Calendar first-quarter earnings reports are hitting the stock market and already a couple of trends have emerged.
As previously mentioned, currency translation with the stronger U.S. dollar is having a material effect on corporate performance, but domestic-operating companies have been turning in fairly decent results.
It’s early days, of course, but plenty of companies are filing their fiscal quarterly earnings reports with at least two months included since the beginning of the year.
CarMax: Earnings Report Shows Decent Growth
One company that just beat Wall Street consensus was CarMax, Inc. (KMX). For its fiscal fourth quarter (ended February 28, 2015), total sales grew 14.2% comparatively to $3.51 billion. The company’s total used vehicle unit sales increased 12.4% over the same quarter last year, while comparable store unit sales increased seven percent comparatively.
The big story with CarMax was its bottom line. The company’s fourth-quarter earnings grew 44.3% to $143.1 million. Excluding two one-time adjustments, earnings improved 19.7% and net earnings per share grew 27.5% comparatively, which is still a solid improvement.
The company’s been buying back its own shares in a robust manner. CarMax spent almost one billion dollars in its most recent year buying back 17.5 million of its own shares. The company has another $2.37 billion authorized going forward.
CarMax is up about sevenfold on the stock market over the last six years. With continued good earnings reports like this quarter’s, I’d bet this stock is going higher yet.
Restaurant Stocks Reporting Continued Strength
Previously, we looked at a number of domestic restaurant stocks whose earnings reports came in solid. In particular, Zoe’s Kitchen, Inc. (ZOES), Sonic Corp. (SONC), and Fiesta Restaurant Group, Inc. (FRGI) reported solid double-digit growth.
As an industry sector, restaurant chains remain a bright spot in an otherwise slow-growth environment. Their earnings reports reveal increasing checks with rising prices not affecting demand, as well as higher food costs not materially affecting the bottom line. (See “These Top Restaurant Stocks Seeing New Earnings Momentum This Year.”)
Lower gas prices are helping the restaurant industry, too. While an indirect benefit to these businesses, the numbers are evident in a chain like Cracker Barrel Old Country Store, Inc. (CBRL), whose locations are prevalent around interstates.
Domestic-Operating Companies Most Likely to Report Decent Results
While it’s early days among first-quarter earnings reports, I am seeing domestic-operating U.S. companies reporting more decent results, as they don’t have currency translation issues. The stock market, however, wasn’t particular enthused with the previous quarterly earnings season, and I suspect this will happen again.
This market is all about the Fed and the pending changes in monetary policy. Accordingly, I don’t expect a lot to happen in the broader market with this new uncertainty in the marketplace.
Earnings reports from large-cap, international businesses will provide some of the best market intelligence for investors. This will give us operating conditions in the eurozone, China, and the rest of Asia.
And they will further delineate the material effects of U.S. dollar strength on corporate reporting. Even if U.S. earnings reports yield decent numbers, this market is still likely to yawn at the results.