Posts Tagged ‘dow jones’
With the broader stock market selling off, it’s amazing to see a company’s share price defy the near-term trend and appreciate in value.
Time and time again, Johnson & Johnson (JNJ) gets bid when the broader market faces convulsion. It’s a powerful signal, and there is still a great deal of angst among institutional investors; they still want those dividends and the relative safety of earnings that are predictable.
Johnson & Johnson has been—and continues to be—an excellent wealth creator. The stock’s been bouncing off $95.00 a share the last while and just recently, it seems to have broken past this price ceiling.
There’s not a lot new with this position. One Wall Street firm recently boosted its earnings expectations for the company in 2015. Sales growth is expected to be in the low single-digits this year, but annual earnings growth combined with dividends should be in the low double-digits once again. The company reports its first-quarter numbers on April 15.
There’s definitely been a change in investor sentiment regarding speculative positions. Biotechnology stocks, which have been the market’s multiyear winning sector have finally seen investors book profits. It’s been long overdue and from a market perspective, is a healthy development for the primary trend.
The selling migrated to large-cap technology names and the shakedown just might last a while longer. Anything can happen during an earnings season, but a “sell in May and go away” type of scenario is a real possibility again this year.
Other blue chip names that are also defying the market’s recent action include 3M Company (MMM), Union Pacific Corporation (UNP), Kimberly-Clark Corporation (KMB), Microsoft … Read More
Earnings are beginning to roll in and quite a few companies are missing Wall Street consensus.
This doesn’t mean, however, that there isn’t growth out there; only that estimates have so far been a little optimistic.
CarMax, Inc. (KMX) is a well-known used-car dealer. The company’s latest numbers were decent, but they came in below what Wall Street was looking for.
Fiscal fourth-quarter sales grew nine percent to $3.08 billion, which is pretty good. Comparable store unit sales grew seven percent in the fourth quarter and 12% year-over-year.
The company had to correct some accounting procedures related to extended service plans and warranties, and it took a hit on earnings because of this.
CarMax is buying back its own stock and just authorized another $1.0-billion repurchase plan that expires at the end of the 2015 calendar year. The stock only dropped marginally on the news.
Another company that missed consensus but is very much a growing enterprise is AZZ Incorporated (AZZ) out of Fort Worth, Texas. We looked at this company last year. (See “Things Are Looking Up! Let’s Hope They Don’t Wreck It.”)
This is a good business. The company manufactures electrical equipment and components for power generation and transmission. Management recently said that business conditions are improving and new quoting activity is noticeably stronger.
Fiscal 2014 fourth-quarter revenues came in at $180 million, compared to $140 million in the fourth quarter of 2013. Earnings were $10.2 million, or $0.40 per diluted share, compared to earnings of $13.2 million, or $0.52 per diluted share.
While the company actually missed Wall Street consensus earnings by $0.02 a share … Read More
It’s been a very choppy start to the year for stocks and with no real trend to latch onto, the news of the day is the catalyst for the trading action.
There is still a positive undercurrent in the equity market, and it’s evidenced, in part, by particular strength in a number of key stock indices. (See “If This Indicator Turns, the Stock Market’s in Trouble…”) But it’s also apparent in a number of leading stocks—the positions that led the stock market in its 2013 breakout performance.
One of these stocks that continue to be a standout and outperformer is Union Pacific Corporation (UNP), an old economy railroad stock that is very much a canary in the coalmine for the U.S. economy.
The railroad business has been exceptionally good the last few years. And if coal shipments have diminished, then oil and fracturing sand have made up the difference and then some.
But for regular freight, business conditions have been pretty decent, according to the railroad companies, and this is material news that rises above the noise. Vehicle shipments have been strong, which has helped a lot.
According to Union Pacific, in spite of what management referred to as significantly weaker coal shipments, volume growth and pricing gains in regular freight produced a record fourth-quarter operating ratio (a measure of profitability) of 65%.
The company reported that its fourth-quarter operating revenues grew seven percent to $5.6 billion, up from $5.25 billion in the same quarter of 2012. Management said that volume growth from agriculture, automotive, intermodal shipments, and industrial products more than offset declines in coal and chemicals…. Read More
The NASDAQ Composite index sold off significantly in January to around 4,000. Then it recovered to its current level at 4,300, which is a pretty substantial move.
