Posts Tagged ‘earnings growth’
This Stock’s 24% Year-to-Date Gain Signaling a Buy Opportunity?
By Mitchell Clark, B.Comm. for Profit Confidential
“Opportunity cost”—it’s a phrase used in microeconomic theory to denote the costs that are forgone by not having your resources in the highest returning assets.
It is a phrase that’s pertinent to the stock market.
Without question, I remain completely taken aback by what has transpired with the stock market since the beginning of the year.
Looking at the numbers, not being invested in many corporations has been costly.
Excluding the reasons why, the simple fact is that the Dow Jones Industrial Average is up 16% since the beginning of the year (not including dividends).
The S&P 500 is up 15.7%. The NASDAQ Composite is up 14.8% and the Russell 2000, an index of small-caps, is up 16.6% (not including dividends).
I think this stock market can smell the end of quantitative easing.
More meaningful, however, is the Federal Reserve’s policy regarding interest rates, which are going to continue to be low for the near future, as it has been made very clear.
This is a huge, perhaps neglected, certainty for the stock market and corporations.
Making the case for being a buyer in this market is extremely difficult. Institutional investors have already placed their bets and a lot of corporations—good companies with real staying power and solid prospects for earnings growth going forward—are fully priced.
Johnson & Johnson (NYSE/JNJ) is a benchmark stock. Like many large corporations, Johnson & Johnson does everything it can to squeeze every penny out of its bottom line. The company lays off employees, closes plants, and does everything to minimize taxes. Johnson & Johnson’s 10-year stock chart is featured below:
Chart courtesy … Read More
The Great Big Gamble: Can a Little Earnings Growth Turn into a Lot?
By Mitchell Clark, B.Comm. for Profit Confidential
At a recent dinner with old pals, the conversation migrated from cars, sports, food, and family to the economy and the unbelievable performance of the stock market.
Everyone said that in their respective professions (a manufacturing sales manager, an insurance adjuster, a foodservice executive, and a bank manager) business conditions were flat.
I’ve heard this from many people. Countless businesses are holding steady, but despite profound efforts, they can’t generate meaningful top-line growth.
Yet, the stock market just hit an all-time record high on modest first-quarter earnings results.
Quite obviously, this stock market is overbought.
Wall Street and institutional investors are in the business of betting on the future using someone else’s money.
Corporate earnings over the last several quarters have held up. But the earnings have mostly been squeezed out of worker productivity and cost controls.
Blue-chip balance sheets continue to grow stronger, and the lack of certainty in the global marketplace has dampened the willingness of corporations to make new investments.
The result is continued growth in quarterly dividends and share buybacks; and this is one of the many reasons why institutional investors have been buying this stock market—there is nowhere else to go.
I think it is still worth keeping a sharp eye on the crucial movements in the Dow Jones Transportation Average. It is old-school, but I believe that many component companies do provide a decent reflection of economic activity in the U.S.—at least from a corporate perspective. (Read “BlackRock Takes In Billions for Equities: A Signal the Stock Market Is Near a Top?”)
What I learned from many large-cap earnings reports was that sales … Read More
How Five Hundred Bucks and a Handshake Created a Colossal Stock Market Winner
By Mitchell Clark, B.Comm. for Profit Confidential
One company that always reports early is NIKE, Inc. (NYSE/NKE).
The company has doubled on the stock market since 2010, and it has more than tripled since 2006.
This kind of stock market performance really is amazing. In just three years, a $12.5-billion company has become a $25.0-billion company.
From Oregon, Bill Bowerman and Phil Night created Blue Ribbon Sports with $500.00 each and a handshake.
In January of 1964, Bowerman and Night ordered 300 pairs of Tiger brand shoes from Onitsuka Inc. of Kobe, Japan for distribution in the U.S. market. Night began selling the shoes out of his Plymouth “Reliant,” and Bowerman began tearing them apart.
Bowerman took an idea from his wife’s waffle iron and created a new running shoe.
Jeff Johnson (a friend and the company’s first employee) came up with the NIKE name in 1971. Shoes were successfully tested and Carolyn Davidson, a graphic design student at Portland State University, created the “swoosh” logo. The company’s first shoes were sold at the U.S. Track & Field Trials held in Eugene, Oregon. The rest, as they say, is history.
As a stock market investment, NIKE has mostly been excellent. The position was flat between 1997 and 2004. The company signed Eldrick “Tiger” Woods in 1996.
In its latest quarter (ended February 28), the company’s comparable sales grew nine percent to $6.2 billion, up solidly from $5.7 billion. Comparable earnings grew from $560 million to $866 million, for a gain of 55%, while earnings from continuing operations were $662 million, up 16% from $569 million.
Sales growth was strongest in North America (18%), followed by Central and … Read More
Why You Should Add Two Medical Stocks to Your Watch List
By Mitchell Clark, B.Comm. for Profit Confidential
There are still all kinds of earnings results pouring into the marketplace, and a lot of them are modestly decent.
Brand-name companies have mostly reported. There has been some broadening of the positive stock market action into the NASDAQ Composite Index.
The stock market’s breakout certainly was well evidenced by blue chips and transportation stocks. But another sector that has been particularly strong (and safe) is health care.
In medical instruments and supplies, specifically, Becton, Dickinson and Company (NYSE/BDX) reported solid earnings that beat consensus, and the company increased its guidance for the rest of the year. The company has 30,000 employees in over 50 countries.
According to the Franklin Lakes, New Jersey-based company, quarterly revenues grew to $2.0 billion for the second fiscal quarter (ended March 31, 2013). This represented an increase of 3.7% over the comparable quarter, and 4.1% without currency translation.
Company management said that its business confidence is growing and raised its fiscal 2013 full-year guidance.
The company’s stock market chart is featured below:
Chart courtesy of www.StockCharts.com
More than 50% of the company’s revenues come from abroad. International sales in the most recent quarter were $1.2 billion, for a gain of 6.2% comparatively; these numbers reflect strength in the emerging markets, especially in diabetes care products.
Actual quarterly earnings were down a little bit due to a one-time charge. The company reported earnings from continuing operations of $1.39 per diluted share, compared to diluted earnings per share of $1.31, for a 6.1% gain year-over-year, or 7.6% on a foreign currency neutral basis.
But what the stock market was so enthused about was the company’s increased … Read More
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