Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Company Earnings

They are also referred to as “corporate earnings” and “corporate profits:” basically, the amount of money a company makes in certain period of time. The price/earnings multiple is still the most common tool used to value a company. The stock market values a company based on the amount of money—the earnings and profits—the company has after all expenses, including taxes, have been paid. In a stock market where stocks are traded at an average of 12 times earnings, a company making $1.00 a share per year would be valued at $12.00. All things being equal, the more money a public company makes, the higher its stock price.

Old Adage of “Don’t Fight the Fed” Stands, but Big-Cap Earnings Uninspiring

By for Profit Confidential

Big-Cap EarningsEarnings season continues and the deluge of results is positively affecting the S&P 500, which is pushing new record highs.

Also continuing its positive upward trend are biotechnology stocks, which still harbor a lot of price momentum from institutional investors.

Ligand Pharmaceuticals Incorporated (LGND) has been very hot since the beginning of the year. The company produced a very strong first half as second-quarter revenues grew 67% to $9.6 million. Earnings were $6.1 million compared to a net loss of $2.5 million.

We’re now seeing a larger number of smaller companies report. They typically take longer to produce their quarterlies because they don’t have the large accounting departments multinational companies do.

Unscientifically, among the large number of companies I follow, I am noticing a more positive second quarter compared to blue chips. This is important, because smaller companies are much more tied to the domestic U.S. economy and, without question, they are stronger drivers of new employment. (See “This Benchmark Company Is Shocking the Street.”)

Mohawk Industries, Inc. (MHK), which is a flooring manufacturing company for residential and commercial customers, leaped higher after reporting second-quarter sales grew 35% to $2.0 million. Earnings per share jumped 61% to $1.84 after unusual charges. Company management said that it is increasingly confident regarding the U.S. market. The position jumped nine percent on the stock market after reporting.

ServiceSource International, Inc. (SREV) is a small company that’s in the business of providing cloud applications to grow recurring corporate revenues. This company announced a solid 13% increase in its second-quarter sales, reaching $67.7 million.

Adjusted earnings were flat, but ServiceSource’s revenue growth was … Read More

What Makes Dividend Increases Market-moving News

By for Profit Confidential

Dividend Increases Market-moving NewsThere is a huge amount of news for the stock market to digest this week, with both economic data and company earnings reports. The stock market has been unsure of itself the last couple of weeks, wondering if the rally off of the Federal Reserve’s third round of quantitative easing (QE3) was a fake out. Now, the market needs company earnings in order to justify its current level; the only problem being, they aren’t expected to grow much over last year’s third quarter.

There certainly is a positive trend to most of the economic news of late; a lot of people are becoming suspicious about the employment figures, however. Leadership in this stock market remains with large-cap technology stocks, and over the next two weeks, market’s largest players will report their corporate earnings.

One blue chip technology stock that has been hit really hard recently is Intel Corporation (NASDAQ/INTC). Ever since Intel announced slowing business conditions due to its operations in the eurozone and increased competition, the stock has been in a sustained downtrend. The company reports today; don’t be surprised if management increases its quarterly dividend again to attract investors. Intel’s company earnings are material to this market. The company’s stock chart is below:

Intel Corp Chart

Chart courtesy of www.StockCharts.com

Other important blue chips reporting today include Johnson & Johnson (NYSE/JNJ) and The Coca-Cola Company (NYSE/KO). Coca-Cola has been a stock market leader this year, but its position recently pulled back during the QE3 rally. Coca-Cola’s company earnings aren’t as material to this market as Intel’s, but they do affect sentiment. This is another company that’s increasingly likely to raise its … Read More

Research In Motion Had Better Be Right

By for Profit Confidential

Research In Motion Had Better Be RightResearch In Motion Limited (NASDAQ/RIMM), otherwise known as RIM, is begging for patience from its shareholders and analysts…and that’s an understatement!

The stock price is down 95% over the last four years after trading at over $140.00 in May 2008, so my stock analysis is indicating that lots of patience is required, which could be just too much to expect from investors at this time.

