Week in Preview: Housing Data, Earnings for Lennar, AutoZone, Adobe
Sep 19th 2010 12:50AM
Updated Sep 19th 2010 2:07PM
Housing steps into the spotlight again this coming week. The release of the National Association of Homebuilders Housing Market Index starts out the week on Monday morning. Then on Tuesday morning, look for housing starts data from August. Release of the July FHFA House Price Index is scheduled for Wednesday. And numbers for existing home sales and for new home sales in August are due out Thursday and Friday, respectively. Overall, the housing market is expected to have continued to lose momentum in August, but less dramatically than in July.
Also on the economic calendar this week: Tuesday's FOMC meeting on interest rates, the Conference Board's Leading Economic Indicators Index for August on Thursday, initial jobless claims for last week, and durable goods orders data for August on Friday. No significant changes from the Fed are anticipated, but the leading economic indicators may rise a bit.
For two of next week's most prominent quarterly reports -- General Mills (GIS) and Nike (NKE) -- the consensus expectations from analysts surveyed by Thomson Reuters are for narrow earnings declines. However, both General Mills and Nike have tended to beat earnings expectations in recent quarters.
Adobe Earnings Expected to Jump
On the other hand, analysts are looking for publishing software provider Adobe Systems (ADBE) to report that its fiscal third-quarter earnings jumped 28.5% from a year ago to 49 cents per share. During the three months that ended in August, San Jose-based Adobe repurchased stock and announced an acquisition, and revenue for that period is expected to total $847.1 million. That's a 41.1% increase from the same period of last year. And analysts also expect sequential and year-over-year revenue growth in the fourth quarter. Adobe has exceeded earnings expectations in the past five quarters.
Adobe has a long-term EPS growth forecast of 15.5%, which is better than that of Microsoft (MSFT). Its forward price-earnings (PE) ratio is 15.8, but that's less than the industry average and the trailing PE ratio of 20.8. The company keeps more than enough cash on hand to cover long-term debt. The First Call recommendation has been to buy ADBE for more than 90 days and the mean price target is currently $40.32. The stock hit a 52-week low in July but has surged recently and ended last week at $32.78.
Another Beat for AutoZone?
During the three months that ended in August, AutoZone (AZO) launched apps for the iPhone and Android. The nation's largest auto parts retailer is expected to post EPS of $5.42, which is a 17.5% increase from a year ago. Fiscal fourth-quarter revenue is expected to have grown 7.0% to $2.4 billion, while the full-year revenue is expected to have grown 7.1% to $7.3 billion. Earnings results have topped consensus estimates in the past five quarters, by as much as 53 cents per share.
AutoZone's long-term EPS growth forecast of 13% is better than that of competitor Advance Auto Parts (AAP), and its forward PE ratio of 13.7 is less than the industry average. Its net cash flow from operations surged in the third quarter. The consensus recommendation remains to buy AZO. The share price has risen steadily since November and the stock is trading near the 52-week high of $221.57.
Other companies expected to report earnings growth this week include Bed Bath & Beyond (BBBY) Carnival (CCL), Conagra (CAG), Darden (DRI), Finish Line (FINL), IHS (IHS), Progress Software (PRGS) and Red Hat (RHT).
Lennar in the Black
Just in time for this week of housing data, homebuilder Lennar (LEN) is expected to post a profit of a nickel per share for a fiscal third quarter that included the declaration of a quarterly dividend. That compares to a loss of 97 cents per share in the year-ago period. Revenue for the three months that ended in August is expected to total $765.2 million, or 6.2% more than a year ago. And the forecast is for sequential and year-over-year revenue growth in the fourth quarter. Lennar's earnings results have been better than expected in the past three quarters.
Lennar's long-term EPS growth forecast is 4.5%. Analysts on average recommend buying LEN, and their mean price target is $19.38. Shares have traded mostly between $13 and $15 since June and ended the week right in the middle of that range: $13.99.
Competitor KB Home (KBH) also is scheduled to post results this week and is expected to have continued to narrow its loss.