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Zacks Earnings Preview: Adobe Systems, Best Buy, FedEx, Goldman Sachs and Morgan Stanley releases the list of companies likely to issue earnings surprises. This weeks list includes Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS). To see more earnings analysis, visit

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

Although we are still a few weeks away from the "official start" of second-quarter earnings season, there will be some notable reports during the third week of June. Five S&P 500 members are on the calendar: Adobe Systems (Nasdaq: ADBE), Best Buy (NYSE: BBY), FedEx (NYSE: FDX), Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS).

Second-quarter earnings will be down on an aggregate basis, but up on a median company basis.

At the aggregate level, earnings for the S&P 500 will be down 9.6% on a bottom-up basis (compiling estimates for all 500 companies) and down 7.5% on an top-down basis (compiling estimates for the index itself). Conversely, if growth is calculated on a median company basis, which diminishes negative impact of financial companies, earnings should grow by 6.4%.

Nearly 60% of the companies within the S&P 500 should report a year-over-year increase in per share earnings.

Key economic data will include:

  • Monday: June New York Fed survey, June National Association of Homebuilders index
  • Tuesday: May PPI, May housing starts, May industrial production and capacity utilization, first-quarter current account gap
  • Wednesday: Weekly crude inventories
  • Thursday: May Conference Board leading indicators, June Phili Fed survey, weekly initial jobless claims

Fed Chairman Ben Bernanke will testify before a Senate committee on Monday about health-care reform. The June Fed meeting will be held on June 24 and 25.

Friday will be a quadruple witching day, with stock options, index options, index futures and stock futures all expiring.

Overall, it could be a volatile week. Earnings from Goldman and Morgan will play a big role and quadruple witching could have an impact late in the week. Oil will remain a wildcard.

Companies That Could Issue Positive Earnings Surprises during the Week of June 16 - 20

Recent earnings estimate revisions do suggest any of the 25 companies confirmed to report are likely to beat expectations. This said, investors may want to note that Goldman Sachs (NYSE: GS) has topped forecasts for 11 consecutive quarters. Fiscal-second quarter, and full-year 2008 and 2009, forecasts have been falling, however, so another positive surprise is by no means guaranteed. Goldman Sachs is scheduled to report on Tuesday, June 17, before the start of trading.

Companies That Could Issue Negative Earnings Surprises during the Week of June 16 - 20

More than half of the covering brokerage analysts have slashed their fiscal second-quarter forecasts on Morgan Stanley (NYSE: MS) within the past 30 days. The cuts have caused the consensus earnings estimate to fall 33 cents to 98 cents per share. The most accurate estimate is more bearish at 95 cents per share. MS has missed expectations twice during the past four quarters. Morgan Stanley is scheduled to report on Wednesday, June 18, before the start of trading.

Charles Rotblut, CFA, is the senior market analyst for

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Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of +30%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have underperformed the S&P 500 by 270% annually (+3% versus +11%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Charles Rotblut, CFA
Phone: 312-265-9352

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