Week of December 17: Earnings and Event Preview
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The penultimate week of trading for 2012 is here, and the calendar is still chock full of important earnings releases, analyst meetings, and economic data. Wall Street's attention remains on Washington, and investors will continue treading water until a resolution is achieved in our nation's capital. Little to no progress was made on the fiscal cliff over the weekend, as President Obama rightly turned his attention to the tragedy that took place in Newton, Connecticut.
As the clock continues ticking towards January 1, I expect to see further downside pressure in our markets as investors take risk off the table. In particular, it is possible for managers to completely withdraw if no resolution is achieved by Friday, December 21 and simply walk away until the New Year, given the holiday-shortened week beginning next Monday.
Here are the earnings calls, corporate events, and economic data I’ll be following for the week of December 17, 2012.
General Electric (NYSE: GE). Chairman and CEO Jeff Immelt will host the company's Annual Outlook and Investor Meeting on Monday at 3:00 p.m. EST. GE's year-end event is tailored to Wall Street analysts and is separate from the Company's shareholders meeting, which is held in April. Shares of the diversified technology and financial services company have risen more than 20% this year.
GE is expected to provide guidance on overall revenue, profitability, and individual business unit performance for 2013. The multi-national company continues expanding its global footprint, with a recent report indicating GE is holding talks with China's three largest oil companies to develop China's shale gas reserves. A second report from a Japanese newspaper indicates GE is planning to expand the development of medical equipment within Japan.
On Friday, December 14, GE announced its Board of Directors has approved a 12% increase in the company's quarterly dividend and increased the existing share repurchase authorization by $10 billion. The dividend boost gives shareholders more than a 3.5% yield based on Friday's closing price.
FedEx (NYSE: FDX). The second largest package delivery company behind UPS (NYSE: UPS) will report second quarter FY2013 earnings on Wednesday before the bell. FedEx announced earlier its expectation for record holiday sales, largely an attribute of the increased percentage of consumer spending being done online.
Both UPS and FedEx have launched services in the past year designed to engage the customer once their online order is placed. UPS’ paid version of its My Choice service allows consumers to electronically authorize packages for dropoff or reroute them to another location. FedEx has introduced a similar service, offering evening or by-appointment deliveries.
FedEx announced earlier in December that it would allow corporate level employees within its Express and Services units to take a voluntary severance. The headcount reduction effort under CEO Fred Smith is part of FedEx’s goal to reduce its budget by $1.7 billion annually over the next three years. The first round of FedEx employees are eligible to leave as of May 31, 2013, the last day of FedEx’s current fiscal year.
Although management has reaffirmed its guidance for this Wednesday’s release, near-term optimism is tempered at FedEx as the size of the company’s $1.7 billion cost reduction effort is larger than analysts originally expected. Consensus estimates for Wednesday stand at $1.41 EPS and $10.84 billion in revenue. FedEx is less expensive than UPS on both a trailing and forward basis. Shares trade at 1.12 and 2.12 price-to-earnings and -to-growth respectively.
Bed Bath & Beyond (NASDAQ: BBBY). Shareholders of this soft goods retailer have endured a year full of volatility, with the stock price falling dramatically after the company’s last two earnings reports in June and September. Shares fell more than 20% following the first quarter release in June when management delivered a cautious outlook and lowered guidance. The stock price recovered throughout the summer, only to fall once again in September when earnings came in lower than expected.
Despite the setbacks in the previous two quarters, analysts expect Bed Bath & Beyond to satisfy the marketplace when it reports Wednesday after the bell. The company has easier comparisons for the third quarter on both a 1-year and 2-year basis, and channel checks which I believe are reliable indicate that sales trends are ahead of management’s guidance. Soft goods sales should also benefit at some point during the housing recovery.
Consensus estimates for Wednesday stand at $1.02 EPS and $2.73 billion in revenue. If the valuation of Bed Bath & Beyond remains depressed, the company could become an attractive leveraged buyout target for investors who have a longer time horizon.
Paychex (NASDAQ: PAYX). The provider of payroll, human resource, and benefits outsourcing solutions will report second quarter FY2013 earnings results on Wednesday after the bell. With the company providing results for the three month period ending November 30, it is possible the report will be negatively impacted based on the timing of an election year and delayed hiring in small- and medium-sized businesses. In addition, concerns over the fiscal cliff have further delayed decision-making across America.
Consensus estimates for Wednesday’s release stand at $0.41 EPS on revenue of $573 million. Paychex management announced on December 10 that the company would accelerate its future February and May 2013 dividends totaling $0.66 per share to shareholders of record as of December 20. Several media outlets have incorrectly reported this as a special dividend.
On the economic front, the New York Fed will be releasing its monthly Empire State Manufacturing Survey on Monday, which measures the health and activity level for manufacturers in New York State. The general business conditions index has been in contraction for four consecutive months through November, and I expect December to mark a fifth consecutive month of contraction. However, the new orders index rose in November and had the first positive reading since June in the aftermath of Hurricane Sandy. It is likely by the time of publication that the New York Fed will release the December report, and you will be able to download it here.
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johnmacris has no positions in the stocks mentioned above. The Motley Fool owns shares of General Electric Company. Motley Fool newsletter services recommend Bed Bath & Beyond, FedEx, Paychex, and United Parcel Service. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!