Public companies, firms that have their shares trade on an exchange, must make their financial reports available for investors to research every quarter, or four times a year. In an earnings report, a firm must supply revenue, expenses, net income, earnings per share, and all of the details in an income statement, cash flow, and balance sheet. Usually the months following the quarter-end are busiest, as this is when most companies will report their earnings.
It wasn’t too long ago that NIKE, Inc. (NKE) reported another great quarter of solid growth in its business.
The company’s fiscal fourth-quarter numbers beat Wall Street consensus, and its sales from continuing operations grew 11% to $7.4 billion, or 13% on a currency-neutral basis.
In this market, double-digit growth is significant no matter if it’s in the top or bottom line.
Like the last several earnings seasons, corporations are typically only beating consensus on one financial metric (either earnings or revenues). But this is enough to keep investors buying.
Under Armour, Inc. (UA) blew the doors off of Wall Street consensus and the stock shot strongly higher.
The company reported a surge in new apparel sales. Total revenues grew a whopping 34% over the second quarter of last year to $610 million.
Breaking it down, the company’s apparel revenues grew 35% to $420 million, while footwear sales grew 34% to $110 million on new product offerings. The company experienced significant sales growth of 30% in North America, while international sales doubled (representing approximately 10% of total revenues).
Previous guidance for 2014 was for sales growth of between 24% and 25% over 2013. Management boosted this guidance to between 28% and 29%, with operating income expected to grow between 29% and 30% over last year.
This time last year, Under Armour was trading around $35.00 per share. It’s doubled since then, and the position has further momentum in this market.
It is pricey, however, with a forward price-to-earnings ratio of around 60. But the stock is likely to stay this way; the business has operational momentum, and that’s what … Read More
Earnings season is always a great time of year to get up to speed on what corporations are saying about business conditions. The numbers are also useful in the sense that you can garner a lot of market intelligence regarding specific industries. And even if you aren’t interested in a specific company, brand-name earnings (or at least a summary of the numbers) can help hone your market view.
But it’s not just about how capital markets interpret corporate results. While earnings are managed, investors need to know if there is genuine sales growth taking place and in which market.
One trend that’s been evident for a number of quarters now is that many companies have been able to modestly increase their prices without materially affecting demand.
During the first-quarter earnings season, many corporations said that their operations in Europe were experiencing renewed vigor. It will be interesting to see if this trend continues this earnings season. Many times, quarterly results reflect one-time events or short spurts in either industrial or consumer demand that aren’t indicative of a new trend you can bet on.
Earnings reports are simply press releases in which companies put their best spin on what’s transpired during the quarter. The real news is the numbers themselves, and a company’s income statement and balance sheets are where I begin to look.
Also invaluable are U.S. Securities and Exchange Commission (SEC) filings, especially the Form 10-Q, which is a much more informative document. The numbers can still be unaudited in the quarterly filings, but not the Form 10-Q, which is a detailed annual report that requires fully audited numbers…. Read More
One of my favorite companies for long-term, income-seeking investors is Johnson & Johnson (JNJ).
While pharmaceuticals are the company’s anchor, its other business lines help with cash flow and dividend increases.
Investors have bid Johnson & Johnson shares tremendously in recent years, and it’s difficult to consider buying the company now, as the position is up another 10 points since March.
But Johnson & Johnson is the kind of stock income-seeking investors should keep an eye on for more attractive entry points, even though they may not come around all that often. The most recent possible entry points were in late September of last year and late January of this year.
My expectations for a mature company like this is for total annual sales to grow by the mid-single digits, with earnings growth and dividends producing an approximate 10% total annual return.
With a 10% annual return on investment, your money doubles every seven years.
Johnson & Johnson is typically priced at a slight premium to the S&P 500, but the company has earned its higher valuation by providing relatively consistent growth, reliable corporate outlooks, and a strong track record of dividend increases.
The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
Johnson & Johnson has typically been a good performer over the long term, but just like any large-cap, it can sit and produce no capital gains for long periods of time.
The position broke out at the beginning of 2013 after a number of years of modest capital gains. Institutional investors, wanting the earnings safety and solid dividends that the company provided, bid the stock … Read More
The earnings are beginning to flow and it’s a total mixed bag out there again.
Carnival Corporation (CCL) beat the Street with its second-quarter numbers, with cruise line sales growing four percent over the second quarter of 2013.
Guidance, however, was mediocre and the position sold off on its earnings results.
Walgreen Co. (WAG) has been very strong on the stock market over the last 12 months. The drugstore chain produced a six-percent gain in sales to $19.4 billion, and a 16% gain in earnings to $722 million.
But the company is getting squeezed both by health insurers and pharmaceutical manufacturers, so its business model is getting pressured.
Walgreen is considering reincorporating overseas to reduce its tax burden, but it won’t have details on any potential plan until later in the summer. The stock went up on the news.
Second-quarter earnings results were actually a bit better than expected and once we get into blue chip numbers, I think the market will be a bit more appeased.
It is important to remember where stocks are coming from. It’s been an exceptionally good last few years for equities; 2013 was outstanding.
The first quarter was a tough one, both due to the weather and general business cycle conditions. The market isn’t expecting second-quarter numbers to be strong, and that goes for both gross domestic product (GDP) and corporate earnings.
All that corporations have to do is meet or beat on one financial metric and either affirm or improve existing full-year guidance. With this backdrop, institutional investors will keep buying.
Monsanto Company (MON) soared to a record 52-week high after releasing a … Read More
Everything in the stock market experiences its own cycle of enthusiasm among investors. And this is especially well illustrated among speculative issues.
There was a time only a few years ago when some of the hottest speculative stocks were in solar energy. Now this small equity universe is still trying to rebuild itself.
And in more recent history, 3D-printing companies experienced incredible capital gains, only to experience incredible capital losses in what is a commonality among the market’s most speculative stocks.
At the end of the day, high-flying positions are still real businesses that have to deal with managing their own business conditions and hype among institutional investors.
As an investor, you have to consider both realities—the growth an underlying business is experiencing and the enthusiasm the marketplace has for such an enterprise or sector.
Twelve months ago, 3D Systems Corporation (DDD) was trading at $44.00 a share. Then it appreciated to a high of $97.28, before spending most of this year retreating to the $50.00-per-share level.
It’s only recently that the position broke the $55.00-per-share barrier, still sporting a forward price-to-earnings ratio of approximately 46.
Fervor for speculative stocks definitely diminished at the beginning of this year, and it’s part of the cycle that equities perpetually experience.
At the beginning of 2013, the breakout was in large-cap blue chips. Institutional investors had just started buying these stocks, and they led the broader market higher.
Then the NASDAQ Composite began to improve and actually took the lead for a while. But even with the Federal Reserve onside, it didn’t take too long for big investors to just book some profits. … Read More
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