Consumer Products

Major Earnings on Deck This Coming Week (ADBE, BBY, KR, ORCL, DFS, FDX, PALM, PIR, JAVA)

bull-and-bear-image2We have a little flurry of key earnings coming this week.  We have provided detailed earnings estimates with Thomson Reuters consensus figures, with our own color for the recent performance, the charts, options, and other critical data when and where it stood out.  The companies covered are Adobe Systems Inc. (NASDAQ: ADBE), Best Buy Co. (NYSE: BBY), The Kroger Co. (NYSE: KR), Oracle Corp. (NASDAQ: ORCL), Discover Financial Services (NYSE: DFS), FedEx (NYSE: FDX), Palm, Inc. (NASDAQ: PALM), and Pier 1 Imports, Inc. (NYSE: PIR).

On Tuesday, September 15, we have earnings from the likes of Adobe Systems Inc. (NASDAQ: ADBE), Best Buy Co. (NYSE: BBY), and The Kroger Co. (NYSE: KR).

Adobe Systems Inc. (NASDAQ: ADBE) is up about 125% since the March lows and is now at levels not seen since late 2008.  The CAD, graphics, and Acrobat software maker is expected to post earnings of $0.34 EPS on $686.16 million in revenues.  The company usually offers guidance.  Estimates for the next report in 3 months are $0.37 EPS and $719.23 million in revenues.  Next quarter also marks its year-end, and those estimates are $1.51 EPS and $2.9 billion in revenues.  The bar has to be set high for this company considering that it has rallied so much and since it trades at 23.3-times current year earnings.  This one has rallied so much that its 50-day moving average is down at $31.42 and the more important 200-day moving average is down at $25.29.  We would only get excited here if Adobe significantly raised guidance or if unveiled a new billion dollar business line.

Best Buy Co. (NYSE: BBY) usually reports early in morning, and is up sharply by almost 150% from its lows.  Estimates are $0.42 EPS on $10.77 billion in revenues.  The estimates are $0.39 EPS and $11.7 billion in revenues for the next quarter.  We would  note that call options activity was very active on Friday and it looks as though the options traders are braced for a move of up to $2.00 or more in either direction.

The Kroger Co. (NYSE: KR) may be interesting here as this company has failed to participate in the rally and as its business of selling food can be hit by spending trends.  Estimates are $0.44 EPS and $18.17 billion in revenues, while next quarter estimates are $0.40 EPS on $17.98 billion in revenues.At $21.78, the 52-week trading range is $19.39 to $29.59.  This is nestled in between its key moving averages as the 50-day moving average is $21.40 and the 200-day moving average is $22.31.  More importantly is that this one has failed to break above the $22.00 to $22.50 mark all summer.

Wednesday, September 16, has the software giant Oracle Corp. (NASDAQ: ORCL) on deck for earnings after the close.  The delay of the Sun Microsystems (NASDAQ: JAVA) merger seems more critical for Sun than Oracle, but will be a thorn in the side either way because it is just a distraction away from core operations and it delays the integration.  Larry Ellison and friends are expected to post $0.30 EPS and $5.24 billion in revenues.  The company may hold off giving formal guidance because of the Sun delay, but next quarter’s estimates are $0.36 EPS and $5.72 billion in revenues.  What is interesting here is how much larger the company will be post-merger.  The fiscal May 2010 revenue is expected to be $23.90 billion, but the fiscal June-2010 revenue estimate for Sun is $10.5 billion.  This merger is going to probably take Oracle out of the shopping game for some time. Oracle will get much larger when (and if) the weasels in the E.U. regulatory body figure out that making a company like Sun stay independent considering the notion that Sun just can’t cut it on its own.  Oracle’s market cap is now almost $115 billion and at $22.86 it is just under its year high as the 52-week trading range is $13.80 to $22.95.  Actually, this hit a new 52-week high on Friday…

Thursday, September 17 is going to be another big day with Discover Financial Services (NYSE: DFS), FedEx (NYSE: FDX), Palm, Inc. (NASDAQ: PALM), and Pier 1 Imports, Inc. (NYSE: PIR) reporting earnings.

Discover Financial Services (NYSE: DFS) is on deck to report Thursday and this is “just another financial stock up over 200% from its lows” as far as we are concerned.  At $14.71, its 52-week trading range is $4.73 to $17.70.  This was almost $25.00 2 years ago.  This credit card lender is more on the lower and middle market consumer, which gives it an almost antithesis of American Express characteristic other than the notion that more ex-AmEx customers are likely going to be Discover customers eventually.  With it still expected to lose money for the quarter, we are failing to get excited here.  Estimates are -$0.13 EPS and $743.2 million in revenues.

FedEx (NYSE: FDX) was likely going to be a key stock to watch but the company raised guidance Friday morning.  We did note that there was actually a very mixed performance in the delivery and transportation players during the Friday trading session, so this sector will be key to watch to see if it can continue running…. Dow Theorists stay tuned.

Palm, Inc. (NASDAQ: PALM) is perhaps the biggest battleground stock of them all to report this coming week.  Forget about its earnings, because what will drive this one is how many of those Palm Treo smartphones it has sold and shipped.  The recent price cuts for Treo and possible could shoulder from the market of this scaled-down Palm Pixi to  to boost Palm’s WebOS software are possible red flags.  Just an opinion here, but is the Pixi perhaps one of the lamest names for a phone yet???  The stock closed Friday at $13.91 and the 52-week trading range is $1.14 to $16.80, but the 50-day day moving average is $14.35 and that moving average has been a bumper-car game for the stock since late July.  Analysts expect -$0.25 EPS on $304.9 million in revenues.  The biggest issue here is the huge short interest of over 47.2 million shares.  If the fully diluted calculations are correct, that means that 40% of the float is now short.  So while we are against the company’s performance, this huge short interest can create one monster rally even if the news is not that good as all the shorts cover and run home to mama.

Pier 1 Imports, Inc. (NYSE: PIR) is on deck for earnings and is a total wild card because of a never-ending turnaround and because it has traded all over the place.  The company has been paring down what it can, making cuts where it can, and working on its inventories and its balance sheet.  Estimates are -$0.22 EPS on 281.9 million in revenues, but be advised that it is very thinly covered.  A $2.60, its 52-week trading range is $0.10 to $5.70.

We are getting close to the end of all the earnings, ad we’ll see R-I-M the following week.  You can join our open email distribution list which goes out several times per week for top day trader alerts, top analyst upgrades and downgrades, IPO’s, key secondary offerings, guru investor data on Buffett and others, mergers, and more.

JON C. OGG
SEPTEMBER 12, 2009