We’re now into the full-blown earnings blitz. On balance, the numbers are coming in pretty much as expected, often with one financial metric (revenues or earnings) not meeting Wall Street consensus.
It is well known that corporate earnings are managed, but what this market really wants to see is top-line revenue growth. That’s the great indicator.
The pizza business is typically a good one; that’s why there are so many chains. Domino’s Pizza, Inc. (DPZ) has been on fire over the last three years. The company’s domestic same-store sales increased a solid 6.7% in the second quarter. International same-store sales growth was 5.8%, representing the company’s 78th consecutive quarter of same-store sales growth in foreign markets.
Revenues grew 10.1% to $414 million, while earnings grew an impressive 18.4% to $33.3 million in spite of higher costs for cheese.
Restaurant stocks are always a good indicator. (See “How Peter Lynch Got It Right 20 Years Ago.”) Domino’s produced another solid quarter.
Moving to technology, Texas Instruments Incorporated (TXN) used to be a stock market darling, soaring eight-fold in the late-90s technology bubble.
The semiconductor company announced second-quarter numbers that surprised Wall Street, and the company’s management team was upbeat about the third quarter.
Second-quarter revenues actually fell nine percent to $3.05 billion as the company winds down its wireless chip business to focus on core analog chips used in cars and televisions.
Earnings increased to $660 million, or $0.58 a share, up from $446 million, or $0.38 a share, including a $0.16 earnings-per-share gain.
The stock moved solidly higher after the company posted its results.
Lockheed Martin Corporation (LMT) beat Wall Street consensus by a wide margin and raised its guidance even in the face of continuing budget cuts.
Ryder System, Inc. (R) met expectations, guiding third-quarter earnings in line, while narrowing its full-year expectations.
And TD Ameritrade Holding Corporation (AMTD), a really good indicator of business conditions in the brokerage business, reported fiscal third-quarter earnings of $183 million, or $0.33 per diluted share, representing a solid gain over earnings of $144 million, or $0.26 per diluted share generated in the same quarter last year.
The company’s revenues grew to a record $725 million during the latest quarter, up solidly from $679 million on what management said was strength in commissions and asset management.
For equity investors, corporations are generally coming through so far and it’s why the S&P 500 is at a record-high with nowhere left for cash to go.
The key to the current stock market rally is earnings results from smaller U.S. companies (who don’t report as soon). This will be the tell-all for genuine economic growth.
My read is that the numbers will continue to be mildly positive and that the stock market’s near-term uptrend is intact.