With only a week left in the current quarter, the S&P 500 is now up 6.2%, year-to-date, and well off of its April 2 peak of up 12.8%. Last week, a number of factors drove the Dow Jones Industrial Average down more than 75 points and the S&P 500 down more than 0.3%. These factors included the Federal Reserve cutting its outlook for the domestic economy and extending its most recent economic stimulation move — Operation Twist, aimed at keeping long-term interest rates low — while the G20 meeting produced nebulous results, as well as the latest readings on the German and Chinese economies slowing further than economists had expected.
On top of that policy and economic information, a number of companies either pre-announced June quarter shortfalls or cut their 2012 outlook. As you’ll soon see, the companies issuing such warnings were not confined to a particular industry, but were across a number of industries, making all of this even more worrisome.
Before we review those company forecasts, let’s consider the latest quarterly poll of chief executives completed by The Business Roundtable. The key takeaway from the survey findings is not that surprising, given the economic backdrop and cloud of uncertainty that lies ahead — fewer large U.S. companies plan to hire or boost spending in the next six months. More specifically, the Business Roundtable found that 36% of its CEO members plan to add workers during the next six months, down from 42% three months ago. And only 43% plan to step up spending on machinery, computers and other large goods, down from 48%.
Jim McNerney, the group’s chairman and CEO of The Boeing Co., blamed the dip in sentiment on “concern over increasingly persistent obstacles to a stronger recovery.” That view affirms the aforementioned cloud of uncertainty that is composed of U.S. tax reform, ObamaCare, the need to raise the debt ceiling, the looming fiscal cliff at the end of 2012 and the pending U.S. presidential election, as well as Europe’s financial crisis.
As I mentioned above, a number of companies from a wide array of industries cut their outlooks. Here are a handful of those companies:
- Ohio-based AK Steel (AKS) announced it would fall short of Wall Street expectations for the current quarter when it reduced expectations to $0.04-$0.06 in earnings per share, well below the $0.11 per share Wall Street was expecting.
- Procter & Gamble Co. (PG), which makes an array of everyday goods ranging from Tide detergent to Gillette razors, lowered its fourth-quarter earnings and revenue forecasts. P&G cut the forecast due to unfavorable foreign exchange rates, continued slow growth in developed markets and a slowdown of growth in China. Developed markets, making up 60% of sales, had dropped off significantly, while in emerging markets, P&G suffered mandated price cuts in Venezuela and import curbs in Argentina.
- Bed Bath & Beyond Inc. (BBBY), a retailer with properties in the United States, Puerto Rico and Canada, issued a weaker-than-expected profit outlook for the current quarter and eyes earnings of about $0.97-$1.03 per share vs. the $1.08 a share forecast.
- Adobe Systems Inc. (ADBE), maker of Photoshop and Acrobat software, cut its full-year revenue outlook as weak demand in Europe is poised to affect sales of the recently launched versions of its popular design software.
- Transportation and services company FedEx Corp. (FDX) cut its first quarter earnings forecast to $1.45-$1.60 per share, below analysts’ forecasts of $1.70 per share, citing uncertainty in the global economy, notably the European debt crisis and slowing growth in Asia that could crimp demand for FedEx’s services. The company’s outlook assumes U.S. gross domestic product growth of 2.2% and global growth of 2.6% this year.These warnings follow other companies, such as yoga-wear retailer LuLuLemon (LULU); mattress companies Tempur-Pedic (TPX) and Mattress Firm Holding (MFRM); and jewelry companies Tiffany & Co. (TIF) and Signet Jewelers (SIG), which all have announced disappointing performance in the last few weeks. With another week to go until the end of the quarter and another before we start hearing from companies about their 2Q 2012 results, odds are we will be receiving more shortfall warnings.
Despite the market environment, we’ve added several new positions in the last few weeks to my PowerTrend Profits portfolio, which each have returned more than 2% in the last several days of market trading. And, that performance is before we factor in their dividend yields that range from 3.2% to 5.5%. I’ll be sharing more prospects like these in the coming weeks to subscribers of my monthly investment newsletter, PowerTrend Profits.
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Editor, PowerTrend Brief
P.S. Today’s challenging market conditions require even more knowledge than ever for investors and traders like you to keep pace with the latest market intelligence to safeguard your portfolio and to profit from opportunities that only may be available for short periods of time. Join me at this year’s MoneyShow San Francisco, August 24-26, at the San Francisco Marriott Marquis to hear recommendations and advice about how best to profit in 2012 and beyond! Register FREE today by clicking here, by going to ChrisVersace.sanfranciscomoneyshow.com or by calling 1-800/970-4355 and mentioning priority code 027877.
Today, June 25, I’ll be attending the Hershey Company’s (HSY) 2012 analyst meeting in New York. Analyst meetings are great on a number of fronts, since they are chock full of company presentations on different business lines and they afford the opportunity to talk one on one with not only senior management but business group heads. In other words, there are a number of large and small insights to be had and my goal is to gather them to share with you next week.
Later this week, we’ll be hearing from some homebuilding companies and gun manufacturer Smith & Wesson, as well as getting the latest on athletic wear from both Nike and Finish Line as we gear up for the 4th of July holiday before diving headfirst into earnings.
Here’s what I’ll be watching for this week:
Monday, June 25
New Home Sales (May)
Imperial Holdings (IFT)
Park Electrochemical (PKE)
Tuesday, June 26
Consumer Confidence (June)
H&R Block (HRB)
Robbins & Myers (RBN)
Wednesday, June 27
MBA Mortgage Index (Weekly)
Durable Orders (May)
Pending Home Sales (May)
Casella Waste Systems (CWST)
General Mills (GIS)
Lennar Corp. (LEN)
McCormick & Co. (MKC)
Monsanto Co. (MON)
Paychex Inc. (PAYX)
Thursday, June 28
Initial & Continuing Jobless Claims (Weekly)
GDP (1Q 2012 – third estimate)
Family Dollar Stores (FDO)
Nike Inc. (NKE)
Research in Motion (RIMM)
Shaw Group (SHAW)
Smith & Wesson (SWHC)
Friday, June 29
Personal Income & Spending (May)
Chicago PMI (June)
Michigan Sentiment Index (June)
Constellation Brands (STZ)
Finish Line (FINL)
KB Home (KBH)