I’ve been looking at all the earnings to date (they often aren’t a calendar quarter, but a fiscal quarter), and so far, I would say that the majority of companies are beating consensus expectations. Corporate earnings are definitely managed, but this is a good development. If the reduced earnings outlooks in the third quarter are partly responsible for the “outperformance,” then the revenues figures are the real good news. It’s too early to tell whether this early trend will become a reality this fourth-quarter earnings season.
There was some good economic news last week, but the stock market didn’t really react to it. I suppose investors are content to sit on the sidelines until the earnings really roll in. There are a lot of stocks that aren’t performing that well in this market, and this is troublesome; but I have to admit, the S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are holding up well.
It’s a very good sign that the Dow Jones Transportation Index (or Average) has broken out of its long consolidation. Dow theory might be “old-school,” but I believe in it. FedEx Corporation (NYSE/FDX) is looking strong on the stock market, and so are Union Pacific Corporation (NYSE/UNP) and JB Hunt Transport Services, Inc. (NASDAQ/JBHT). The airlines, as a group, are still way down, but they recently saw a significant turnaround on the stock market. The one exception in this group is Alaska Air Group, Inc. (NYSE/ALK), which has been doing outstandingly well over the last few years.
So far this earnings season, I see a lot of potential. Looking at the numbers to date, business growth isn’t robust, but it’s not bad either. One company that I’ve highlighted a couple of times in this column is AZZ Incorporated (NYSE/AZZ). This company manufactures and sells electrical components to utility companies, and its latest quarter was very good. According to the company, its revenues for its third fiscal quarter, ended November 30, 2012, grew solidly from $117 million to nearly $150 million. Third-quarter earnings were $15.4 million, or $0.60 per diluted share, up nicely from earnings of $10.0 million, or $0.39 per diluted share, in the comparable quarter. AZZ’s stock chart is below:
Chart courtesy of www.StockCharts.com
On the stock market, AZZ has been a solid long-term performer. (See “Beating the Stock Market with Utilities?”) The stock might be a little pricey, but the company pays a dividend; and I have to say, it’s great for selling to utility and power companies, because they are well-heeled customers that pay on time.
Even though I’m not expecting anything from the stock market this year, I’m kind of optimistic this earning season. There are so many things outside of the stock market that could turn things negative (debt ceiling, sovereign debt in Europe, geopolitical tensions in the Middle East), but I suppose these are the usual suspects. All things being equal, I think we’re going to have a solid fourth-quarter earnings season. If the revenue figures show growth, then the market is poised to advance.