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

Company

A company is a limited liability legal entity whose purpose is to produce a product or deliver a service to the marketplace for profit. A company is considered to be the next step in the evolution of the sole proprietorship.

 

 

Why I Expect a Big Boost in This Company’s 2015 Dividend Payout

By for Profit Confidential

Company 2015 Dividend PayoutEven with the recent price retrenchment, there’s not a lot of value circulating in this stock market. Everything’s already gone up and the capital gains have been great the last few years. But it’s still a slow-growth environment in the global economy, and despite a very accommodative monetary policy, stocks can’t go up forever without experiencing a meaningful retrenchment.

Company earnings are pouring in and there have been some disappointments. But for a lot of mature large-cap businesses, this is a reflection of their industries’ cycles. Large companies in mature industries don’t grow by very much more than the low single-digits.

Which is why a company’s dividends are so important in a stock market that’s at a high but offering little value.

It’s difficult to imagine stocks this year serving up double-digit returns on the back of 2013’s standout performance.

And investor sentiment has changed, too, with oil prices being the catalyst for the recent “deflation worry” sell-off. (See “Is This Stock Sell-Off Just a Blip?”)

The stock market’s existing winners are the way to go going into 2015. There’s plenty of cash in company coffers for more dividends and more share repurchases. It’s a formula that’s worked for large corporations over the last several years, and there’s no reason why it won’t keep working in a slow-growth environment.

Texas Instruments Incorporated (TXN) had a good quarter. The company beat Wall Street consensus, producing substantial double-digit gains in comparable earnings on eight-percent year-over-year revenue growth.

Texas Instruments achieved a new record in gross margin as both analog and embedded processors (which comprise just over 80% of the company’s total sales) … Read More

Why This Company Is a Consistent Winner for Investors

By for Profit Confidential

One Company That’s Proven It Can Adapt to the MarketplaceAmid all the turmoil in capital markets, I’m reminded of all the good corporate earnings being released.

Of course, the stock market is a system of discounting future business conditions and the recent sell-off has been pronounced, but stocks have come so far over the last several years. If the catalysts were deflationary pressures among oil prices and global economic activity, a little haircut in share prices is well deserved.

One of the first businesses to show a real turnaround after the financial crisis sent stocks and the economy tanking was Winnebago Industries, Inc. (WGO).

The first thing that dries up when there’s a shock to the economy is spending on luxury items and/or non-essential products. Likewise, the recreational vehicle market is very sensitive to prevailing economic conditions. For a number of years now, however, Winnebago Industries has been on a turnaround roll.

Based in Forest City, Iowa, the company’s fourth fiscal quarter of 2014 (ended August 30, 2014) saw revenues improve a solid 15% to $246 million, up from $214 million in the same quarter last year.

The company reported that it experienced a 15% improvement in total motorhome sales. A 25% comparable gain in motorhome unit growth was offset by lower average selling prices.

Earnings came in solid with management noting particular bottom-line strength in towable recreational vehicles. Total fourth-quarter operating earnings grew 19% to $18.3 million. Net earnings grew to $12.9 million for a comparable quarterly gain of 22%, while net earnings per diluted share improved 26% to $0.48.

All in all, it was another very good financial report from Winnebago Industries and the company just reinstated … Read More

Plunging Oil Prices Next Big Investment Opportunity?

By for Profit Confidential

Declining Oil Prices the Market’s CatalystWhile corporate earnings continue to come in solid, stocks continue to be sold.

It’s not all the time that stocks follow oil prices, but they certainly have this time around and the selling momentum has gained on deflationary pressures from producer prices to declining expectations for global economic growth.

And the selling is happening to companies that beat consensus with their earnings, like J.B. Hunt Transport Services, Inc. (JBHT), which beat Wall Street estimates for sales and earnings in what was a very solid quarter for the trucking company.

For J.B. Hunt, sentiment just wasn’t strong enough to carry the stock materially higher, even in the face of declining prices for diesel fuel, which is a big bonus for that company’s bottom-line.

