Week in Preview: Beige Book Highlights Holiday-Shortened Week
The Federal Reserve's next Beige Book report is scheduled to be released this week. This report is a compilation of anecdotal information on current economic conditions from each of the 12 Federal Reserve Bank districts, and it is released eight times a year. The data comes from interviews with business contacts, economists, market experts, and other sources. While the June report showed modest growth across districts, the July report showed that the economic recovery had slowed, even stalled in some districts.
Other economic data due out this holiday-shortened week include:
- Wednesday: consumer credit outstanding in July
- Thursday: trade balance in July; initial jobless claims for last week
- Friday: wholesale trade in July
The crunch of second-quarter earnings reports is over; National Semiconductor (NSM) is the only S&P 500 member scheduled to report earnings this week. But there are still a few reports that may be worth a look, including results from Smithfield Foods (SFD), Talbots (TLB) and Men's Wearhouse (MW).
The world's largest hog and pork processor, Smithfield Foods, was a rumored takeover target and released its annual corporate social responsibility report during its fiscal fiscal quarter. Analysts surveyed by Thomson Reuters forecast earnings to total 45 cents per share. That compares to a year-ago loss of 56 cents per share. Revenue for the three months that ended in July is expected to come to $3.0 billion, or 12.1% more than in the same period of fiscal 2010. Looking ahead to the second quarter, analysts foresee sequential and year-over-year revenue growth. The per-share earnings results have topped analysts' expectations in the past three quarters, and the first quarter will be the third in a row in positive territory.
Smithfield's long-term EPS growth forecast of 9% is better than that of Tyson Foods (TSN). The 14.9 forward price-earnings (PE) ratio is less than industry average and the trailing PE ratio of 15.3. Smithfield's net cash flow from operations swung into the black in the most recent reporting period. The First Call recommendation recently shifted from holding to buying SFD, and the mean price target is $18.50. Shares have climbed 12.1% in the past month and ended the week at $16.72. The 52-week high is $21.48.
Analysts anticipate that Talbots, which sells women's apparel and accessories in 580 stores and 20 catalogs, will report second-quarter earnings of a nickel per share, which compares to a loss of 33 cents per share in the same period of last year. During the three months ended in July, Talbots closed a share offering and saw two new board members, and analysts expect revenue for that period to total $316.8 million, up 4.0% year over year. And the consensus forecast calls for sequential and year-over-year growth of both EPS and revenue in the third quarter. Talbots beat earnings expectations in recent quarters, by 21 cents per share in the first quarter.
Talbots' long-term EPS growth forecast of 14.0% tops that of competitors such as Macy's (M) and Nordstrom (JWN). The forward PE is 13.2, but that's less than the industry average and the trailing PE ratio of 23.5. Talbots reported no long-term debt in the first quarter. The stock has seen recent analyst upgrades, and the consensus recommendation remains to buy TLB. The mean price target is $17.29. The stock has traded mostly between $10 and $12 since June, and the share price ended the week at $11.49.
During the three months that ended in July, Men's Wearhouse named a chief of digital strategies and declared a quarterly dividend. The Houston-based discount menswear retailer is expected to post EPS of 77 cents, which is a 7.8% increase from a year ago. Second-quarter revenue is expected to have grown 1.7% to $535.0 million. So far, analysts predict full-year earnings of $1.35 per share (+20.7%) on revenue of $1.9 billion (+1.7%). Earnings results have topped consensus estimates in recent quarters, by as much as 12 cents per share.
The long-term EPS growth forecast of 8.3% is better than the industry average, and the forward PE ratio of 14.9 is less than the trailing PE ratio of 17.2. Men's Wearhouse has a dividend yield of 1.7% and it reported no long-term debt in the first quarter. Analysts on average recommend buying MW, and their mean price target is $25.50. Shares have met resistance around $20 since June but closed Friday up to $21.36, along with the market rally that ended the week.
Others scheduled to post quarterly results this week include Casey's General Store (CASY), Ciena (CIEN), Korn Ferry (KFY), Lululemon Athletica (LULU), Navistar (NAV), Pep Boys (PBY) and Smith & Wesson (SWHC).