Zacks Earnings Preview: KB Home, Lennar, Micron Technology, Monsanto and Oracle

Business Wire, June 25, 2007

CHICAGO -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Lennar (NYSE: LEN), Micron Technology (NYSE: MU) and Monsanto (NYSE: MON). To see more earnings analysis, visit http://at.zacks.com/?id=3207.

Earnings Preview is written by Charles Rotblut, CFA, Senior Market Analyst for Zacks.com.

The Federal Reserve Open Market Committee ("the Fed") will hold a two-day meeting on Wednesday and Thursday. The Committee's statement is expected to be released at about 2:15 p.m. (plus or minus five minutes) on Wednesday. The target for the federal funds rate should be left unchanged at 5.25%.

What could change is the language used in the statement. Core inflation is moving down towards the upper end of the Fed's perceived comfort range, though food and energy prices remain high. Resource utilization is basically unchanged from the last meeting. The adjustment in the housing sector is still ongoing. The economy appears to have picked up steam in the second quarter based on the ISM and Philadelphia Fed surveys. At the same time, a correction in the bond market has occurred, sending yields considerably higher. It seems likely that these two last factors will weigh on the committee's discussions and could cause a change in the statement's language. Obviously, any change in wording will be scrutinized by the financial markets.

The Fed's June meeting is not the only event on the economic calendar. May home sales data kicks off this week with existing home numbers due out on Monday and new home numbers due out on Tuesday. The Conference Board will publish its June consumer confidence survey on Tuesday. Wednesday features May durable goods orders. The final revision to first-quarter GDP data will be published on Thursday. Friday is packed with May personal spending and income, May construction spending, June Chicago PMI and the final June University of Michigan consumer confidence survey.

The emphasis on interest rate moves will remain amplified because of a relative lack of catalysts from the equity markets. The end of the fourth quarter could bring some window dressing from portfolio managers, but this should not have a significant impact on the overall weekly returns. The number of estimate revisions has been falling and while some companies could provide updated guidance, nothing more than a nominal increase in the overall number of estimate revisions is expected, at best.

The earnings calendar won't help much either. Only 45 companies are scheduled to report quarterly results (16 are S&P 500 members). Micron Technology (NYSE: MU) and Oracle (Nasdaq: ORCL) could have some influence on tech stocks, though the current trend in estimate revisions does not suggest either company is going to revise guidance upwards. The housing sector will also get additional focus with KB Home (NYSE: KBH) and Lennar (NYSE: LEN) reporting.

Companies That Could Issue Positive Earnings Surprises during the Week of June 25 - June 29

Monsanto (NYSE: MON) recently raised its full-year earnings guidance to between $1.75 and $1.80 per share, an increase of 15 cents per share. As part of this new guidance, the company expects fiscal third-quarter profits to be about $1.00 per share. All of the covering brokerage analysts promptly adjusted their forecasts, resulting in full-year and third-quarter consensus estimates of $1.81 and $1.00 per share, respectively. So, where is the room for the upside? MON has topped expectations during the past two quarters by an average of five cents per share, leading to the possibility that the company was a bit conservative with its guidance. Monsanto is scheduled to report on Thursday, June 28, before the start of trading.

Companies That Could Issue Negative Earnings Surprises during the Week of June 25 - June 29

The fact that earnings estimates have been falling for Lennar (NYSE: LEN) should not come as a surprise given the housing slump. Fiscal second-quarter profit forecasts are down two cents from a month ago to eight cents per share. The Most Recent Consensus is more bearish at four cents per share. What is notable, however, is that the full-year consensus earnings estimates for both fiscal 2007 and fiscal 2008 are declining - a sign that brokerage analysts do not expect optimistic guidance either. LEN has topped expectations once and missed expectations once during the past two quarters. Lennar is scheduled to report on Tuesday, June 26, before the start of trading.

Concerns about falling chip prices seem to be weighing on the quarterly forecasts for Micron Technology (NYSE: MU). During the past 30 days, about one-third of the covering brokerage analysts have cut their projections by seven cents. The revisions have resulted in a new fiscal third-quarter consensus estimate of a loss for a loss of 20 cents per share. The Most Recent Consensus is more bearish and calls for a loss of 30 cents per share. The semiconductor company has missed twice over the past three quarters. Micron Technology is scheduled to report on Thursday, June 5.