Updated from 9:28 a.m. ET on Feb. 21 to include latest information on progress in Greece's bailout talks.
NEW YORK (
) -- Yes, there are quarterly reports, economic data, and the latest drama from Greece to concern investors this week, but there's also a reason for hope and optimism: Pitchers and catchers reporting for spring training!
After all, the baseball fan is up there with the retail investors as one of nature's great rationalizers, always finding a way to summon a scenario where his or her team can go all the way. If this guy builds on what he did last year, if the rookie has a breakout season, if the old vet can turn the back the clock for six months, it's World Series here we come. Anyone who's ever bought a tiny biotech stock knows the feeling.
The slow stretching, easy smiles, green grass and blue skies that accompany baseball in February epitomize hope: Everyone is 0-0 again, nothing counts yet and nearly all the story lines can be spun into positives.
In that spirit, any bearish indicators out there are being overlooked for a day in favor of keeping it simple and stating that stocks are putting together a helluva year so far. The
has booked gains in six of the first seven weeks of 2012, the equivalent of hitting .857. It's been mostly worm-burners, one small gain after another, but they've added up to an 8.2% year-to-date advance on a price basis.
2011 was flat for the S&P 500, and the index still is
facing a hurdle
as it comes up against last year's high of 1370, but given the way things are progressing, investors can be forgiven if they dare to dream.
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Dow Jones Industrial Average
has risen an impressive 5.9%, while the
, helped along by an MVP-caliber year from
, is the comeback kid, surging 13.3% so far after losing roughly 2% in 2011.
An unspectacular earnings season hasn't slowed stocks, and the economic data seem to be picking up some momentum, with housing and employment showing real signs of life recently.
coming through with QE3 cropped up this past week, but that can be spun as one of those good problems to have, because it means economic conditions are improving enough that another round of asset purchases isn't justifiable.
Europe's not out of the woods by any means, but optimism that Greece will get its next round of bailout money and about the European Central Bank's second long-term refinancing operation later this month are keeping the sellers at bay.
Being bearish right now seems to be the equivalent of being the cranky guy who calls the sports talk radio station in the middle of the night to drone on about all the things the manager of the first-place team did wrong in the last game (even though it won). There may be some logic in his sourness, but no one wants to hear it.
As for Tuesday's scheduled news, there's no economic data to speak of, but it's a big earnings day, one of the last of the fourth-quarter reporting season.
The heavy hitters before the bell are two Dow components,
Home Depot is due to report its fiscal fourth-quarter results, and Wall Street is expecting a profit of 42 cents a share on revenue of $15.5 billion for the January-ended quarter, which is typically its weakest because of the slowdown in home improvement and construction projects during the winter months.
Shares of the Atlanta-based company have been strong performers over the past year, rising nearly 23% and hitting a new 52-week high of $46.72 during Friday's session. At their closing price of $46.71, the shares trade at a forward price-to-earnings ratio of 16.9 and have a forward annual dividend yield of 2.5%.
The sell side is pretty upbeat, with 19 of the 30 analysts covering Home Depot at strong buy (11) or buy (8), but the 12-month median price target sits at $47, indicating some sentiment that valuation is stretched.
Citigroup previewed the quarter last week, asking, "Is it All Priced in?" The bank, which has a buy rating and a $49 price target, answered "no," saying it sees upside potential in both the fourth quarter and the fiscal 2013 outlook. It's expecting a profit of 43 cents a share, a penny ahead of consensus with same-store sales up 2.5%-plus, mainly because of indications that professional construction activity has picked up.
"Although it is a 'tough' comp, we think other areas of the store have accelerated vs. last year, specifically appliances (from potential share gains from
), construction tools, and professional services," Citigroup wrote.
The bank's analysts also wrote that Home Depot needs to forecast fiscal 2013 earnings of $2.80 to $2.90 per share, 2%-5% above the current consensus, "in order to trigger a significant positive catalyst (+5%-+7%)" for the shares.
Bank of America Merrill Lynch was also bullish on Home Depot last week, keeping a buy rating while lifting its price target to $50 from $46 ahead of the report.
"We believe HD will continue to execute well and gain share within the home improvement industry," the firm said. "Reflecting incremental gross margin gains and expense leverage on higher same-store sales, we have raised our 2012 and 2013 EPS estimates to $2.81 and $3.30 from $2.78 and $3.21, respectively."
Home Depot gets the nod over competitor
from Bank of America Merrill Lynch, though. "With the stocks trading on similar valuations, we continue to prefer HD over LOW as we expect it to benefit to a greater degree from its company-specific initiatives (supply chain and technology enhancements) and believe it executes better vs. LOW."
Check out TheStreet's quote page for Home Depot for year-to-date share performance, analyst ratings, earnings estimates and much more.
As for Wal-Mart, shares of the world's biggest retailer have been winners as well over the past year, rising 16.4% and hitting a 52-week high of $62.63 on Feb. 1. As of Friday's close, at $62.48, the stock has a forward P/E of 12.8 and a forward annual dividend yield of 2.3%.
The average estimate of analysts polled by
is for earnings of $1.45 a share on revenue of $124.2 billion in the January-ended quarter. Wal-Mart has a solid earnings track record, beating the consensus view in six of the past eight quarters, although the margin of upside surprise is typically less than 5% and it did come in a penny short in the third quarter.
