The week in preview: Best Buy, General Mills, Oracle and more earnings expectations

Posted Dec 13th 2009 12:30PM by Trey Thoelcke
Filed under: Earnings Reports, Forecasts, Best Buy (BBY), General Mills (GIS), Oracle Corp (ORCL), Palm Inc (PALM), Economic Data

Best Buy Inc. (BBY), which was a favorite on Black Friday, announced a partnership with Netflix (NFLX) and another one with Google (GOOG), as well as declared a quarterly dividend, during its fiscal third quarter. For the three months that ended in November, Best Buy is expected to report that earnings rose 18.6% from a year ago to $0.43 per share. Revenue is expected to total $11.9 billion, or 4.2% higher than a year ago. The full-year forecast is for a profit of $2.95 per share (+2.4%) on $48.6 billion (+7.8%) in sales. This Richfield, Minn.-based company has topped earnings estimates in three of the past four quarters, by as much as 21 cents per share.

Best Buy's long-term EPS growth forecast of 12.5% is better than that of Walmart (WMT). Best Buy's earnings multiple is 14x. Analysts, on average, recommend buying BBY and have for more than 90 days; two analysts recently raised their earnings estimates. The mean price target is $44.77. Shares have risen 11.5% in the past three months and recently reached a new 52-week high of $44.50.

The three months that ended in November saw General Mills Inc. (GIS) introduce the new and improved Breakfast of Champions and its new Worldwide Innovation Network, as well as declare a quarterly dividend. Analysts expect this Minneapolis-based breakfast cereal maker to report fiscal second-quarter 2010 earnings of $1.44 per share, up from $1.36 per share in the same period of last year. Revenue for the period is expected to be 1.6% higher to $4.1 billion. And the forecast is for year-over-year growth of both EPS and revenue in the third quarter. General Mills has beat consensus earnings estimates in four of the past five quarters, by 25 cents per share in the first quarter.

The long-term EPS growth forecast for General Mills is 9.1%, which is better than that of Ralcorp (RAH) but less than Kellogg (K). General Mills has an earnings multiple of 15x, which is less than the industry average. The consensus recommendation remains to buy GIS, with a mean price target of $73.29. iStockAnalyst likes the company's strong brands and growth potential overseas, and the Motley Fool suggests hanging on to the stock. Shares have risen 14.0% in the past three months and are trading near the 52-week high of $69.53.

Enterprise software giant Oracle Corp. (ORCL) denied that its proposed acquisition of Sun Microsystems (JAVA) would reduce competition and detailed its plans for Sun during the three months that ended in November. Analysts are looking of the Redwood Shores, Calif. company to report that fiscal third-quarter earnings rose two cents per share from a year ago to $0.36. Revenue is expected to the same as a year ago, or $5.7 billion. And so far analysts expect fourth-quarter numbers to be about the same. Oracle has met or topped earnings estimates in recent quarters.

Oracle's long-term EPS growth forecast is 12.8%, which is better than that of Microsoft Corp. (MSFT). Oracle's earnings multiple is 11x, which is less than the industry average. Analysts, on average, recommend buying ORCL and have for more than 90 days. The mean price target is $24.91. The Motley Fool called it a healthy company based on its metrics. Shares have risen 8.8% in the past six months and are trading near the 52-week high of $23.00.

Analysts expect to see a narrower loss from Palm Inc. (PALM). The Sunnyvale, Calif.-based smartphone maker announced that it opened the doors to its webOS developer program and also announced a stock offering in its fiscal second quarter. The consensus forecast is for a net loss of $0.32 per share, down from a $0.73 per-share loss in the same period a year ago. But sales for the period that ended in November are expected to be 38.6% higher to $265.5 million. The forecast is for an even smaller loss in the third quarter, as well as more than 400% year-over-year growth in revenue during the holiday shopping period. Palm's losses were smaller than expected in the previous two quarters.

Palm's long-term EPS growth forecast is 16.4%, but that is less than rival Research in Motion Inc. (RIMM). Some have speculated that Palm brand could disappear next year, perhaps due to a takeover by Nokia (NOK). One analyst, though, expects an upside surprise this week. After falling off in October from around $17.00, Palm shares have been trading around $11.50 in the past month and closed Friday at $11.86.

Homebuilder Hovnanian Enterprises Inc. (HOV), which saw its chairman and founder pass away during the fiscal fourth quarter, is expected to report that, for the three months that ended in October, its net loss narrowed to $1.40 per share from a loss of $5.79 per share in the year-ago period. But revenue for the quarter is expected to total $454.1 million, or 37.1% lower than a year ago. The full-year forecast is for a net loss of $7.69 per share on $1.6 billion in revenue, compared with a year-ago net loss of $16.04 per share on of $3.3 billion. But losses for this New Jersey-based company have been deeper than expected in three of the past four quarters.

Hovnanian's long-term EPS growth forecast is 6.0%, which is less than that of competitors D.R. Horton Inc. (DHI), Lennar Corp. (LEN) and Pulte Homes Inc. (PHM). Investopedia sees Hovnanian as a possible takeover target. Shares have faced resistance above $4.00 since early August and recently slipped below the 100-day moving average. But at $3.60, the share price is 60.7% higher than a year ago.

Other companies expected to report earnings growth this week include Research in Motion (RIMM), Scholastic Corp. (SCHL) and Take-Two Interactive Software Inc. (TTWO). But Adobe Systems Inc. (ADBE), Carnival Corp. (CCL), Darden Restaurants Inc. (DRI), Discover Financial Services (DFS), FedEx Corp. (FDX) and Nike Inc. (NKE) are forecast to post smaller earnings, while Rite Aid Corp. (RAD), Pier 1 Imports Inc. (PIR) and Winnebago Industries Inc. (WGO) are expected to report losses for the recent quarter.