The Week Ahead: A Troubling Guidance Trend

 | Feb 09, 2014 | 8:00 PM EST  | Comments
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Things seemed off to a rough start last week as December-quarter earnings rolled in along with two softer-than-expected reports -- the manufacturing index from the Institute for Supply Management and December factory orders.

As we moved through the week, more S&P 500 companies released fourth-quarter results, and the trend of weaker-than-anticipated current-quarter guidance continued. Of the 71 S&P names that have issued expectations thus far, 80% offered negative guidance relative to Wall Street expectations. While that's down modestly from last week's 82%, the figure is still significantly higher than the five-year average of 64%.

Despite those reports, the average analyst estimate still has the S&P 500 delivering earnings per share of $120 this year, up from $109.60 in 2013. This consensus number bears watching in the coming weeks.

My stance remains that Wall Street and the investment community are reevaluating economic and earnings-growth expectations for 2014, and that this has pressured the market lower. That's the fundamental picture. If we turn to the technical one -- and I will not pretend to be well-versed in looking at the stock market on this basis, as I am a fundamentalist at heart -- the Dow Jones Industrial Average entered oversold territory this past week. We saw also technical turns in both the S&P 500 and the Nasdaq Composite.

As my Thematic Growth Portfolio partner Doug Fabian pointed out to me over the weekend, many Wall Street strategists are calling for a 10% to 15% move in the stock market in 2014 -- but after the 5.8% pullback in the S&P 500 (hit this past Tuesday), there is more upside to be had. At the Thematic Growth Portfolio, so far this year I've been using the overall market weakness to put money to work. More specifically, I've been picking up such stocks as KEYW (KEYW), Medidata Solutions (MDSO), II-VI (IIVI) and others that have been overly punished by Wall Street despite favorable long-term fundamentals.

Another 55 S&P 500 companies are scheduled to issue their quarterly results over the coming five trading days, and I will be watching for any movement one way or another on the negative-guidance front. A wider view shows that more than 850 corporate earnings reports are on tap this week, and that will take center stage given the relatively thin amount of forthcoming economic numbers.

Speaking of economic data, of note on that front will be retail sales and industrial production for January. I shared my view on both with The Street's Brittany Umar, and you can watch that clip here.

As for earnings, Nuance Communications (NUAN) numbers are due out Monday -- and while I continue to see voice as the next hot interface, we'll find out if the company's outlook is as rosy. Over Monday and Tuesday we'll get a better sense of the housing and construction industries thanks to earnings from Loews (L) and Masco (MAS).

Then, on Wednesday and Thursday, several key reports hit – including from Cisco Systems (CSCO), Deere (DE) and Mondelez (MDLZ).

Cisco commentary on the emerging markets will be key, given recent concerns in those territories that have weighed on the overall stock market. I do expect CEO John Chambers to be bullish on the Internet of Everything, as he calls it. Meanwhile, Deere's view on the North American agriculture market will be telling in light of drought conditions and the strong corn harvest last year. As for Mondelez, we are starting to see upward movement in both cocoa bean and coffee prices, and these could weigh on the company's outlook after steep declines in 2012 and 2013.

Across the week a number of consumer-facing names -- Cheesecake Factory (CAKE), Skechers (SKX), GNC (GNC), Avon (AVP), VF Corp. (VFC) and others -- are set to share their latest. Considering the employment market, and wages and January weather more specifically, I'm not expecting big things from these kinds of companies.

Here's a more detailed look at what's on tap in the week ahead.

