Zacks Earnings Preview: Activision, Bunge Limited, EOG Resources, Equifax and Harman International

Business Wire, Feb 4, 2008

CHICAGO -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Activision (Nasdaq:ATVI), Bunge Limited (NYSE:BG), EOG Resources (NYSE:EOG), Equifax (NYSE:EFX) and Harman International (NYSE:HAR). 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.

Earnings season shifts toward mid-cap and small-cap companies, though there are 83 S&P 500 member companies on deck. Among the most notable are Cisco Systems (Nasdaq: CSCO) and Dow component Walt Disney (NYSE: DIS).

The higher proportion of smaller companies suggests that earnings headlines will do nothing for the most part to stem the level of volatility characterizing the markets right now.

It is difficult to predict when this volatility will end. Many of the intraday moves have been fueled by event-driven news such as the rouge French trader, mortgage insurer credit quality and surprise mergers. Plus, economic visibility remains limited.

There will be some frivolous discussion about the Super Bowl indicator. This indicator is supposedly predicts how the markets will perform based on whether an old AFL team wins or not. It has proven to be fairly accurate in the past, but this is simply a case of pure coincidence. How a football team performs has as much impact on market direction as who gets an Oscar for best actress. Put bluntly, it doesn't matter and given enough time, the Super Bowl indicator will lose its accuracy.

What does work, however, are earnings estimate revisions. Therefore, it is important for investors to continue monitoring the companies within their portfolios. Also, keep reading the earnings reports with an eye on earnings per share growth relative to net income growth. You want to make sure that EPS growth is being driven by higher overall profits and not share buybacks.

Going back to the week's schedule, forthcoming economic data includes:

* Monday: December factory orders

* Tuesday: ISM services index

* Wednesday: Preliminary fourth-quarter productivity

* Thursday: December pending home sales, December consumer credit and weekly unemployment claims (could a get a closer look following the drop in January nonfarm payrolls)

* Friday: December wholesale trade

Fourth-Quarter Earnings Results

Reports are in from slightly more than half of the S&P 500 member companies. Fourth-quarter earnings season is shaping up to be okay. Not great, but not horrible either.

Median per share earnings growth is 8.6%. Net income growth is 6%. The differential largely reflects the impact of stock repurchase programs.

Positive surprises are outnumbering negative surprises by a ratio of 2.3:1. This ratio reflects the fact that we are seeing a higher number of misses than in past quarters, due to the problems in the financial sector. Finance companies account for more than half of earnings misses reported so far. In total, 172 companies have beat expectations and 76 have missed.

Expanding the universe out to the S&P Composite (S&P 500, S&P MidCap 400 and the S&P SmallCap 600) does not significantly change the numbers. Per share earnings growth is 8.7% and net income growth is 6%. The ratio of positive to negative surprises is 1.78.

Companies That Could Issue Positive Earnings Surprises during the Week of Feb 4 - 8

Activision (Nasdaq: ATVI) produced two of most popular video games in December, according to the NPD group. ATVI's Call of Duty 4 was the best selling game and Guitar Hero III was ranked #3. Fourth-quarter consensus estimates are up two cents over the last 30 days to 77 cents per share. The most accurate estimate is more bullish at 79 cents per share. ATVI has exceeded expectations for three consecutive quarters. Activision is scheduled to report on Thursday, Feb 7, after the close of trading.

Last month, two of the covering brokerage analysts raised their fourth-quarter projections on Bunge Limited (NYSE: BG).The consensus estimate now calls for the agribusiness and food company to have earned $1.50 last quarter, six cents more than the average forecast of a month ago. The most accurate estimate is more bullish at $1.59 per share. BG has topped expectations for two consecutive quarters. Bunge is scheduled to report on Thursday, Feb 7, before the start of trading.

EOG Resources (NYSE: EOG) is one of several exploration and production (E&P) companies experiencing rising forecasts from brokerage analysts, as I stated in last Wednesday's Industry Rank Analysis. The reason is that oil prices stayed at higher levels than analysts expected last year. Now, that natural gas prices are rebounding, good guidance could accompany strong fourth-quarter earnings.

The consensus estimate calls for EOG to have earned $1.07 last quarter, two cents more than the average forecast of a month ago. EOG did miss expectations last quarter, but it previously had a four-year streak of topping expectations. EOG Resources is scheduled to report on Friday, Feb 8, before the start of trading.