A company reports its revenue and earnings on a quarterly basis. The company will then issue guidance of where they see the market in the future, along with any possible developments in either the goods or services they produce or the market in general. This information is then used by analysts, who then make an estimate of where they believe the earnings outlook will be for the company in future quarters. Investors will use this information, in addition to other criteria they may have, to make investment decisions.
Lots of companies have broken out of their previous long-term trends on the stock market, and it’s a positive, contributing signal to a secular bull market.
One company that recently beat Wall Street consensus and just broke out of its previous price trend is A. Schulman, Inc. (SHLM) out of Akron, Ohio.
This business deals with resins and plastic compounds. It’s not very exciting, but the company is growing, it pays a dividend, and its corporate guidance is rising.
A. Schulman is one of the few companies that actually file their SEC Form 10-Q commensurate with their earnings press releases. It’s something that’s very much appreciated because this information is typically more in-depth than a plain earnings report. Even if you aren’t interested in the resins and plastics business, what a company like A. Schulman says about its business conditions is helpful in shaping your own market view.
The company just reported solid growth in its second fiscal quarter of 2014 (ended February 28, 2014). Management said that business in Europe is getting better, with noticeable sales gains in the automotive and electronics markets.
Most of the company’s sales come from Europe, the Middle East, and African regions, which is often described by the acronym EMEA. Sales to these countries gained 12% in the most recent quarter to $383 million.
Sales in the Americas grew nine percent to $157 million, but they would have been stronger if not for foreign currency impacts, particularly in Argentina. Management is also de-emphasizing commodity-related sales, which are less profitable. Asia Pacific (APAC) sales grew 67% to $48.4 million, mostly due to an acquisition.
Last … Read More
The Dow Jones Transportation Average is still very close to its all-time high, and so are countless component companies. The airlines, in particular, have been very strong in a classic bull market breakout performance. Many of these stocks have roughly doubled over the last 12 months.
Commensurate with continued strength in the Russell 2000 index of small-cap stocks and year-to-date outperformance of the NASDAQ Composite, this is still a very positive environment for equities. The NASDAQ Biotechnology Index continues to soar.
While strength in transportation stocks is a leading indicator for the U.S. economy, so is price strength in small-caps. Smaller companies are more exposed to the domestic economy, and while it’s too early for many of these companies to report fourth-quarter earnings, the Russell 2000 has outperformed the Dow Jones industrials and the S&P 500 over the last five years, confirming the primary upward trend.
Instead of an actual correction in stocks, we’ve only experienced price consolidation; the latest being in blue chips since December.
This is very much a market in need of a pronounced price correction, if only to realign expectations with current earnings outlooks. Fourth-quarter numbers, so far, are mostly showing limited outperformance, and those companies that have beat consensus are still, for the most part, just confirming existing guidance, not raising it. If this is a secular bull market, it’s time for a break.
A meaningful price correction in stocks would be a very healthy development for the longer-term trend. Corporations are in excellent financial shape, and the short-term cost of money is cheap and certain.
In order for this market to turn in a … Read More
Looking for volatility? Stick with 3D (three-dimensional) printer stocks. While most continue to exude upward price momentum, valuations are off the charts and the action can only be described as “gut-wrenching.”
Stratasys Ltd. (SSYS) is a company we looked at back in November. Based out of Eden Prairie, Minnesota, Stratasys is one of the leading manufacturers of 3D printers. (See “In Spite of Hype, New Tech Sector Not a Fad.”)
The company’s share price is up six-fold since October of 2011, but it recently experienced its first blip in expectations. The stock dropped $15.00 a share, or about 11.5%, after reporting a 2014 earnings outlook slightly below existing consensus.
Still, this is very much a growth story, and it’s likely the company will continue to be a hot commodity on the stock market. Revenues for 2014 are expected to grow by a minimum of 25% organically.
But like many enterprises in high-growth mode, Stratasys is investing heavily in its business, hiring new sales people and spending on marketing. Combined with higher costs for research and development, total operating expenses this year are expected to rise considerably. The Street sold the position on the day of the announcement, exacerbated by the company’s extremely high valuation.
Almost twice as large as Stratasys is Rock Hill, South Carolina-based 3D Systems Corporation (DDD). This company has been on a tear, up by more than 100% on the stock market since this time last year.
The Street expects 3D Systems to grow its sales by 45% this year and another 30% next year. Earnings aren’t forecast to grow as quickly as sales for … Read More
We won’t really get into the heart of the fourth-quarter 2013 earnings season until late January into early February. Smaller companies typically take longer to report, as they don’t have the large accounting departments that blue chips have.
I’ve noticed that quite a number of Wall Street research analysts have been boosting their 2014 full-year earnings expectations. They’re playing the same old game of cat and mouse with corporations and research analysts. Corporations always want to “outperform” if they can, so they deliberately keep their outlooks pretty conservative.
Companies getting a boost to their full-year earnings outlooks include: Wal-Mart Stores, Inc. (WMT), Microsoft Corporation (MSFT), Colgate-Palmolive Company (CL), Oracle Corporation (ORCL), E. I. du Pont de Nemours and Company (DD), Exxon Mobil Corporation (XOM), and Verizon Communications Inc. (VZ). Even Intel Corporation (INTC) is having its earnings outlook nudged higher by the Street for several upcoming quarters, including all of 2014.
According to FactSet, eight out of 10 S&P 500 market sectors are expected to report an increase in fourth-quarter earnings; these sectors are led by a strong expected gain in financials, followed by the telecom and industrial sectors. Energy is expected to produce a decline, comparatively.
While revenue growth from financials should be lackluster to negative on a comparative basis, a strong expected gain in earnings will be market-boosting news. Countless financials have been doing very well on the stock market since last November.
Over several of the last quarters, companies reported they were able to increase their selling prices without materially affecting demand. Sales growth has been a combination of increased volumes and rising prices.
Extreme monetary expansion … Read More
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