RIM’s management is lucky we live in a sane and lawful society; otherwise, the company’s executives might be dragged out into the streets, and well, I will let you imagine.

The story behind RIM was impressive. Powered by the visions of co-founders Mike Lazaridis and Jim Balsillie, this small Canadian technology company developed an innovative real-time e-mail system that operated via an early smartphone called the “BlackBerry.” There was nothing like it. Wall Street and corporations loved the idea of having real-time access to e-mails. So popular was the personal digital assistant (PDA) and e-mail system that users began to term the BlackBerry a “CrackBerry” due to its addictive qualities.

But once it became the market leader, RIM became the target of all its rivals.

At first, my stock analysis was that there was no matching RIM due to the BlackBerry’s e-mail function, but as phones became smarter (hence the term “smartphone”), RIM’s initial rivals, such as Nokia Corporation (NYSE/NOK) and Samsung, began to develop innovative phones that raised the bar.

RIM was able to fend off the competition, but on June 29, 2007, Apple Inc. (NASDAQ/AAPL) launched the “iPhone” in the U.S., which was a “killer” phone according to my stock analysis.

In five … Read More

Stock Market in April Making a Fool of Traders?

By for Profit Confidential

 jobless rateThe first quarter was great for stocks. April on the other hand has not been kind to stocks so far, but it’s early. The question is: are stocks pausing and then moving higher or lower?

Is this a sucker’s rally?

The bull market is into its fourth year and my market view is that the near-term technical picture shows tough chart resistance.

The S&P 500 and Dow Jones Industrials have declined in four straight sessions, and they are searching for buying support, according to my market view.

The Russell 2000 is down 3.25% in April. The Dow is down 2.14%. More importantly, the Dow and Russell 2000 have breached below their respective 50-day moving average (MA).

Despite the near-term weakness in small-cap stocks, in my market view, I continue to feel that the smaller growth stocks, especially in technology, have the biggest upside. I discussed this in Where to Look for the Biggest Potential.

 jobless rate

Chart courtesy of www.StockCharts.com

A market view of the S&P 500 shows a 14-week upward move. My market view is that there’s some near-term topping action and a downside break. The S&P 500 is within 11 points of its 50-day MA as of the close of Monday. My market view is that a break below could trigger additional weakness down to as low as the 100-day MA at 1.312 and 1,300, a possible correction as much as 9.4%.

My market view is not that this will happen, but that there is some technical evidence a market adjustment may be coming, especially if traders cannot find any fresh reasons to buy.

The next several days and … Read More

The Thorn in the PC Market Leader’s Side

By for Profit Confidential

company earningsMy kid hardly ever works on his desktop personal computer (PC) anymore, instead favoring a laptop. In fact, I often see him surfing the Internet and doing research using my “iPad” or his “iTouch.” This market shift is not only with my kid, but with millions who are also abandoning their computers in favor of tablets. The result of this is proving quite difficult for PC makers, who are fighting to come up with a defense.

The market leader in PCs, Dell Inc. (NASDAQ/DELL), had a strong run, but it is now facing the surging shift to tablets. The company beat on its fourth-quarter revenues, but fell short on company earnings. Dell also disappointed after offering soft revenue guidance for the first quarter. The pickup in tablet sales is likely hurting Dell, even though it also makes tablets; however, they’re nowhere nearly as successful as the iPad made by Apple Inc. (NASDAQ/AAPL). I continue to view the latter stock as a long-term buying opportunity.

Hewlett-Packard Company (NYSE/HPQ) also disappointed investors after slightly beating on fiscal first-quarter earnings, but coming in short on revenues. Earnings were much lower than the prior year and revenues declined 7.1% year-over-year. Hewlett-Packard also provided soft fiscal second-quarter guidance like PC market leader Dell.

The commonality is that both of the companies are blaming the declining PC sales on the meteoric rise of tablets as a replacement for PCs and laptops, and hence neither is a buying opportunity.

What I described is why I continue to favor Apple as a buying opportunity, which is that it is edging higher after breaking the $500.00 price level to … Read More

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