Zacks Earnings Preview: Big Lots, Medtronic, Tiffany, Boeing and American Airlines

Aug 22, 2011, 09:54 ET from Zacks Investment Research, Inc.

CHICAGO, Aug. 22, 2011 /PRNewswire/ -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Big Lots (NYSE: BIG), Medtronic (NYSE: MDT) Tiffany (NYSE: TIF), Boeing (NYSE: BA) and American Airlines (NYSE: AMR). To see more earnings analysis, visit http://at.zacks.com/?id=3207.

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Earnings Season Almost Done

Second quarter earnings season is almost over. Mostly we are down to the retailers, many of which have fiscal quarters ending in July, not June, but there are a few significant non-retailers that will report this week as well. There will be just 90 firms reporting, but 7 of those are in the S&P 500.

By next Friday afternoon, almost 99% of the S&P 500 will have reported. So far, earnings season has been very strong with seven S&P 500 firms reporting positive surprises for every two that have disappointed. The firms reporting next week include: Big Lots (NYSE: BIG), Medtronic (NYSE: MDT) and Tiffany's (NYSE: TIF).

It will be a relatively light week for economic data. We get key housing data in the form of New Home Sales. We also learn what New Orders for Durable Goods were doing in July. The big news will be on Friday when we get the second look at the second quarter GDP numbers.

Monday

  • Nothing of particular significance.

Tuesday

  • New Home Sales are expected to slip ever so slightly to a 310,000 rate from 312,000 in May. That is simply a pathetic level, even if it is slightly off the record low set in January. The records go back to the Kennedy administration. If we do come in at 310,000, that is still lower than any month prior to 2010. Unlike used home sales, each new home sold represents a lot of economic activity. Thus this is a very important report. Normally, new home sales are what leads the economy out of recessions, but they have been a huge drag this time around.

Wednesday

  • New Orders for Durable Goods are expected to rise by 2.0% reversing a 1.9% decrease in June. Previous months are often revised significantly for this data, and those revisions can be just as important as the current month's data. Much of the strength last month came from the highly volatile transportation equipment segment. Since they are so high-priced, a few orders for jetliners can really push around the total number, but the orders tend to be lumpy. Excluding transportation equipment, new orders are expected to fall 0.4% reversing last month's +0.4%. The headline number is going to be strong thanks to a massive order that Boeing (NYSE: BA) just got from American Airlines (NYSE: AMR).

Thursday

  • Weekly initial claims for unemployment insurance come out. They had a very nice decline early in the year, had a rough few months, but recently have been showing improvement again. Last week they rose by 9,000 to 408,000 (after an upward revision to the prior week of 4,000). The 400,000 level is important psychologically in that it has historically been the inflection point, below which we tend to create enough jobs to bring down the unemployment rate. Thus the dip below that level was very good news and was greeted by the market with a big rise, but the rebound above 400K was met with a big sell-off this week. The consensus is looking for this number to fall back to the 400,000 level. The four-week moving average will probably stay above the 400,000 level, where it has been for the last four months. The week-to-week numbers can be very volatile, so the four-week average is the thing to focus on. The sharp rise in initial claims was an early warning of the weak jobs report for June. Keep an eye on the prior week's revision as well as the change from the revised number.
  • Continuing claims have also in a downtrend of late, but the road down has been bumpy. Last week they rose by 7,000 to 3.702 million. That is down 785,000 from a year ago. I would expect a small decline this week. The consensus is looking for 3.700 million. Some of the longer-term decline is due to people simply exhausting their regular state benefits, which run out after 26 weeks. Those, however, don't last forever either. Federally paid extended claims fell by 44,000 to 3.658 million. Looking at just the regular continuing claims numbers is a serious mistake. They only include a little over half of the unemployed now, given the unprecedentedly high duration of unemployment figures. A better measure is the total number of people getting unemployment benefits, currently at 7.336 million, which is down 144,000 from last week (there are some timing issues, so the change in continuing and existing claims does not match the change in the total). The total number of people getting benefits is now 2.634 million below year-ago levels. What is not known is how many people have left the extended claims via the road to prosperity -- finding a new job -- and how many have left on the road to poverty -- having simply exhausted even the extended benefits. Make sure to look at both sets of numbers! Many of the press reports will not, but we will here at Zacks.

Friday

  • We get the second look at GDP in the second quarter. The initial read came in at just 1.3%, well below the expected level of 1.7% growth. We also got massive revisions to prior quarters, including the first quarter being revised all the way down to just 0.4% growth from 1.9% growth. No revisions to prior quarters are likely this time, but the consensus is looking for the second quarter to be revised down to just 1.1% growth. The make-up of GDP growth can be just as important as the overall growth level. We will provide a complete breakdown of which parts of the economy were adding to growth and which were drags on growth, as well as if there was a change from the first look.

Dirk Van Dijk, CFA, is the Chief Equity Strategist for Zacks.com.

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Contact: Dirk Van Dijk, CFA
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