US corporations have enjoyed an impressive appreciation of equity, as stock values have risen considerably since the broad market consolidated at its lows on March 9, 2009. The following assessments of earnings are complimentary of James Williamson, a fellow trading practitioner and director of the future market analytics site www.marketthesis.com.
Tuesday, April 7th
AA - Alcoa kicks off the Dow earnings season with a bust. Analyst estimates have continued to drift south over the past 30 days - the street is looking for a Q1 loss of 57 cents. Aluminum prices fell 50% in the second half of 2008 and 9% in Q1 of 2009. Aluminum producers are still dealing with an overhang of supply as demand has weakened from automakers and manufacturers. Alcoa never meets the street forecast, it's a miracle this company is still a DOW component (with only $6.5 Billion in Market Cap). Wouldn't trade it though - AA has been rumored as a takeover target from Chinese firms or larger Materials stocks such Rio Vale, Rio Tinto, or BHP.
MOS - The Mosaic Company, and others in the fertilizer business, appear to have put in a bottom. After falling from $161 to $21, Mosaic has climbed steadily higher and has technical support from its 50 and 100 Day Moving Averages. Let's not forget recent history, though, as MOS reported Q4 EPS of $1.12, missing the street estimate of $1.42. And EPS for Q1 has been ratcheted down to only 24 cents from about $1.13 three months ago. Unless they miss horribly, I would say their momentum will be kept intact.
Wednesday, April 8th
FDO - Family Dollar Stores has been in a sweet spot taking advantage of cash strapped consumers. The stock has seen a revival over the past year and has been on fire in 2009. EPS estimates have continued to be raised for both Q1 and full year 2009. Irrespective of their earnings, if you believe that the economy will recover later this year, then I would steer clear of FDO because consumers that traded down to FDO will trade back up to non-discount retailers. If you think the economy and the consumer will continue to be in rough shape, FDO will have the opportunity to grow market share as job losses mount and family budgets remain tight. I prefer the former and would be a buyer on dips.
Thursday, April 9th
CVX - The first of Big Oil to report, Chevron will give traders a sense of how the company (and others) weathered the collapse in oil prices from $140 to $35. They will have benefited from selling some futures contracts at much higher prices, but it's unclear how demand destruction will play out for their businesses. The stock has made a nice run from $55 to $70 into their earnings call, but still doesn't have clear support from the technicals. Their guidance on demand destruction will be key and I would prefer to wait on the sidelines in the meantime.
PBY - Just a quick note on Pep-Boys. The Do-It-Yourself auto space has done very well as consumers have shied away from buying big ticket items such as new cars in favor of "asset maintenance". But not for PBY. Competitors like Autozone (AZO), have had great runs and have had their EPS estimates raised for both Q1 and full year 2009. PBY will reporting for the Quarter ending in January and the numbers don't look good. Company says it will lose 59 to 69 cents, while the current street estimate is for a loss of 26 cents. But the stock has had a decent run. I think management has low balled their rhetoric and we could see EPS at the higher end of the range and a raising of guidance for the year. Buy on Dips?
