Week in Preview: More Housing, Employment Numbers on the Way
Aug 29th 2010 12:30PM
Updated Aug 29th 2010 5:20PM
Investors nervous about the possibly stalled economic recovery -- or worse, the second dip of a double-dip recession -- weren't pleased with last week's housing numbers.
Things were ameliorated somewhat by durable goods orders and a revised GDP that weren't as bad as expected, but that didn't stop the Dow from dipping below 10,000 later in the week, before fighting its way back to end the week above the benchmark, thanks largely to Fed chair Bernanke's comments on Friday.
Though the end of August is usually quiet, this week lots more economic data than usual are due out, including more housing numbers: The Case-Shiller Home Price Index for June on Tuesday, construction spending for July on Wednesday, and NAR's pending home sales for July on Thursday. There's not expected to be much to get excited about in these numbers.
Manufacturing and Employment Figures
The Chicago Purchasing Managers Index for August comes out Tuesday, while the Institute of Supply Management releases its manufacturing survey for August on Thursday and its services sector survey for August on Friday. Also look for revised productivity numbers for the second quarter and data on factory orders in August on Thursday. Further evidence of a slowing expansion in the manufacturing sector is anticipated.
Perhaps most importantly, more employment data is coming this week. The ADP employment index for August is due on Wednesday, while initial jobless claims for last week will be released on Thursday. And then the big one: The Labor Department's unemployment numbers for August will be released on Friday. The continued departure of census workers and other government employees is expected to weigh on these results.
Also watch this week for August new motor vehicle sales and July consumer spending, as well as the release of the minutes of the Aug. 10 meeting of the Fed Open Market Committee, or FOMC, the branch of the Fed that makes key decisions about interest rates and growth of the U.S. money supply.
Some Earnings Expectations
On the earnings front, things will be more quiet. These three companies are expected to report strong results: Greif (GEF), Cooper Companies (COO) and Dollar General (DG).
Ohio-based Greif announced the retirement of its CFO and raised its dividend during its fiscal third quarter, ended in July. Analysts surveyed by Reuters Thomson forecast earnings for that period to total $1.21 per share, which is up 27.3% from the same period of last year. Revenue of this producer of industrial packaging and shipping products is expected to come to $899.9 million, or 25.4% more than a year earlier. Analysts foresee sequential and year-over-year revenue growth in the fourth quarter as well. The per-share earnings topped analysts' expectations in the past five quarters, by as much as 8 cents a share.
Greif's long-term EPS growth forecast of 10% is better than that of competitor Smurfit-Stone (SSCC). The 12.5 forward price-earnings (PE) ratio is less than the trailing PE ratio of 14.9. The First Call recommendation has been to buy Greif for more than 90 days, and the mean price target is currently $70. Shares ended the week at $58.22, which is less than $3 below the 52-week high.
During the three months ended in July, Cooper Companies settled a shareholder suit and declared a quarterly dividend. The California-based medical devices maker is expected to report that earnings per share came to 71 cents, a 23.9% increase from a year ago. Fiscal third-quarter revenue is expected to have grown 4.1% to $297.0 million. So far, analysts predict full-year EPS of $2.57 (+10.9%) on revenue of $1.1 billion (+5.8%). But earnings results met consensus estimates in two of the past three quarters, falling short by 3 cents per share in the first quarter.
Cooper's long-term EPS growth forecast is 14.3%, which is better than bigger competitor Johnson & Johnson (JNJ). Cooper's forward PE ratio of 14.0 is less than the industry average and the trailing PE ratio of 17.3. Analysts on average recommend buying Cooper, and their mean price target is $43. Shares hit a 52-week high of $42.26 last week, but are trading in the same range as six months ago.
Analysts anticipate that Dollar General, the Tennessee-based discount retail chain, will report second-quarter earnings of 38 cents per share, up from 29 cents in the same period last year. During the three months ended in July, Dollar General was recognized by the secretary of defense for support of employees who work in the National Guard and Reserve, and it also opened its 9,000th store, and analysts expect revenue for that period to total $3.2 billion. Thus far, the consensus full-year forecast is for EPS of $1.72 (+23.8%) on revenue of $13.1 billion (+10.9%). Dollar General's earnings beat analysts' expectations in the previous two quarters.
The long-term EPS growth forecast of 18.9% tops that of competitors Family Dollar (FDO) and Fred's (FRED). And the forward PE is 14.2, but that's down from the trailing PE ratio of 17.9. The consensus recommendation remains to buy Dollar General. The mean price target is $33.71. The stock has traded mostly between $27 and $30 since April, and the share price ended the week at $28.09.
Also look for this week's quarterly reports from Borders (BGP), Brown-Forman (BF.B), Campbell Soup (CPB), HJ Heinz (HNZ), H&R Block (HRB), Krispy Kreme (KKD), SAIC (SAI) and Winn-Dixie (WINN).