WGO Easily Tops Q3 EPS Expectations
Winnebago (WGO 12.75 +1.67) reported fiscal third quarter earnings this morning, topping Wall Street expectations.
The company reported fiscal third quarter earnings of $0.21 per share, $0.18 better than the Thomson Reuters consensus of $0.03. Revenues rose 165.4% year-over-year to $134.8 million, below the $137.9 million dual-analyst estimate.
Winnebago Industries' sales order backlog was 935 motor homes at May 29, 2010, an increase of 144.8 percent compared to the end of the third quarter of fiscal 2009.
The company said , "While our sales order backlog increased considerably since the third quarter of fiscal 2009, it has declined 19.3 percent sequentially from the end of the second quarter of fiscal 2010."
CPI Supports Disinflation Trend
The CPI data for May provide further affirmation that the Fed will be on hold for some time yet. Inflation pressures are simply not a problem at this juncture. The trend in both total CPI and core CPI is clearly one of disinflation, which is apt to stoke commentary about a possible turn to a deflation environment.
Consumer prices declined 0.2% in May, slightly lower than the -0.1% decline in April. The Briefing.com consensus expected the index to fall 0.1%. Total CPI is up 2.0% year-over-year versus a 2.2% increase in April.
Core prices, which exclude food and energy, increased 0.1% (consensus +0.1%). The year-over-year core CPI growth rate has fallen to 0.9%, well below the Fed's target level of 2.0% - 2.5%.
The drop in prices was not much of a surprise.
Energy prices declined 2.9% in May, which was mostly due to a 5.2% drop in gasoline prices. However, most of this was a statistical anomaly as the nonseasonally adjusted gasoline prices actually increased 0.7%.
Food prices remained unchanged from April's level. As expected from the PPI report, fruits and vegetable prices, which increased 3.4% in March following a poor early harvest, fell 1.1% in May as more supplies came on-line. The drop in fruits and vegetable prices offset gains in most other food sectors.
Outside of the food and energy sectors, there were no sectors that showed extraordinary price changes during the month.
STLD Issues Downside Q2 EPS Guidance
After the close yesterday, Steel Dynamics (STLD 14.06 -0.15) issued second quarter earnings guidance, which is below current Wall Street expectations.
The company issued second quarter earnings guidance of $0.20 to $0.25 per share, below the $0.34 Thomson Reuters consensus.
STLD said second quarter earnings will be impacted quarter-over-quarter by decreased metals recycling margins as scrap prices declined early in the second quarter, and by lower flat-rolled volumes and margins. Production and shipping volumes in the company's steel operations were impacted by planned spring maintenance outages and by unexpected transformer repairs at the Roanoke Bar and Flat Roll divisions in June.
The company said, "Our steel operations had healthy earnings in April and May with some slowing of order entry for June at our Butler flat-rolled facility... Unfortunately our structural steel business remains challenging with only marginal improvement."
The Initial Claims Level Reveals a Dismal Labor Sector
Initial claims for the week ending June 12 jumped by 12,000 to 472,000 and neared the recent May 14 peak of 474,000 claimants. The Briefing.com consensus expected claims to fall to 450,000.
These numbers do not reveal a strengthening labor market. Instead they suggest that businesses remain cautious about future consumer demand. Furthermore, the claims data fit the view that the recovery in the labor market will be a protracted one.
As much as analysts would like to discount changes in the claims numbers, the claims level has tracked sideways since the end of December. More importantly, the sideways movement in the initial claims level provides more evidence that the 218,000 private nonfarm payroll increase in April was an outlier and that we should expect growth in the 40,000 - 60,000 range instead.
The continuing claims level increased from 4.483 mln for the week ending May 29 to 4.571 mln for the week ending June 5. The consensus expected the claims level to fall to 4.475 mln.
A move higher should not have been too much of a surprise. The May 29 decline was the largest since July 2009 and was due to an increase in the number of claimants whose benefits had expired. As the expiration rate slowed, the influx of new initial claimants pushed the continuing claims level higher.
The emergency extended benefits level declined 191,103 for the week ending May 29. We do not believe this was due to recent hiring. Like last week's continuing claims level, it was caused by an increased expiration rate.
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