Benzinga Weekly Preview: ECB Back In The Spotlight

All eyes will be on the European Central Bank next week as investors wonder whether or not the bank will step in stop the region’s inflation from falling further. However, data out on Friday has eased the pressure on ECB President Mario Draghi to take action.

Key Earnings Reports

Next week investors will be waiting for several key earnings reports including Staples, Inc. SPLS, Finisar Corporation FNSR and Pinnacle Foods PF

Staples Inc

Staples is expected to report fourth quarter EPS of $0.39 on revenue of $5.98 billion, compared to last year’s EPS of $0.46 on revenue of $6.57 billion.

S&P Capital IQ has a Buy rating on Staples with a $17.00 price target. The team at S&P said they expect to see Staples sales and profitability increase over the next couple of years due to several drivers.

“We think the reinvestment of cost savings, the downsizing of its retail footprint, and product offering expansion will drive improved sales and profitability over the next few years. We also favor SPLS's management, what we view as its strong balance sheet, and significant cash generation. We think potential industry supply reductions following the merger of two competitors could improve the overall economics of the office supply retail industry, benefiting SPLS.”

Bank of Ame an Underperform rating on Staples with a $12.00 price objective. The rating was based on the analyst team an Merrill Lynch’s opinion that the company is lacking near term catalysts.

“Barring an unlikely improvement in the macro, we think near-term upside is limited as we expect earnings and multiples will be under pressure. Upside risks are higher levels of employment, further synergies resulting from Corporate Express, better-than-expected performance in Europe and faster-than expected growth in high-margin services. Downside risks are budget cuts, continued high unemployment, further deterioration in the small-to-medium customer base, worse-than-expected macro or currency weakness in Europe and slower-than-expected take-up of services. Also, if the Corporate Express integration proves less effective longer-term than planned, Staples will be negatively affected. Changes in the competitive landscape, given restructuring at its two big box competitors, could also impact the shares.”

Finisar Corporation

Finisar is expected first quarter EPS of $0.44 on revenue of $298.95 million, compared to last year’s EPS of $0.17 on revenue of $238.35 million

The analysts at Jefferies upgraded Finisar’s rating to Buy with a $30.00 price target on February 11, citing stronger demand for their optimism.

“We’re upgrading FNSR to Buy given our checks suggesting very strong demand trends in data center optics and a good backdrop for Telecom optical spend in CY14. We see potential for significant upside to our raised EPS estimates driven by these trends.”

Pinnacle Foods

Pinnacle Foods is expected to report fourth quarter EPS of $0.58 on revenue of $718.39 million.

Credit Suisse gave Pinnacle Foods an Outperform rating on February 10 and noted that the company has been an industry laggard.

“The weak sales trends of Pinnacle's brands (-7%) highlights why the investment proposition for the stock depends heavily on tack-on acquisitions and the company's ability to generate cost savings. We expect the stock's valuation multiple to expand in 2014 as investors get better visibility into the synergies from the Wish-Bone acquisition and the potential cost savings from bringing Duncan Hines manufacturing in-house.”

Economic Releases

Several central banks will release their interest rate decisions with the European Central Bank taking top bill on investors’ calendars. The ECB will be tasked with deciding if and how the bank should make a policy change in order to combat the region’s lackluster inflation data. The most recent figures showed that inflation was stable at 0.8 percent, which may take talk of another rate cut off the table.

Daily Schedule

Monday

• Earnings Releases Expected: Rockwood Holdings, Inc. ROC, Stratasys, Inc. SSYS, SolarCity SCTY
• Economic Releases Expected:  Australian interest rate decision, US manufacturing PMI, British manufacturing PMI, eurozone manufacturing PMI, German manufacturing PMI, French manufacturing PMI, Italian manufacturing PMI

Tuesday

• Earnings Expected: PC-Tel, Inc. PCTI, John Bean Technologies Corporation JBT
• Economic Releases Expected: British construction PMI, eurozone PPI, Australian GDP, Chinese services PMI

Wednesday

• Earnings Expected: No notable earnings reports expected
• Economic Releases Expected:  US services PMI, Italian services PMI, Spanish services PMI, German services PMI, French services PMI, eurozone services PMI, British services PMI, eurozone retail sales, US oil inventory data

Thursday

• Earnings Expected From: Costco Wholesale Corporation COST, Staples, Inc SPLS, CIENA Corporation CIEN, Joy Global Inc. JOY
• Economic Releases Expected: French unemployment rate, German factory orders, Greek unemployment rate Bank of England interest rate decision, European Central Bank interest rate decision

Friday

• Earnings Expected From:  Valero Energy Partners VLP, Footlocker Inc. FL
• Economic Releases Expected:  US unemployment rate, German industrial production, Italian PPI, US consumer credit, Chinese import and export data