The majority of the sell side is a bit cautious, however, with 16 of the 29 analysts covering Wal-Mart at hold (15) or underperform (1) and the 12-month median price target at $64. For its part, Bank of America Merrill Lynch made a bold bullish call on Feb. 1, saying it expects 2012 to be a breakout year for the company and setting a price target of $70.
The bank offered up 10 reasons to buy Wal-Mart at the time, leading with its feeling that the outlook for the company's core, low-income U.S. consumer is improving.
"We believe modest improvements in the unemployment rate and consumer confidence plus an outlook for lower gas prices vs. last year support a solid outlook for WMT's core, low-to-mid-$40k annual income consumer," Bank of America Merrill Lynch said.
The bank's analysts also cited an expectation for continued improvement in U.S. same-store sales owing to initiatives like offering layaway and price-match guarantees, strong global square footage growth of 4-5% this year, an effort by Wal-Mart to lower its selling, general and administrative expenses by 100 basis points over the next five years, and improving trends in the company's international business supported by an emerging middle class overseas.
Wal-Mart also got a fairly positive review Friday from Jefferies, which lifted its price target to $57 from $54 but stayed at a hold rating ahead of the quarter.
"Our checks lead us to think Wal-Mart achieved its goal for positive comp store sales in U.S. Wal-Mart stores, and we are upping our comp store sales estimate to 2.0% from 1.5%, against an easy comparison of -1.8% a year ago," Jefferies said. "Given the well-communicated mission to invest in price, it is unclear how much margin Wal-Mart may have given up to accomplish a better comp store sales gain, so we are not changing our $1.45 Q4 EPS estimate."
Check out TheStreet's quote page for Wal-Mart for year-to-date share performance, analyst ratings, earnings estimates and much more.
Other notable companies reporting early Tuesday include
Barnes & Noble
Dollar Thrifty Automotive
Medco Health Solutions
is a big name reporting after the bell, and Wall Street is expecting earnings of 51 cents a share on revenue of $15.94 billion in the computer maker's fiscal fourth quarter.
The stock has done well over the past year, rising nearly 20% and hitting a 52-week high of $18.33 last Thursday, and that run-up ultimately prompted Sterne Agee to downgrade the stock to underperform from neutral last week.
"We believe investor sentiment on DELL shares has gotten too positive and arguably complacent," said the firm, which has a $15 price target on the stock. "What we find interesting is that consensus CY12 estimates call for 2% top-line growth and a 4% decline in EPS. This compares to peers IBM, AAPL, CSCO, and HPQ, where most are looking for high-single-digit to low-double-digit EPS growth."
Sterne Agee sees 15%-20% downside risk in the stock at current levels, arguing that the company is in a transitional phase but isn't being aggressive enough.
"We believe DELL remains in a tough competitive position sandwiched between lower-cost players (
) and AAPL encroaching more in its core PC business as Macs and iPads gain share," the firm said. "Despite efforts to grow beyond a PC company, we estimate 70%-75% of its business is tied to PCs. This includes peripherals, software, and services. In addition, we see HPQ, IBM, and CSCO competing more in its core market in small-medium business (SMB) and servers."
The later roster of reporters also includes
Chiquita Brands International
Extra Space Storage
Grand Canyon Education
Papa John's International
The action in shares of
will also be interesting to watch on Tuesday. The volatile stock got a 3%-plus haircut on Friday after the China Internet search provider's
. The earnings were above consensus, but the company's outlook for revenue of $666.5 million to $688 million in its fiscal first quarter does represent a sequential decline from its fourth-quarter total of $710.9 million.
Over the weekend, China
Jefferies kept its buy rating and $200 price target on Baidu shares following the report, saying the company's "growth outlook is intact as traditional offline and brand advertisers increase spending on search marketing."
The firm wasn't put off by Baidu's guidance and underlined how quickly the company is growing by noting it added 5,200 employees in 2011, including 1,400 in the fourth quarter, to bring total headcount to more than 16,000.
"Baidu guided 1Q12 total revenue at RMB4.195bn-4.33bn, representing 72.2-77.7% YoY growth or 3.2-6.2% QoQ decline," Jefferies said. "The QoQ decline is mainly due to weaker seasonality for online ads in 1Q11. The midpoint of the guidance (RMB4.26bn) is 12.3% higher than our previous forecast (published on January 30), and in line with consensus."
Baidu shares closed Friday at $136.90, down 3.5%, with volume reaching nearly 16 million, more than two times its three-month trailing daily average of 6 million. Year-to-date, the stock is up 17.5%, pushing its forward P/E to 21.2.
Check out TheStreet's quote page for Baidu for year-to-date share performance, analyst ratings, earnings estimates and much more.
And finally, the decision on releasing the next round of bailout money for Greece should come later Monday with Eurozone leaders and representatvies from the International Monetary Fund, and the European Central Bank and private creditors meeting in Brussels. The big deadline is March 20, but Greece needs the funds now so it can move ahead on a debt relief deal with said private creditors.
The feeling is that
, according to
The Associated Press
"Greece comes into today's Eurogroup meeting having fulfilled all the requirements for the approval of the new program," Greece's Finance Minister Evangelos Venizelos told the
on Monday. "For Greeks, this is a matter of national dignity and a national strategic choice and no other integrated and responsible choice can be opposed to it."
-- Written by Michael Baron in New York.
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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.