Posts Tagged ‘earnings season’
The lull between earnings seasons will soon be here and with the absence of corporate results, trading action can get choppy.
It’s still important to follow transportation stocks and the NASDAQ Composite. Transportation stocks have a tendency to lead the broader market, and outperformance from the NASDAQ Composite (compared to the other major indices) signals speculative fervor remains.
The one commodity that’s very much back in play in terms of a reflection of investor sentiment is oil. West Texas Intermediate (WTI) has come back to the $100.00-per-barrel level on what looks like speculative betting on better economic growth this year.
There were actually quite a few disappointments in big oil’s recent financial results and production is definitely an issue. Both large-cap and small-cap oil stocks have not seen their share prices rise commensurately with oil prices, but some value is finally appearing in this sector.
One company that we looked at previously is Kodiak Oil & Gas Corp. (KOG). This is a Bakken oil play that, until recently, was expensively priced. (See “While Few See It, This Stock Sector Is Getting Risky.”)
Kodiak expects to produce 42,000–44,000 barrels of oil equivalent per day (boepd) this year, which represents about a 45% gain over last year. The company’s stock chart is featured below:
Kodiak reports its fourth-quarter and year-end financial results at the end of this month. Junior oil companies may see their fourth-quarter numbers affected by the severe cold in terms of the number of well completions.
While Kodiak may be considered a hold currently, this position is becoming more attractively valued. The … Read More
This choppy trading action in stocks is here to stay for a while, and it could even be more pronounced once fourth-quarter earnings season ends.
The numbers continue to pour in, but the unease in investor sentiment is obvious, and it’s partially due to the fact that stocks didn’t experience a meaningful correction last year. Whatever the reason or catalyst, further retrenchment in share prices is an eventuality that’s easily in the cards this year.
While companies, especially large-cap corporations, are able to manipulate adjusted earnings and fully diluted earnings per share, the numbers are still only mediocre at best. And share prices came up so tremendously in the Fed-induced reflation that today’s earnings results aren’t making the case for buyers.
In the large-cap space, The Clorox Company (CLX) perfectly illustrates the numbers being presented by countless blue chips.
The company beat on revenues but missed on earnings. Fiscal second-quarter sales were flat at $1.33 billion. Net earnings were down to $115 million, or $0.87 per diluted share, as compared to earnings of $123 million, or $0.93 per diluted share last year. Currency translation had a material effect on U.S. dollar sales.
The company delivered one percent in total volume growth in the most recent quarter, which is quite anemic, even for a mature blue chip consumer company.
Fiscal 2014 total sales growth is expected to be between one and two percent. Diluted earnings per share should be between $4.40 and $4.55, but management specifically cited unfavorable currency rates as a red flag.
Nothing is as troublesome in global capital markets than currency movements. The devaluation of emerging market currencies … Read More
Why owning blue chips makes so much sense in a slow-growth environment: they have the cash and they are willing to spend it to keep shareholders happy—and that’s just one of the reasons.
Take Caterpillar Inc. (CAT), for example. This company is experiencing slow business conditions, because the mining industry is in its own recession.
The company can’t manufacture sales, but it can keep buying back its own shares. Management allocated $1.7 billion for share repurchases in this quarter alone. Last year, the company spent a total of $2.0 billion buying its own shares.
Caterpillar’s recent financial results surprised Wall Street. Even though sales were down comparatively, 2013 fourth-quarter revenues beat consensus by $1.0 billion and consensus earnings by $0.26 per share.
Caterpillar is a global benchmark and an enterprise worth following. The company offers a lot of industry and global economic information to investors. (See “A Must-Read for Long-Term Equity Investors.”)
Big corporations have the cash, and while capital expenditures on plant, equipment, and employees are restrained, shareholders are the beneficiaries of such strong balance sheets.
United Technologies Corporation (UTX) reported fourth-quarter revenues below Wall Street consensus, but earnings were better than expected. The company plans to buy back $1.0 billion of its own shares this year after spending $1.2 billion in 2013.
Share repurchases help shareholders and corporate executives on a short-term basis, but if there is a drawback to them, it’s the opportunity cost of new business investment; excess cash could be invested in new research and development, expansion, acquisition, and innovation. A company that chooses to buy back its own shares is one that’s … Read More
Some prolonged downside is exactly what this stock market needs—a market that’s been looking for a catalyst to sell for quite some time.
While there has been pressure on long-term interest rates, we still have virtual monetary certainty this year with the Fed funds rate staying where it is. Weakness abroad in China is still a story of overcapacity, but there has been some refreshing economic data out of the eurozone.
What’s clear in Western economies is that positive economic data is sporadic and mostly without trend. The lack of consistency in mature economies has equity investors in a bit of a loop. Ten percent downside across the main stock market indices would be a healthy development for the long-term trend. We never did get a stock market correction last year, only consolidation, as investors were only too happy to keep buying.
