The Week Ahead: The Consumer Is Still Struggling

 | May 25, 2014 | 8:00 PM EDT  | Comments
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Stock quotes in this article:

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Last week was fairly quiet on the economic-data front, but a number of retailers reported their quarterly results -- and, at least in my view, they very much served to confirm my view of The Cash Strapped Consumer. There have been some positive standouts, among them Tiffany (TIF), Nordstrom (JWN) and Foot Locker (FL). For the most part, though retailers took it on the chin, as seen in Aeropostale (ARO), Urban Outfitters (URBN), Target (TGT), American Eagle Outfitters (AEO) and TJX (TJX).

As I look over most of the companies that are set to report earnings this week -- Chico's FAS (CHS), Express (EXPR), Guess (GES) and a few others -- my expectations are not very high. The one retailer worth watching will be Michael Kors (KORS), given its track record of blowing Wall Street estimates out of the water over the last year.

Other companies will be on tap, as well this week, and the three that I'll be watching closely are Palo Alto Networks (PANW), Toll Brothers (TOL) and Sanderson Farms (SAFM).

Palo Alto is set to offer us clues regarding any changes in the volume and velocity of cyber threats expected in 2014. As for Toll Brothers, we own this stock in the Thematic Growth Portfolio, so of course I am interested in the quarterly results -- but I'll also be looking for confirmation on my housing thesis that I shared last week on Real Money Pro.

Finally there's Sanderson Farms, whose shares have climbed more than 15% since I shared my bullish view on this stock back in early January. Recently, Tyson Foods (TSN) called for the worst in beef prices between July and October, and Kraft Foods (KRFT) is taking a meats price increase this month, so my gut says we'll be seeing even more price pain ahead. Given the move in Sanderson shares, I'd recommend adding to any existing positions on a pullback -- but my candid view is that I don't expect one near-term.

One other earnings report to keep tabs on will be Avago Technologies (AVGO). Through these numbers, we might gather some intelligence on when Apple (AAPL) will start to ramp production of the expected iPhone 6.

Let's now turn to the economic data scheduled to be published this week, which will be a shortened one due to Memorial Day on Monday. More housing data are scheduled for release, along with another look at the manufacturing economy and several consumer-facing data points.

Last week's data from Markit Economics points to the continued improvement in domestic manufacturing, while new-home sales for April arguably surprised on the upside. That tells me durable orders and related housing data should be fairly positive. The wild card for data comes late this week in the form of personal income and spending, and my guesstimate is that recent retail reports don't bode well for this report, nor for any related metrics.

One final thought: It's certainly possible I'm missing something when it comes to Hewlett-Packard (HPQ) shares, but I have a tough time getting behind this company. HP's core business is more than challenged, it has reported 11 consecutive quarters of revenue declines and it's also going through another round of layoffs, this time of as many as 16,000 people. Remember, too, that HP is aiming to "tackle the cloud." While I am only one person, it is this person's view that there are better opportunities out there.

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Economic Calendar

Monday, May 26

  • U.S. Stock Market Closed

____

Tuesday, May 27

  • Durable Orders (April)
  • Case-Shiller 20-City Index (March)
  • Federal Housing Finance Agency (FHFA) Housing Price Index (March)
  • Consumer Confidence (May)

____

Wednesday, May 28

  • Mortgage Bankers Association (MBA) Mortgage Index (Weekly)

____

Thursday, May 29

  • Initial and Continuing Jobless Claims (Weekly)
  • Gross Domestic Product (GDP) -- Second Estimate (First Quarter)
  • Pending Home Sales (April)

____

Friday, May 30

  • Personal Income and Spending (April)
  • Personal Consumption Expenditures (PCE) (April)
  • Chicago Purchasing Managers Index (PMI) (May)
  • Michigan Sentiment Index -- Final (May)

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Earnings Calendar

Monday, May 26

  • U.S. Stock Market Closed

____

Tuesday, May 27

  • AutoZone Inc. (AZO)
  • Frontline Ltd. (FRO)

____

Wednesday, May 28

  • Brown Shoe Co. (BWS)
  • Cracker Barrel (CBRL)
  • Chico's FAS (CHS)
  • DSW Inc. (DSW)
  • Michael Kors (KORS)
  • Palo Alto Networks (PANW)
  • Toll Brothers (TOL)

____

Thursday, May 29

  • Abercrombie (ANF)
  • Avago Technologies (AVGO)
  • Annies Inc. (BNNY)
  • Costco (COST)
  • Delias (DLIA)
  • Express Inc. (EXPR)
  • Freds Inc. (FRED)
  • Fairway Group (FWM)
  • Guess Inc. (GES)
  • Pall Corp. (PLL)
  • Sanderson Farms (SAFM)

____

Friday, May 30

  • Big Lots Inc. (BIG)
  • Lions Gate Entertainment (LGF)

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