Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Alcoa (NYSE: AA), First Niagara Financial Group (Nasdaq: FNFG), Gannett (NYSE: GCI), Genentech (NYSE: DNA) and Host Hotels & Resorts (NYSE: HST). To see more earnings analysis, visit http://at.zacks.com/?id=3207.
Earnings Preview written by Charles Rotblut, CFA, Senior Market Analyst for Zacks.com.
Third-quarter earnings season officially kicks off next week with Alcoa’s (NYSE: AA) report on Tuesday. Unfortunately, current trends are negative for the aluminum company. The third-quarter consensus estimate has been eroding over the past 60 days. Earlier this week, two analysts lowered their forecasts, resulting in the consensus estimate falling to 80 cents. Two months ago, analysts were forecasting profits of 83 cents per share. Notably, projections for 2006 and 2007 earnings have also been on the decline.
Alcoa is not a reliable proxy for determining how good, or bad, overall corporate profits are going to be. Although AA has topped expectations for two consecutive quarters, it missed fourth quarter expectations by three cents. Over the past eight quarters, Alcoa has topped estimates four times and missed four times.
Alcoa’s report may be regarded as the “official” start to earnings season, but AA is not the first company to report. Through Thursday evening, there have been 86 third-quarter reports from companies within the Zacks Rank universe(a). These are companies who operate on fiscal years that end in a month other than December.
The early results are encouraging. Positive surprises have outnumbered negative surprises by a margin of 4.6:1. Adjustments to full-year earnings estimates(b) are slightly negative for 2006 (average revision of -0.6%), but positive for 2007 (average revision of 2.1%).
Recent changes to analyst forecasts suggest that these companies could surprise when they report this week.
Host Hotels & Resorts (NYSE: HST) has been the recipient of some recent analyst optimism. The current third-quarter forecast of 28 cents per share is a penny higher than the month-old forecast. Projections for 2006 earnings are unchanged, but projections for 2007 have slowly been rising. HST matched expectations in the second quarter and topped expectations in the first quarter. Host Hotels & Resorts will report on Wednesday, before the open.
First Niagara Financial Group (Nasdaq: FNFG) has missed expectations twice during the past three quarters. Ahead of the company’s third-quarter report, the consensus estimate has been lowered by a penny to 22 cents per share. First Niagara Financial Group will report on Friday, before the open.
Gannett (NYSE: GCI) has missed once during the past four quarters. Over the past 30 days, nine of the 14 covering analysts have revised their forecasts for third-quarter earnings. These cuts have caused the consensus estimate to fall by two cents to $1.11 per share. Forecasts for 2006 earnings are down by five cents over the same period to $4.91 per share. Gannett will report on Wednesday, before the open.
Genentech (NYSE: DNA) has met expectations twice and beat expectations twice over the past four quarters. The current consensus estimate for third-quarter earnings of 46 cents is unchanged from 30 days ago, but one thing that caught my eye was the most recent consensus. The most recent consensus, which reflects the average of recently issued revisions, is 43 cents – three cents below the overall consensus estimate. Genentech will report on Tuesday, after the close.
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(a)The Zacks Rank is assigned to companies with earnings estimates made available by brokerage analysts. The Zacks’ database contains earnings estimates for approximately 4400 companies.
(b)Changes made to full-year forecasts within the last four weeks. The average is calculated based on 90% of the companies that have reported to prevent the skewing effect of outliers. The worse 5% of revisions and the best 5% of revisions have been excluded.
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