The autumn sell-off also flies in the face of reduced pressure on the Federal Reserve to begin raising rates as recent data shows a softening of economic activity on a global basis.

If oil was the catalyst and economic data the accelerator, it’s important to remember where stocks have come from. The equity market has been due for a material correction for a number of quarters. It didn’t even need a reason for a correction only because share prices have come so far over the last several years.

The breakdown in oil prices has been truly spectacular and is now seriously affecting the business case for many energy producers.

And the breakdown isn’t just due to increasing domestic production; it’s a breakdown in sentiment based on declining expectations for the global economy.

So stocks have sold off and they may go further, but a five to 10% price … Read More

Former Wall Street Tech Favorite Set for a Comeback

By for Profit Confidential

How This Former Wall Street Tech Star Is Making a ComebackThe financial media and analysts are talking endlessly about the state and fragility of the stock market and whether a bottom may be near. I discussed the vulnerability to the downside in my last article. If you missed it, you may want to go back and read what I said. (See “Strategies to Protect Your Capital While Investing in This Market.”)

While stocks appear to be heading to negative ground in 2014, I view continued weakness as a buying opportunity to accumulate some stocks at a discount.

For the majority of you, I would advise staying away from the higher-beta small-cap and momentum stocks at this time and wait for things to settle down. In other words, I want to see some sustained buying support emerge to show some evidence the downside selling is coming to an end.

In the meantime, take a look at some of the bigger S&P 500 and DOW stocks that have moved lower to much more attractive entry points.

In the technology area, I like what’s happening at former Wall Street darling Microsoft Corporation (NASDAQ/MSFT) under the stewardship of CEO Satya Nadella.

While Nadella recently said some disparaging remarks on females in the workforce, what he has done at Microsoft since taking over from former CEO Steve Ballmer has been encouraging.

The rise in the stock price in Microsoft has even allowed Ballmer to pay an obscene $2.0-billon-plus for the LA Clippers. Ballmer’s failure to recognize and fully understand the big impact the mobile sector has on the technology space helped to make Microsoft insignificant for years.

MSFT Microsoft Corp Chart

Chart courtesy of www.StockCharts.com

Nadella has shifted his … Read More

Is This Stock Sell-Off Just a Blip?

By for Profit Confidential

Is This Stock Sell-Off Just a BlipIf there’s one thing the stock market needs, it’s a distraction from global growth worries and geopolitical events. And corporate earnings are the ticket for that as this season’s numbers are starting to pour in.

Pharmaceutical benchmark Johnson & Johnson (JNJ) once again beat Wall Street consensus, generating another good quarter of both sales and earnings growth.

The company completed a major divestiture of its ortho-clinical diagnostics division during its latest quarter; even so, it was able to generate domestic sales growth of 11.6% over the same quarter last year. Total consolidated sales grew 5.1% to $18.5 billion. Excluding the impact of the company’s recent divestiture, domestic sales would have increased 14.8% comparatively.

Excluding gains, litigation accrual, tax adjustments, and integration costs from the large acquisition of Synthes, Inc., Johnson & Johnson’s bottom-line earnings grew 9.5% to $4.5 billion, or 10.3% to $1.50 on a diluted earnings-per-share basis.

Once again, global pharmaceutical sales, including over-the-counter products, were the driver of growth, up 18.1% over the same quarter last year.

Johnson & Johnson clearly continues to have operational momentum. Positive price action in the stock may be slow near-term commensurate with the broader market, but this company is still delivering the goods.

Management increased its full-year earnings guidance and a $5.0-billion share repurchase program is still available at their discretion.

Another big-name corporation reporting solid earnings results was Wells Fargo & Company (WFC), the largest U.S. mortgage lender. The company beat Street consensus on revenues and matched the earnings estimate.

And Citigroup Inc. (C) experienced a big increase in its revenues, too, coming in at $19.6 billion, up from $17.9 billion. … Read More

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