The Economy and Earnings in the Week Ahead
June 25, 2012

Week Ahead: Nike and Research In Motion Top The Earnings Reports

Important Reports on the Economy -- Personal Income and Housing!

by Ian Harvey

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The Key Events in the Week Ahead

Introduction

Data has pointed to slowing growth in the United States, a view corroborated by the Fed. Corporate earnings have also pointed to strained conditions as more companies signal disappointing results than at any time over the past decade.

The coming week will provide data on consumer sentiment, new home sales and other housing figures, which could shed light on whether the housing market is finally healing. Major companies scheduled to report financial results include Nike, Research In Motion, Monsanto Co and General Mills Inc.

Earnings in the Week Ahead

There are two earnings reports of importance: Nike (NKE) and Research In Motion (RIMM). The BlackBerry maker's stock price fell below $10 on Friday for the first since since 2003 as investors are signaling the company is in crisis.

Nike is expected to be profitable to investors with earnings of $1.37 per share for the fiscal fourth quarter, up 10.5% from a year ago. Revenue is expected to grow 13.1% to $6.52 billion.

The order book will be of importance, which includes an estimate of orders for the next few months. Listen to see if Europe is affecting sales. One analyst believes the European business is still quite strong, the Portland Business Journal noted Friday. Sterne Agee's Sam Poser said in a client note that athletic footwear and apparel brands and retailers are actually growing in Western Europe.

Research In Motion is a different and sadder story. The company expects to report a loss for its fiscal first quarter. It has promised to explore strategic alternatives, which would mean a sale.

The consensus estimate is still for a penny a share in earnings, down from $1.33 a year ago, with a 35.8% decline in revenue to $3.15 billion. And the questions at the conference call will surely be on survivability.

Healthcare Decision -- Influence on Health Insurance Companies

The U.S. Supreme Court is expected to rule on the Affordable Care Act, the healthcare overhaul passed by Congress in 2010 that has faced a number of court challenges.

For health insurance companies and hospitals there are several different scenarios for the impact of the ruling. Some on Wall Street have devised complex strategies - betting on one sector against another - depending on how the ruling comes out.

Stocks of health insurers that specialize in Medicaid programs for the poor, like Centene Corp (CNC) or Molina Healthcare Inc (MOH), could be hit if the law is struck down. Large insurers like Aetna Inc or WellPoint Inc could benefit.

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Economy in the Week Ahead

There will be important reports on the economy, personal income and housing.

With the last revision for GDP, reports this past week (and in weeks before that), suggested the economy has slowed down from a quick start in the first quarter. This week's reports will probably confirm that.

There may be some light at-the-end-of-the-tunnel from housing. Nomura Securities is expecting May new-home sales to rise 4% in May to 375,000 units. That will undo some of the gloom from Thursday's existing-home sales report for May, which said sales on analyzed basis were off 1.5% from April.

Here's another bit of good news: We're far enough along in the year that unadjusted sales (that is actual sales) were up slightly in May.

Here is a brief list of some of the key events in the week ahead.

All earnings dates listed below are tentative and subject to change. Please check with each company's respective website for official reporting dates.

Monday

Earnings: Apollo Group

Economy:

• 10.00 am New home sales
• 10.30 am Dallas Fed survey

Tuesday

Earnings: H&R Block

Economy:

• 9.00 am S&P/Case-Shiller home prices

• 10.00 am Consumer confidence

• 10.00 am Richmond Fed survey

• 1.00 pm $35 billion 2-year note auction

Wednesday

Earnings: General Mills, McCormick, Monsanto, Commercial Metals, Paychex, Herman Miller, Progress Software

Economy:

• 8.30 am Durable goods

• 10.00 am Pending home sales

• 1.00 pm $35 billion 5-year note auction

Thursday

EU Leaders Summit begins

Earnings: Nike, Research In Motion, Accenture, Family Dollar, Worthington Industries, Tibco Software, Smith and Wesson

Economy:

• 8.30 am Initial claims

• 8.30 am Real GDP (Q1 final)

• 11.00 am Kansas City Fed survey

• 11.30 am Cleveland Fed President Sandra Pianalto on housing

• 12.00 pm Dallas Fed President Richard Fisher on the economy

• 1.00 pm $29 billion 7-year note auction

Friday

EU Leaders Summit Final trading day of 2 QTR

Earnings: Constellation Brands, KB Home, Finish Line

Economy:

• 8.30 am Personal income

• 9.05 am St. Louis Fed President James Bullard on economy

• 9.45 am Chicago PMI

• 9.55 am Consumer sentiment

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Economic Reports to Watch in the Week Ahead

1. Case-Shiller Home Price Index from Standard & Poor's -- due Tuesday -- look for a small year-over-year decline. But the rate of decline is slowing rapidly.

2. The Conference Board's Consumer Confidence Index -- due Tuesday -- this will probably decline. The index is closely attuned with the stock market.

3. Durable-goods orders -- due Wednesday -- slowing European growth will depress orders.

4. Gross domestic product: a final revision for the first quarter -- due Thursday -- analysts expect growth at an annualized 1.7%, down from 3% in the fourth quarter of 2011.

5. Personal income -- due Friday -- look for a small gain in income and in spending.

6. Chicago Purchasing Managers Index -- due Friday -- Nomura Securities sees the index falling to 51.2 in June from May's 52.7. But a reading above 50 means the economy is still growing.

7. University of Michigan consumer sentiment index -- due Friday -- expect a big decline thanks to the stock market's woes.

Other Articles of Importance

1. The Week Ahead in the Stock Market - June 25, 2012

2. The Past Week Stock Market Results - June 25, 2012

3. Technical Analysis - Comparing Tools - Market Indicator for the Week Ahead - June 25, 2012


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