For a number of months now, the NASDAQ has been outperforming both the S&P 500 and Dow Jones Industrial Average. This relative outperformance continues to be a positive overall sign regarding sentiment.
I don’t really expect much from stocks this year, although the prospect of rising dividends still remains very good in the bottom half. 2013’s stock market performance was so exceptional and so substantial, especially among blue chips, that it’s time for earnings to catch up with share prices.
Not to be excluded, the performance of the Russell 2000 index has also been relatively strong compared to larger-caps. But this index still can’t quite keep up to the outperformance of the NASDAQ.
Stock market leadership from large-cap technology stocks is always a good thing. And a lot of it has been from older brand-name companies, the kind of former fast-growing stocks that are now almost income plays.
Oracle Corporation (ORCL) has been on the comeback trail after several quarters of disappointing results. This position has been treading water since the beginning of 2011, and its recent breakout on the stock market is not immaterial. The company’s five-year stock chart is featured below:
Chart courtesy of www.StockCharts.com
Following a similar trading pattern over the last several years, Microsoft Corporation (MSFT) has recently been strong. The stock is up $10.00 a share over the last 12 months, and Wall Street earnings estimates have been going up across the board for this fiscal year and … Read More
Putting together an equity market portfolio always requires conviction. In this market, stocks have not come off their highs very much at all. The main indices have been bouncing around quite a bit, but there is still a positive disposition to stocks with fourth-quarter earnings mostly coming in close to consensus.
Leadership in this market is still with the financials, the Dow Jones Transportation Average, and the NASDAQ Composite. These three metrics are good indicators as to where the broader market is headed.
In terms of portfolio construction, I’m a big believer in owning the market commensurate with owning a handful of positions with conviction—three to five benchmark stocks that can be accumulated when prices are down. These are the kind of stocks that a long-term investor can build wealth in over time using the short-term fluctuations in share prices for long-term advantage.
Wealth creation often does come from owning larger positions in a handful of stocks. Warren Buffett has consistently been this type of investor, taking on big positions after rigorous research.
But when it comes to stocks, there are always times when you are going to be wrong about the strength of a business and/or the marketplace’s capacity to recognize it. You still have to be nimble, willing to move on from non-performance and to remember that buying and selling stocks are business decisions.
Investing with conviction is something that can more easily be done with larger-cap companies or blue chips. Dividend reinvestment is a very good way to compound your investment return over time. There is always room for more aggressive bets, but accumulating positions in benchmark … Read More
Along with railroad stocks, trucking enterprises are good benchmark indicators. When it comes to forming a stock market view, the Dow Jones Transportation Average is still very much an important index.
One of the major components of this index is J.B. Hunt Transport Services, Inc. (JBHT), which just reported revenues in line with estimates, but missed on earnings per share. But even with the earnings miss, the company still reported a solid fourth quarter, and while Wall Street expectations are important, so is real double-digit economic growth from a mature enterprise.
The company said its total operating revenues in the fourth quarter of 2013 grew to a record $1.47 billion, up from $1.34 billion comparatively.
Fourth-quarter earnings also achieved a record $92.0 million, or $0.77 per diluted share, compared to $84.0 million, or $0.70 per diluted share, for a gain of 10%.
Full-year 2013 operating revenues grew 10% to $5.6 billion, while total earnings per share grew 11% to $2.87 per diluted share.
J.B. Hunt’s been an outstanding wealth creator since its March low of 2009 (up four-fold on the stock market). For a $9.0-billion company, 10% top- and bottom-line growth is very respectable. If the company missed earnings consensus by two pennies, then it did. The stock’s been due for a sell-off; this was the catalyst.
Noteworthy in the company’s numbers was a 17% gain in intermodal shipments within eastern networks. Transcontinental loads grew 11% during the fourth quarter, and operating income grew 17% within this important segment (almost two-thirds of total sales).
