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TheStreet Open House

Paychex, Constellation Brands Report Earnings as July Begins

NEW YORK (TheStreet) - Payroll processing firm Paychex (PAYX) reports quarterly results for the period ending in May after the closing bell on Tuesday. Analysts expect the company to report earnings per share of 40 cents.

Since Paychex caters its payroll processing and human resources services to small and medium-size companies, a better-than-expected earnings report would indicate that the economy is on track to reverse the negative GDP growth reported for the first quarter.

If the economy is snapping back, that could bode well for Constellation Brands (STZ), which reports its quarterly results for the period ending in May before the opening bell on Wednesday. This stock is one of Jim Cramer's latest stock picks.

Analysts expect the company to report earnings per share of 92 cents. An earnings beat would indicate that consumers may have stocked up on beer, wine and spirits for Friday's Independence Day celebrations.

Improvements in a payroll processing firm could just lead to increased spending in the liquor stores.

Let's take a look at the stock profiles:

Paychex ($41.21) began 2014 setting a multiyear intraday high at $45.95 on Jan. 7, then traded as low as $39.86 on Feb. 4, which was below its 200-day simple moving average. The stock moved back above this key average the next day, trading as high as $43.56 on March 27. Paychex has been below its 200-day now at $41.98 since April 7. The stock ended 2013 at $45.53, so it has a year-to-date loss of 9.5%.

The weekly chart shifts to positive with a close this week above its five-week modified moving average at $41.22. The 200-week SMA lags at $34.03. Annual value levels lag at $33.76 and $33.42, with a weekly pivot at $41.20 and semiannual risky level at $45.22.

A positive earnings report should have this stock above its 200-day SMA with a positive weekly chart and upside potential back toward the January high.

Constellation Brands ($87.98) set an all-time intraday high at $88.60 on June 25 and last tested its 200-day simple moving average when it was around $29 back on Jan. 31, 2013. The 200-day SMA is now at $74.97. The stock ended 2013 at $70.38, so it has a year-to-date gain of 25%.

The weekly chart is positive with its five-week modified moving average at $84.16. The 200-week SMA lags at $38.50. An annual value level lags at $41.18, which is the risk if the alcoholic bubble breaks.

If the stock is trading below this week's pivot at $87.38 at Tuesday's close, that would be a warning. A semiannual value level is $76.49, with a quarterly risky level at $94.31 well above the all-time high.

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At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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