BALTIMORE (Stockpickr) -- The headlines are turning back to bearish this week as Spain's financial woes take center stage in the Eurozone debt crisis. With Greece's financial problems contained at the moment, Spain is facing additional scrutiny following the 1.5 billion euro bailout request from four Spanish banks. While the bailout funds being requested come from Spain's own rescue facility, Wall Street analysts will be anxious to see just how much that fund can take before the country is forced to turn to its European neighbors.
That risk has forced the spread on Spanish and German government bonds back toward 200 basis points, a sign that investors are pricing risk bank into borrowings of the Spanish government.
We'll see just how that economic turbulence prices into the market this week. So far in Monday's pre-market investors are focused on the bullish turn markets took in the last five trading days.
It's that bullish sentiment that helped last week's Rocket Stocks plays return 3.26%, beating the broad market by 0.75%. That jump means that in the last 47 weeks, Rocket Stocks have outperformed the
index by 60.23%.
If you've never run across them before, Rocket Stocks are our weekly list of beaten-down stocks with near-term growth catalysts and long-term fundamental growth potential. This week, we're turning to the Rockets once again to make bets on five earnings plays with stellar potential.
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International shipping giant
is set to announce its quarterly earnings numbers on June 16, providing Wall Street with a glimpse at just how well this company is recovering amid an uptick in consumer spending. Now nearly four decades old, FedEx has made considerable strides since its founding as the first express shipper back in the early 1970s. Since then, it's become the second largest U.S. airline by fleet size, established a serious mid-term delivery service with FedEx Ground, and outlived competitors like DHL, who were forced out of the U.S. domestic market after failing to operate profitably.
FedEx manages its success though its tremendous logistics prowess. By dealing with all of the details needed to get a parcel from point A to point B, FedEx takes the strain off of its customers and puts it onto its own transportation network. The slowed pace of business during the last couple years had a palpable effect on FedEx's bottom line, but the company's impressive cost structure enabled it to scale back outlays in line with the cutback in box volume.
Unlike its leading competitor,
United Parcel Service
, FedEx's employees aren't members of a union (barring its pilots), and most drivers are contractors - two factors that give FedEx the power to scale back its operations easily. Now that package volume is starting to pick back up, however, it's time to expect this company to stretch its operational legs once again. Watch earnings on Wednesday.
is another of this week's earnings plays. As the largest supermarket chain in America, the company benefits from significant size advantages over the competition. Those advantages have kept costs down as consumers eschewed the higher-margin items that once padded Kroger's coffers. A powerful private label initiative should turn that trend around.
While declining consumer spending definitely made an impact on Kroger's operations, the company continued to build its market share in 2009, a factor that made the situation markedly less bad. Kroger has been quick to adapt its business to trends, adding 900 gas stations to its own stores as a means of driving store traffic and increasing the value of its customer loyalty programs. But Kroger's private label branding is my favorite tailwind for 2010.
Private labels have proven to be one of the most impressive trends of the last few years. By stocking their own brands on store shelves, grocery chains have been able to increase their profitability and exert more control over the manufacturing and distribution channels. Expect those factors to make an impression when the company announces numbers on June 17.
Who Owns Kroger?
are living high on the hog in 2010. So far, shares of the hog producer and processor are up more than 12% year-to-date, versus a broad market that's in the red over that same period. Those gains come despite the impact of volatile hog pricing that continue to hang over the company's head. But while Smithfield faces some significant challenges, it has the potential to impress investors with its quarterly release this week.
There isn't much to say about the world's largest hog producer. Smithfield raises 20 million hogs annually, and carries significant advantages over its competitors with genetically proprietary hogs and a more advanced distribution channel. But the company is plagued by commodity volatility from both the hogs themselves and their input costs (such as corn and fuel). Couple that with a poor balance sheet position, and you have a seemingly unattractive prospect in Smithfield.
But for a short-term turnaround play, this company certainly has room to impress investors. Smithfield has been working hard to restructure its operations for palpable cost savings, and consumer spending increases should work their way down noticeably to meat producers. Watch this company's earnings on June 17.
Who Owns Smithfield?
Viking Global Investors
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At the time of publication, author had no positions in stocks mentioned.
Jonas Elmerraji is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.