Earnings season is starting to wind down, but we still have some
interesting companies reporting this week. Since we are nearing the end
of the season a lot of these companies’ peers will have already
reported, so the market will be anticipating the direction of the
results. I’m going to use this approach to preview what investors might
expect from the results this week.
Tuesday
I can think of very few sectors as unglamorous as painting and coatings, but who cares? Anyone purely focused on making money couldn’t help but notice that these stocks have been hot over the last year or so. Valspar (NYSE: VAL) will give numbers, and following the recent solid results from Sherwin-Williams and others we can expect similarly good numbers here. However, it is somewhat a story of a two different markets.
The US consumer market has been strong--in line with an improving housing market--but industrial coatings have been more varied. The key thing to look for in these results will be how its mix of geographies and end markets are holding up. The industrial sector has been mixed so far this year, with areas like automotive and aerospace strong but general industrials growing weaker. Indeed, Valspar reported weakness in food and general line packaging last time around. Given the more positive news out of China recently we could see a bounce back.
Wednesday
A couple of bellwether’s report on Wednesday, with Deere outlining the state of play in farming and construction machinery, and Macy’s will be discussing high end consumer spending.
Thursday
Thursday is undoubtedly the most interesting day of the week. Bring your own device (BYOD) play Aruba Networks (NASDAQ: ARUN) has already pre-announced and disappointed by missing estimates and guiding lower. Frankly if you don’t know that the telco and enterprise technology sector has been weak in Q1 then you aren’t invested in technology. Company after company has pretty much repeated the mantra: customers are reluctant to sign off on big deals but the pipelines remain in place, etc. It is disappointing, but the correct tactic has been to buy after the crash. This is why the color around Aruba’s conference call will be so important. Investors will want to discern whether this is a company-specific issue or a macro one. If it is the latter then the stock can recover strongly given a cessation of sequester/macro fears. Unfortunately at this point it is hard to tell the difference.
Autodesk (NASDAQ: ADSK) is a company I’ve discussed at length in an article linked here. Frankly it is very hard to predict what it will report. It is a company with an enviable record of beating its guidance, so when it misses the stock gets trashed. If you follow the general ‘tech is weak in Q1’ approach then you should be braced for a miss. On the other hand, certain industrial sectors have been strong in Q1.
The question is does Autodesk have enough exposure to areas like automotive and aerospace? Moreover, it has long term secular growth prospects from the shift to a software as a service (SaaS) based company, and this should provide sales support. The one thing I’m sure of is that the stock will be volatile over the results. Its internal guidance is for $570-590 million in sales and Non-GAAP EPS of $0.41-$0.46.
Two vastly different retail names also give results. Wal-Mart is about as mass market as you are going to get, but Nordstrom Inc (NYSE: JWN) is arguably more of a high end play. It’s a company with a well regarded management team that it engaging in every initiative it can to generate future growth in the face of a difficult consumer environment.
There is an outline of its growth strategy in an article linked here. Nordstrom is expanding its lower priced Rack stores and investing heavily in its e-commerce facility and in store Point of Sales offerings. Over the next few years its revenue streams will be substantially changed. The key questions are whether this will cannibalize or denigrate its existing brand and if the investment program will be executed successfully. For the next few years it is all about investment for Nordstrom, and investors should focus on this (and its effect on margins) in the upcoming results.
Friday
Friday’s are usually quiet days, but I’m interested to look at industrial filtration company Donaldson (NYSE: DCI). Its prospects are largely dictated by conditions in China. Its exposure to transportation and industrial products (with a heavy weighting towards construction machinery) will always mean it is a cyclical play.
Construction, mining and heavy trucking are problematic end markets right now, and investors have seen the point of an anticipated pick up being pushed out to the end if 2013 in previous reports. The key thing in the upcoming results will be the commentary over the recovery in China and where the country’s stimulus spending will be directed. In general it has been a weakening environment for its industry bellwethers, with Caterpillar and Joy Global both struggling to convince. On the other hand, Alcoa reiterated its guidance for 2013 within China, and since this implies 12%-16% growth in its Chinese heavy truck and trailer division, I think this bodes well.
