Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Where to Get the Best Earnings in This Stock Market

Friday, November 2nd, 2012
By for Profit Confidential

Best Earnings in This Stock MarketIf there is one international business in which you could still say, “business is booming,” it would be Visa Inc. (NYSE/V). The company just reported its fiscal fourth-quarter and year-end financial results and the numbers were great. This company has been a powerhouse wealth-creator on the stock market and so far has been immune to the economic woes facing the largest economies.

The company’s revenues grew to $2.7 billion in its latest quarter, up from $2.4 billion. But after a tax reversal, earnings accelerated significantly to $1.7 billion, way up from $880 million in the same quarter last year.

Visa has been a top performer on the stock market over the last year. Currently trading around $140.00 a share, it was $90.00 a share this time last year. The stock is expensively priced, but then again, it has always been expensively priced. Visa is a large-cap, blue chip company with a lot of staying power. The company’s stock chart is featured below.

Visa Inc Chart

Chart courtesy of www.StockCharts.com

While a company like Visa is doing well due to grow in emerging markets, it’s more of an exception in this market. Companies like McDonalds Corporation (NYSE/MCD) and 3M Company (NYSE/MMM) have struggled to grow their earnings due to weakness in Europe, Japan, and China. McDonalds’ comparable sales in Europe actually grew 1.8% in the most recent quarter, but guest traffic fell. The company’s third-quarter earnings fell three percent to $1.5 billion on flat revenues. McDonalds’ stock chart is below.

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McDonalds Corp Chart

Chart courtesy of www.StockCharts.com

So if there is one clear trend this latest earnings season, it’s that weakness abroad is definitely taking a toll on corporate revenues and earnings. U.S. operations are showing the most stability, and I think this should be a consideration for stock market investors looking at new positions. If there is any large economy that is best positioned to generate economic growth going forward it’s the U.S. economy. We’re not on the cusp of a new business cycle quite yet, but I don’t think one’s far off either.

Trading action in the stock market is still quite weak. Days that start positive tend to end negative. Investor sentiment has definitely changed since the QE3 rally this past summer. (Read “Want to Know Where Stocks Are Headed? Follow These Three.”)While I’m not advocating investors take on major new positions in this stock market, I would pick and choose among companies with sizeable domestic operations. The rest of the world is in much worse shape.

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Mitchell Clark - Equity Markets Specialist, Financial AdvisorMitchell Clark, B. Comm. 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, such as Income for Life and Micro-Cap Reporter. Mitchell, who has been with Lombardi Financial for 17 years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. Add Mitchell Clark to your Google+ circles