 

Economic Calendar

Monday, Feb. 10

  • HSBC Emerging Markets Index

____

Tuesday, Feb. 11

  • Job Openings and Labor Turnover Survey (December)
  • Wholesale Inventories (December)

____

Wednesday, Feb. 12

  • Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
  • Crude Oil Inventories (Weekly)
  • Treasury Budget (January)

____

Thursday, Feb. 13

  • Initial and Continuing Jobless Claims (Weekly)
  • Retail Sales (January)
  • Business Inventories (December)
  • Natural Gas Inventories (Weekly)

____

Friday, Feb. 14

  • Import and Export Prices (January)
  • Industrial Production (January)
  • Capacity Utilization (January)
  • University of Michigan Sentiment Index (February)

________________

Earnings Calendar

Monday, Feb. 10

  • Amkor Technology (AMKR)
  • Annie's Inc. (BNNY)
  • Hasbro Inc. (HAS)
  • Loews Corp. (L)
  • Nuance Corp. (NUAN)
  • Rackspace Hosting (RAX)
  • Rick's Cabaret International (RICK)
  • Sensient Technologies (SXT)

____

Tuesday, Feb. 11

  • CVS/Caremark Corp. (CVS)
  • Dean Foods Co. (DF)
  • Diodes, Inc. (DIOD)
  • FireEye, Inc. (FEYE)
  • Fossil, Inc. (FOSL)
  • Genesee & Wyoming (GWR)
  • Henry Schein Inc. (HSIC)
  • Ingersoll-Rand Co. (IR)
  • Masco Corp. (MAS)
  • The Mosaic Company (MOS)
  • PG&E Corp. (PCG)
  • Reynolds American (RAI)
  • Regal-Beloit (RBC)
  • Sprint-Nextel (S)
  • comScore Inc. (SCOR)
  • Trimble Navigation (TRMB)
  • ValueClick, Inc. (VCLK)

____

Wednesday, Feb. 12

  • Applied Materials (AMAT)
  • Angie's List (ANGI)
  • The Cheesecake Factory (CAKE)
  • CBS Corp. (CBS)
  • Cott Corp. (COT)
  • Cisco Systems (CSCO)
  • CenturyTel Inc. (CTL)
  • Deere & Co. (DE)
  • Dr. Pepper Snapple Group (DPS)
  • LeapFrog Enterprises (LEAP)
  • Lorillard, Inc. (LO)
  • Mondelez International (MDLZ)
  • Network Appliances (NTAP)
  • Nvidia Corp. (NVDA)
  • Packaging Corp. of America (PKG)
  • Rovi Corp. (ROVI)
  • Rush Enterprises (RUSHA)
  • Skechers USA (SKX)
  • Time Warner Telecom (TWTC)
  • The Valspar Corp. (VAL)
  • Whole Foods Market (WFM)
  • Zillow, Inc. (Z)

____

Thursday, Feb. 13

  • Agilent Technologies (A)
  • Barrick Gold Corp. (ABX)
  • Avon Products (AVP)
  • Bunge Limited (BG)
  • General Cable (BGC)
  • Burger King Worldwide (BKW)
  • BorgWarner (BWA)
  • Cabela's Inc. (CAB)
  • Corrections Corp. of America (CXW)
  • Equifax Inc. (EFX)
  • GNC Holdings (GNC)
  • Starwood Hotels & Resorts (HOT)
  • International Flavors & Fragrances (IFF)
  • Jarden Corp. (JAH)
  • Joe's Jeans (JOEZ)
  • Kraft Foods Group (KRFT)
  • Limelight Networks (LLNW)
  • Learning Tree International (LTRE)
  • Nielsen Holdings (NLSN)
  • Orbitz Worldwide (OWW)
  • PepsiCo, Inc. (PEP)
  • Regal Entertainment (RGC)
  • stamps.com (STMP)
  • Molson Coors Brewing (TAP)
  • Weight Watchers International (WTW)

____

Friday, Feb. 14

  • American International Group (AIG)
  • Allete, Inc. (ALE)
  • Coty Inc. (COTY)
  • Campbell Soup Co. (CPB)
  • Hyatt Hotels Corp. (H)
  • ITT Corp. (ITT)
  • Red Robin Gourmet Burgers (RRGB)
  • The J.M. Smucker Co. (SJM)
  • TRW Automotive Holdings (TRW)
  • VF Corp. (VFC)

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