Tuesday
I can think of very few sectors as unglamorous as painting and coatings, but who cares? Anyone purely focused on making money couldn’t help but notice that these stocks have been hot over the last year or so. Valspar (NYSE: VAL) will give numbers, and following the recent solid results from Sherwin-Williams and others we can expect similarly good numbers here. However, it is somewhat a story of a two different markets.
The US consumer market has been strong--in line with an improving housing market--but industrial coatings have been more varied. The key thing to look for in these results will be how its mix of geographies and end markets are holding up. The industrial sector has been mixed so far this year, with areas like automotive and aerospace strong but general industrials growing weaker. Indeed, Valspar reported weakness in food and general line packaging last time around. Given the more positive news out of China recently we could see a bounce back.
Wednesday
A couple of bellwether’s report on Wednesday, with Deere outlining the state of play in farming and construction machinery, and Macy’s will be discussing high end consumer spending.
Thursday
Thursday is undoubtedly the most interesting day of the week. Bring your own device (BYOD) play Aruba Networks (NASDAQ: ARUN) has already pre-announced and disappointed by missing estimates and guiding lower. Frankly if you don’t know that the telco and enterprise technology sector has been weak in Q1 then you aren’t invested in technology. Company after company has pretty much repeated the mantra: customers are reluctant to sign off on big deals but the pipelines remain in place, etc. It is disappointing, but the correct tactic has been to buy after the crash. This is why the color around Aruba’s conference call will be so important. Investors will want to discern whether this is a company-specific issue or a macro one. If it is the latter then the stock can recover strongly given a cessation of sequester/macro fears. Unfortunately at this point it is hard to tell the difference.
Autodesk (NASDAQ: ADSK) is a company I’ve discussed at length in an article linked here. Frankly it is very hard to predict what it will report. It is a company with an enviable record of beating its guidance, so when it misses the stock gets trashed. If you follow the general ‘tech is weak in Q1’ approach then you should be braced for a miss. On the other hand, certain industrial sectors have been strong in Q1.
The question is does Autodesk have enough exposure to areas like automotive and aerospace? Moreover, it has long term secular growth prospects from the shift to a software as a service (SaaS) based company, and this should provide sales support. The one thing I’m sure of is that the stock will be volatile over the results. Its internal guidance is for $570-590 million in sales and Non-GAAP EPS of $0.41-$0.46.
Two vastly different retail names also give results. Wal-Mart is about as mass market as you are going to get, but Nordstrom Inc (NYSE: JWN) is arguably more of a high end play. It’s a company with a well regarded management team that it engaging in every initiative it can to generate future growth in the face of a difficult consumer environment.
There is an outline of its growth strategy in an article linked here. Nordstrom is expanding its lower priced Rack stores and investing heavily in its e-commerce facility and in store Point of Sales offerings. Over the next few years its revenue streams will be substantially changed. The key questions are whether this will cannibalize or denigrate its existing brand and if the investment program will be executed successfully. For the next few years it is all about investment for Nordstrom, and investors should focus on this (and its effect on margins) in the upcoming results.
Friday
Friday’s are usually quiet days, but I’m interested to look at industrial filtration company Donaldson (NYSE: DCI). Its prospects are largely dictated by conditions in China. Its exposure to transportation and industrial products (with a heavy weighting towards construction machinery) will always mean it is a cyclical play.
Construction, mining and heavy trucking are problematic end markets right now, and investors have seen the point of an anticipated pick up being pushed out to the end if 2013 in previous reports. The key thing in the upcoming results will be the commentary over the recovery in China and where the country’s stimulus spending will be directed. In general it has been a weakening environment for its industry bellwethers, with Caterpillar and Joy Global both struggling to convince. On the other hand, Alcoa reiterated its guidance for 2013 within China, and since this implies 12%-16% growth in its Chinese heavy truck and trailer division, I think this bodes well.
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