Another component company of the Dow Jones Transportation Average, Alaska Air Group, Inc. (ALK) reported excellent … Read More
The Dow Jones Transportation Average is still very close to its all-time high, and so are countless component companies. The airlines, in particular, have been very strong in a classic bull market breakout performance. Many of these stocks have roughly doubled over the last 12 months.
Commensurate with continued strength in the Russell 2000 index of small-cap stocks and year-to-date outperformance of the NASDAQ Composite, this is still a very positive environment for equities. The NASDAQ Biotechnology Index continues to soar.
While strength in transportation stocks is a leading indicator for the U.S. economy, so is price strength in small-caps. Smaller companies are more exposed to the domestic economy, and while it’s too early for many of these companies to report fourth-quarter earnings, the Russell 2000 has outperformed the Dow Jones industrials and the S&P 500 over the last five years, confirming the primary upward trend.
Instead of an actual correction in stocks, we’ve only experienced price consolidation; the latest being in blue chips since December.
This is very much a market in need of a pronounced price correction, if only to realign expectations with current earnings outlooks. Fourth-quarter numbers, so far, are mostly showing limited outperformance, and those companies that have beat consensus are still, for the most part, just confirming existing guidance, not raising it. If this is a secular bull market, it’s time for a break.
A meaningful price correction in stocks would be a very healthy development for the longer-term trend. Corporations are in excellent financial shape, and the short-term cost of money is cheap and certain.
In order for this market to turn in a … Read More
Here we are in just the third week of 2014 and the media is all over the stalling in the stock market, saying that perhaps we are at the end of the bull stock market that is now in its fifth year.
I’m hearing about the low level of the S&P 500 Volatility Index (VIX), also known as a measure of fear in the stock market. Yes, it’s low and perhaps the stock market is too relaxed, but that doesn’t always imply that we are headed for a stock market correction.
Traders are also concerned with the lack of buying so far in January, which, if it ends in the red, could suggest a down year for stocks based on historical tendencies—albeit, I doubt that.
We are seeing some stalling on the charts, as the new approach to investing this year appears to be one of prudence and not bidding the stock market higher until we see evidence of a healthier economy, stronger jobs creation, and earnings/revenue growth from corporate America.
I’m not surprised by this shift, given the massive stock market gains in 2013.
The impact of the Federal Reserve and its proposed tapering timeline appears to be less of a factor this year, as it is expected that the tapering will continue. The uncertainty surrounding tapering that drove the erratic trading of 2013 is gone; traders are now discounting in the tapering. (See “Stock Market’s Dependence on Easy Money Weakening?”)
My view is that as long as the withdrawal of the bond buying is slow and the economy delivers stronger and steady growth, market participants … Read More
We won’t really get into the heart of the fourth-quarter 2013 earnings season until late January into early February. Smaller companies typically take longer to report, as they don’t have the large accounting departments that blue chips have.
I’ve noticed that quite a number of Wall Street research analysts have been boosting their 2014 full-year earnings expectations. They’re playing the same old game of cat and mouse with corporations and research analysts. Corporations always want to “outperform” if they can, so they deliberately keep their outlooks pretty conservative.
Companies getting a boost to their full-year earnings outlooks include: Wal-Mart Stores, Inc. (WMT), Microsoft Corporation (MSFT), Colgate-Palmolive Company (CL), Oracle Corporation (ORCL), E. I. du Pont de Nemours and Company (DD), Exxon Mobil Corporation (XOM), and Verizon Communications Inc. (VZ). Even Intel Corporation (INTC) is having its earnings outlook nudged higher by the Street for several upcoming quarters, including all of 2014.
According to FactSet, eight out of 10 S&P 500 market sectors are expected to report an increase in fourth-quarter earnings; these sectors are led by a strong expected gain in financials, followed by the telecom and industrial sectors. Energy is expected to produce a decline, comparatively.
While revenue growth from financials should be lackluster to negative on a comparative basis, a strong expected gain in earnings will be market-boosting news. Countless financials have been doing very well on the stock market since last November.
Over several of the last quarters, companies reported they were able to increase their selling prices without materially affecting demand. Sales growth has been a combination of increased volumes and rising prices.
Extreme monetary expansion … Read More
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