Earnings Warnings Might Be Losing Shock Value

Earnings warnings from major U.S. companies continue. But increasingly, they appear to be losing their ability to shock.

That could be another sign that the stock market has bottomed in the near term, analysts say.

On Monday, a number of major retailers warned that holiday sales are weaker than expected. But many of the stocks fell modestly, if at all.

Among those warning:

* Lowe’s Cos. said profit this fiscal quarter and next year will miss forecasts as the slowing U.S. economy dampens home building and prompts consumers to put off house-remodeling projects.

The second-largest U.S. home-improvement chain expects earnings of 40 cents to 42 cents a share in the fourth quarter ending Feb. 2. Analysts’ average estimate was 46 cents, according to First Call/Thomson Financial.

Yet the stock (LOW) closed up $1.94 at $41.81 after falling as low as $37.75.

Given the slowdown in consumer spending, “The fact that earnings will disappoint isn’t a surprise,” said David Buchsbaum, analyst at Wachovia Securities.

* Catalog retailer Lands’ End Inc. said its earnings this year would fall or change little from last year. Previously, the catalog merchant said profit would rise.

The stock (LE), however, rose $2.88 to $26.95.

* Wal-Mart, the world’s largest retailer, said sales at its discount and warehouse stores in the week ended Friday came in below company forecasts.

The results mark the second week in a row that sales have fallen short of the Bentonville, Ark.-based company’s expectations.

The warning by Wal-Mart (WMT) seemed to resonate more with worried investors: The stock slumped $3.06 to $51.38.

Also falling were specialty retailers Pacific Sunwear (PSUN), down $2.13 to $23.25, and Hot Topic (HOTT), down $4.19 to $37, after analyst Richard Baum at Credit Suisse First Boston cut ratings on the shares, citing concerns that they may not be able to rise much amid slowing retail sales.

Outside the retail sector, other profit warnings on Monday seemed to fall on deaf--or at least tolerant--ears.

McDonald’s Corp., the world’s biggest restaurant chain, said profit this year will be at the lower end of forecasts because sales dropped in Europe amid a mad-cow disease scare and a weak euro.

Profit will rise 10% to 11%, not the 10% to 15% gain the company expected, said spokeswoman Anna Rozenich.

“It’s mad-cow disease,” said Howard Penney, an analyst at Morgan Stanley Dean Witter with a “strong buy” rating on McDonald’s shares. “Consumers just have a little concern.”

The stock (MCD), already down 26% this year, inched up Monday despite the warning. It added 44 cents to $29.94.

Also rising Monday despite a warning was Anadigics Inc., a maker of telecommunications chips. The company said fourth-quarter profit and revenue will be below forecasts because of a drop in orders and slower sales of its new amplifiers for fiber-optic networks.

The company expects a fourth-quarter loss of 3 cents a share. It was expected to break even, the average estimate of analysts polled by First Call/Thomson Financial. Revenue will be about $31 million.

Shares of Anadigics (ANAD) rose $1.19 to $21. They had been as high as $112 this year, and fell as low as $15.88 in late November.