Revenues or Earnings—Seems Like Stocks in This Market Can’t Beat on Both

By Wednesday, October 31, 2012

Revenues or EarningsThe earnings train continued while the stock market was closed on Monday, and the numbers still aren’t that great. Archer-Daniels-Midland Company (NYSE/ADM) is one of the few large-cap companies that beat stock market consensus on revenues, but earnings were down due to negative margins in ethanol production and the effects of this year’s drought. This stock hasn’t done much over the last several years; its current dividend yield is approximately 2.6% with a price-to-earnings (P/E) ratio of around 15.

Herbalife Ltd. (NYSE/HLF), which sells weight-management and nutritional products in 85 countries, generated record third-quarter revenues of $1.0 billion, up 14% over last year. Earnings grew nine percent to nearly $118 million, but earnings per diluted share grew 20% to $0.87. Management reported that the company experienced double-digit volume growth in all its geographic regions. Herbalife’s stock chart is below.

Herbalife Chart

Chart courtesy of www.StockCharts.com

Also recently, TD Ameritrade Holding Corporation (NYSE/AMTD) slightly beat the Street with its earnings, but total revenues dropped to $647 million from $667 million. Earnings for the third quarter were $143 million, down from $154 million in the third quarter last year. TD Ameritrade’s stock chart is below:

TD Ameritrade Holding Corp Chart

Chart courtesy of www.StockCharts.com

So while a lot of companies are technically beating consensus with their earnings, revenue growth is minimal and the stock market now recognizes this. It’s pretty clear with a lot of these numbers that we’re not going to see an accelerating stock market anytime soon. (See “Warning: QE3 Rally Is Now Over.”) There is no upward momentum in corporate financial results and the fourth quarter is likely to be troublesome for the stock market.

Economic news has shown some improvement lately; housing valuations are a little bit better, and so is consumer confidence. But what the U.S. economy needs is income growth for individuals, and this remains absent with the current jobless rate. The stock market can’t meaningfully accelerate in these conditions; the stock market will likely stay flat for a while.

About the Author, Browse Mitchell Clark's Articles

Mitchell Clark is a senior editor at Lombardi Financial, specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, including Micro-Cap Reporter, Income for Life, Biotech Breakthrough Stock Report, and 100% Letter. Mitchell has been with Lombardi Financial for 17 years. He won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was a stockbroker for a large investment bank. In the... Read Full Bio »