below the forecast of a month ago. WMT has missed expectations once in the past three quarters. Wal-Mart is scheduled to report on Tuesday, May 15, before the start of trading.