MILLBURN, N.J. (Stockpickr) -- Spring is here, the birds are chirping, and we are about to embark on another earnings season. But I expect this earnings season to stray slightly from the usual path. Instead of the usual focus on financial companies -- which I still expect to deliver improvements -- I anticipate that this earnings season, the economic recovery will expand to consumer and industrial companies.
That said, let's take a
at the next few weeks of earnings reports to see what we should anticipate.
Industrial demand is coming back. Metal and material commodity prices are rising. Whether it is aluminum and steel for aircraft and cars or copper for pipes and tubing, there are certain to be opportunities in this sector both for the suppliers and producers and for those using the commodities.
For the suppliers and producers, we could finally see some encouraging results. On a relative basis, improvements for cyclical steel producers such as
United States Steel
and perennial aluminum producing laggards such as
are expected. Alcoa, the traditional grand marshal of the earnings parade, reported after the close today, meeting analyst expectations with EPS of 10 cents excluding nonrecurring charges. Sales for U.S. Steel are expected to increase, and losses are expected to improve thanks to the improvement in auto manufacturing. Copper prices have soared due to increasing demand from China and to a lesser extent the U.S. as industrial activity has begun to sprout some green shoots. Earnings and sales for
Freeport-McMoRan Copper and Gold
are expected to surge.
User demand in the materials market is on the upswing. While
recently announced that commercial aircraft delivery declined in the first quarter of 2010 vs. the same quarter in 2009, the company is gearing up for production of its 787 Dreamliner after a successful test flight in the fourth quarter of 2009. The real end user darling is
, which has increased sales and market share. The entire industry has also seen a rebound in sales.
As I wrote
, the retail trade-down phenomenon is drawing to a close, and recent retail sales have supported this thesis.
Parents have a little more disposable income than they did in 2009. More teens and tweens have part-time jobs as substitutes for adult full-time employment. Retailers who target this consumer demographic are seeing sales growth return to their stores. Companies such as
are growing absolutely, while
Abercrombie & Fitch
American Eagle Outfitters
are turning themselves around.
I want to take this thought process one step further. For the first time since 2008 -- perhaps even 2007 -- this spring/summer, consumers will once again focus on their homes. Home improvement retailers such as
could see pent-up demand surge ahead of the spring and summer. Furthermore, those companies may have also benefited from the heavy winter snows across the country. Home improvement suppliers such as
Scott's Miracle Grow
Stanley Black & Decker
likely had solid advance sales, which could be reflected in first-quarter 2010 results.
Restaurants have been one of the hottest sectors in the market. But while it may appear that restaurants stocks are running on pure momentum, that is not the case. The economy is improving. Despite the poor weather patterns across the U.S. in January and February, diners were returning to casual dining establishments. This phenomenon will continue in 2010.
Commodity costs, with the exception of gasoline are stable or declining, so margins and traffic can comfortably increase. Growth concepts such as
Chipotle Mexican Grill
Buffalo Wild Wings
solidified their presence in the market during the recession and were able to grow strategically. Others, such as
, took another approach, rationalizing and resizing their businesses. While the stocks may reflect improved results, I expect the companies to report better-than-expected results and increase guidance.
-- Written by Scott Rothbort in Millburn, N.J.
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At the time of publication, Rothbort was long F, F Warrant, FCX, ARO, URBN, CMG, PNRA, BWLD and RT, although positions can change at any time.
Scott Rothbort has over 25 years of experience in the financial services industry. He is the Founder and President of
, a registered investment advisor specializing in customized separate account management for high net worth individuals. In addition, he is the founder of
, an educational social networking site; and, publisher of
. Rothbort is also a Term Professor of Finance at Seton Hall University's Stillman School of Business, where he teaches courses in finance and economics. He is the Chief Market Strategist for The Stillman School of Business and the co-supervisor of the Center for Securities Trading and Analysis.
Mr. Rothbort is a regular contributor to
TheStreet.com's RealMoney Silver
website and has frequently appeared as a professional guest on
Fox Business Network
and local television. As an expert in the field of derivatives and exchange-traded funds (ETFs), he frequently speaks at industry conferences. He is an ETF advisory board member for the Information Management Network, a global organizer of institutional finance and investment conferences. In addition, he is widely quoted in interviews in the printed press and on the internet.
Mr. Rothbort founded LakeView Asset Management in 2002. Prior to that, since 1991, he worked at Merrill Lynch, where he held a wide variety of senior-level management positions, including Business Director for the Global Equity Derivative Department, Global Director for Equity Swaps Trading and Risk Management, and Director for secured funding and collateral management for the Global Capital Markets Group and Corporate Treasury. Prior to working at Merrill Lynch, within the financial services industry, he worked for County Nat West Securities and Morgan Stanley, where he had international assignments in Tokyo, Hong Kong and London. He began his career working at Price Waterhouse from 1982 to 1984.
Mr. Rothbort received an M.B.A., majoring in Finance and International Business from the Stern School of Business, New York University, in 1992, and a B.Sc. in Economics, majoring in Accounting, from the Wharton School of Business, University of Pennsylvania, in 1982. He is also a graduate of the prestigious Stuyvesant High School in New York City. Mr. Rothbort is married to Layni Horowitz Rothbort, a real estate attorney, and together they have five children.