Fourth-quarter earnings season has been modest so far, with outperformance (according to Wall Street) mostly coming in at the bottom-line, meaning that genuine sales growth is still a very tough thing to accomplish. Furthermore, a lot of corporations aren’t guiding 2014 above previous outlooks, and this makes it very difficult to be a new buyer.
Global capital markets are gyrating on a reassessment of investment risk and the prospect for real economic growth. Add in currency volatility, and there are the makings of a flight to the U.S. dollar and a sell-off in the stock market.
Still, the most important data now is what corporations actually say about their businesses. Beating the Street is less important than a true assessment of business conditions and expectations for the future. … 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
You can tell from the activity and the lack of direction in the stock market that the much-anticipated fourth-quarter earnings season has, yet again, been another letdown.
Now I’m not saying the early results this earnings season have been that bad; it’s just that the numbers from corporate America have not been that great.
And with just four days remaining in January, the NASDAQ and Russell 2000 are slightly positive, while the Dow Jones Industrial Average and the S&P 500 are in the red. This creates some anxiety.
As many of you know, I have discussed my views on earnings and, more particularly, the revenue side. I don’t really care that companies beat earnings-per-share (EPS) estimates as many of these so-called sell-side estimates from Wall Street have been adjusted downwards to meet the lower expectations over the past few years.
It’s akin to analysts doing whatever they can to make sure companies can meet lower targets instead of demanding that companies deliver.
So far, the early numbers this earnings season suggest it’s more of the same—and perhaps slightly worse.
Of the 53 S&P 500 companies that have reported so far this earnings season, a mere 57% have managed to beat the mean average based on research from FactSet. (Source: “Earnings Insight,” FactSet, January 17, 2014.) And of the 101 companies that have offered guidance, a staggering 96 companies offered negative EPS guidance, while just 15 companies were positive in their assessment.
Folks, this is not good, considering that Wall Street has already been manipulating estimates. Plus, only 58% of these companies have beaten the mean sales estimates. Again, not good…. Read More
With U.S. oil and gas production surging, you’d expect a company like Halliburton Company (HAL) to be doing well. The company is a major provider of hydraulic fracturing services, otherwise known as “fracking.”
However, the surprise in the company’s latest results wasn’t financial strength in domestic operations, but in business conditions in the Middle East and Asian markets. The company’s 2013 fourth-quarter revenues grew to a record $7.6 billion, up two percent sequentially.
For the year, the company noted that Eastern hemisphere operations provided 17% year-over-year growth, while also contributing a 23% gain to adjusted operating income.
In comparison, North American fourth-quarter sales fell one percent and adjusted operating income dropped six percent due to weather-related disruptions and holidays.
The company just slightly beat consensus and the stock sold off on the news.
We’ve been getting quite a few stocks selling off after reporting, which is more normal trading action.
Johnson & Johnson (JNJ), a benchmark stock, also sold off after reporting fourth-quarter revenue and earnings that beat consensus, conservatively guiding 2014 earnings per share to the low end of the forecast.
Delta Air Lines, Inc. (DAL) moved a point higher after the company announced a strong fourth quarter on lower fuel costs. Management expects meaningful margin expansion this quarter. This stock has doubled since last April and is a bullish indicator for the U.S. economy.
On balance, the numbers, so far, are decent, but they aren’t really strong enough to warrant new bidding action, largely because stocks are already fully valued.
If anything, fourth-quarter earnings results should be justifying current share prices. A company’s latest financial results are like … Read More
Some earnings reports are coming in now and a lot of them are pretty decent. At the very least, many are beating consensus and/or previous outlooks for upcoming quarters.
This is all recognizing, of course, that earnings are managed and that a lot of corporations purposely downplay their expectations for the future, so it makes it easier to outperform when results are due. Still, this is the way the system works and the market trades off these relative expectations.
From the numbers that I’m reading so far, the outlook for fourth-quarter earnings season is looking pretty good. There have been a few misses so far, but mostly in regards to guidance for future quarters.
The Container Store Group, Inc. (TCS) was one of the market’s misses in that it reported adjusted earnings per share that beat its comparable quarter by over 37.5%, with a seven percent gain in sales to $188.3 million. Its 2014 full-year sales were forecast to be $754.0 million, just slightly below previous guidance of $756.2 million, and the position sold off.
TCS has been one of the stock market’s hottest IPOs of late and it’s still a decent growth story. The shares doubled in the stock’s market debut back in November. Price volatility is inherent in IPOs; they are almost always overpriced to begin with.
But a lot of companies have so far beaten consensus and increased previous guidance for 2014. Solid earnings results have come from Frischs Restaurants, Inc. (FRS), The Greenbrier Companies, Inc. (GBX), Constellation Brands, Inc. (STZ), Monsanto Company (MON), Team Inc. (TISI), UniFirst Corporation (UNF)…and the list goes on.
UniFirst has been … 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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