Zacks Earnings Preview: BJ's Wholesale Club, Hewlett-Packard and The Home Depot

Zacks Earnings Preview: BJ's Wholesale Club, Hewlett-Packard and The Home Depot

CHICAGO--(BUSINESS WIRE)--

Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes BJ's Wholesale Club (NYSE: BJ), Hewlett-Packard (NYSE: HPQ), Lowe's (NYSE: LOW), Target (NYSE: TGT) and The Home Depot (NYSE: HD). To see more earnings analysis, visit http://at.zacks.com/?id=3207.

Earnings Preview is written by Charles Rotblut, CFA, Senior Market Analyst for Zacks.com.

Hewlett-Packard (NYSE: HPQ) and The Home Depot (NYSE: HD) will help wrap up first-quarter earnings season. The two Dow components will be joined by 14 other S&P 500 members, including Lowe's (NYSE: LOW) and Target (NYSE: TGT).

Overall, we have confirmed that 111 companies should release quarterly results, a sharp decline from the number of reports released over the past several weeks.

The minutes from the April Federal Open Market Committee meeting will be published Wednesday. Given the current economic data and the stimulus checks, no changes to rates are expected until August, at the very earliest. Therefore, it seems unlikely that the minutes should elicit much of a reaction. This said, I would not completely rule out a move by the markets following the release of the meeting notes.

    Other notable economic data will include:

    --  Tuesday: First-quarter Case-Shiller housing price index, April
        new home sales, May Conference Board consumer confidence
        survey

    --  Wednesday: April durable goods orders

    --  Thursday: Revised first-quarter GDP, weekly jobless claims

    --  Friday: April personal income and spending, May Chicago PMI,
        final May University of Michigan consumer confidence survey

Three Fed officials will be speaking. Vice Chairman Donald Kohn will discuss the economic outlook on Tuesday morning. Kevin Warsh will deliver a speech entitled "Using the Federal Funds Rate in Extraordinary Times" on Wednesday afternoon. Randall Kroszner will talk about the mortgage markets on Thursday morning.

The markets have been in a trading range, though traders have mostly been shrugging off the bad news. The calendar does not contain much that would seem to move stocks out of the current range, though a continued climb in oil prices could be a concern.

Keep an eye on volume late in the week, particularly on Friday afternoon, as some traders and portfolio managers head out early for the holiday weekend.

First-Quarter Earnings

First-quarter earnings were not terrible, but they were not good either.

Although the median company did achieve per share growth of 9.2%, more than 160 companies with the S&P 500 reported a year-over-year drop in income. (Thirty-four firms actually lost money - most of them being either financial firms or home-builders.)

Looking at the numbers from the index level, S&P 500 earnings were down 16.3% last quarter. This number reflects the weighting of the financial stocks in the index and therefore differs from the median calculation, which is not weighted.

Positive surprises outnumbered negative surprises by a 2.2:1 margin. Good, but not nearly as good as we have seen in past quarters.

Companies That Could Issue Positive Earnings Surprises during the Week of May 19 - 23

BJ's Wholesale Club (NYSE: BJ) realized a 17.8% increase in same-store sales last month. (Gasoline sales helped as did the timing of Easter.) The strong performance led five of the 14 covering brokerage analysts to raise their forecasts for the first-quarter. The current consensus estimate of 27 cents is two cents above the average forecast of a month ago. The most accurate consensus is more bullish at 29 cents per share. BJ has exceeded expectations during each of the past three quarters by an average margin of 4.6 cents. BJ's Wholesale Club is scheduled to report on Wednesday, May 21, before the start of trading.

Last Tuesday, Hewlett-Packard (NYSE: HPQ) preannounced fiscal second-quarter earnings of 87 cents per share, above the then consensus estimate of 84 cents per share. Four brokerage analysts promptly raised their forecasts, but the majority has not, putting the current consensus estimate at 85 cents per share. Given that HPQ has consistently topped expectations for several years, it is likely that the consensus estimate is too low. Hewlett-Packard is scheduled to report on Tuesday, May 20, after the close of trading.

Companies That Could Issue Negative Earnings Surprises during the Week of May 19 - 23

The Home Depot (NYSE: HD) has missed earnings estimates twice in the past four quarters. Ahead of the company's first-quarter announcement, the most accurate estimate is suggesting earnings will total 36 cents per share, which would be a penny below the consensus estimate. The Home Depot is scheduled to report on Tuesday, May 20, before the start of trading.

Charles Rotblut, CFA, is the senior market analyst for Zacks.com.

Want to turn earnings surprises into quick profits? Learn how by visiting http://at.zacks.com/?id=3206.

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Source: Zacks.com