Earnings Preview: Four Companies That Could Surprise

The final full trading week of the year could be a bit volatile with earnings from three investment banks and quadruple witching.

More than 60 companies are scheduled to report next week, including 18 members of the S&P 500. Brokerage earnings will be front and center with Bear Stearns (BSC), Goldman Sachs (GS) and Morgan Stanley (MS) confirmed to report. Other companies of note on deck include Adobe (ADBE), Best Buy (BBY), Discover Financial Services (DFS), Micron Technology (MU) and Oracle (ORCL).

Quadruple witching will occur on Friday, Dec 21. Quadruple witching is the expiration of stock options, index options, index futures and single stock futures. The simultaneous expiration of these contracts can lead to increased volatility.

Economic data should not have material impact on the direction of trading.

• Monday - December NAHB Housing Market Index, December New York Fed manufacturing index, third-quarter current account balance
• Tuesday - November housing starts
• Wednesday - No economic reports will be released
• Thursday - December Philadelphia Fed survey, November Leading Indicators, final third-quarter GDP
• Friday - November personal income and spending, final December University of Michigan consumer confidence survey

A quick note about Christmas. The U.S. equity markets will close at 1 p.m. on Dec 24. Trading will resume on Dec 26. I will include a reminder about this in next week's Earnings Preview.

Companies That Could Issue Positive Earnings Surprises during the Week of Dec 17 - 21

ConAgra Foods (CAG) preannounced that fiscal second-quarter earnings will be "higher than planned". Good performance in the company's Trading and Merchandising and Food and Ingredients divisions have resulted in earnings that are better than a year prior. CAG had previously called for profits to be basically unchanged.

Slightly less than half of the covering brokerage analysts adjusted their forecasts following the preannouncement. The revisions pushed the fiscal second-quarter consensus earnings estimate up a penny to 42 cents per share. The most accurate consensus is more bullish at 43 cents per share. CAG has topped expectations during each of the past four quarters by an average margin of five cents per share. ConAgra Foods is scheduled to report on Thursday, Dec 20, before the start of trading.

Bucking economic trends, Herman Miller (MLHR) recently raised its fiscal second-quarter guidance. Order rates have strengthened enough for the company to predict that sales will be "near or slightly above" the upper end of its previous guidance between $475 million and $500 million. Based on this projection, the company now anticipates per share earnings of 56 to 63 cents. All three of the covering brokerage analysts revised their forecasts in response, pushing the consensus estimate four cents higher to 59 cents per share. MLHR has topped expectations for two consecutive quarters. Herman Miller is scheduled to report on Wednesday, Dec 19, after the close of trading.

Companies That Could Issue Negative Earnings Surprises during the Week of Dec 17 - 21

All of the covering brokerage analysts have lowered their fiscal fourth-quarter projections on Bear Stearns (BSC) within the past month. (Four of the analysts cut their projections last week.) The current consensus estimate calls for a loss of $1.49 per share and is $4.22 below the average forecast of 30 days ago. The investment banking firm announced last month that it would write down $1.2 billion in mortgage related losses. Bear Stearns is scheduled to report on Thursday, Dec 20, before the start of trading.

Two analysts have cut their fiscal first-quarter estimates on Micron Technology (MU) within the last 30 days. The revisions caused the average projected loss to worsen by two cents to 14 cents per share. The most accurate consensus is even more bearish at a loss of 16 cents per share. Micron has missed expectations twice during the past four quarters.

Written By Charles Rotblut

Comments

[User 131963]

MLHR blows away estimate and looks positive again forward