Posts Tagged ‘earnings’
If business conditions are good for a public company, then it’s highly likely that its share price has already been doing well in this great monetary expansion.
With the stock market at a high, it’s tricky being a new buyer/speculator. As we’ve seen with biotechnology stocks, the price momentum can quite suddenly come to a halt.
One sector where there is more price momentum to be had is in oil. Not so much in the large, integrated oil companies but in domestic mid-tier producers as well as services. (See “My Top Energy Pick with Market-Defying Momentum.”)
In the large-cap space, Baker Hughes Incorporated (BHI) is now experiencing renewed momentum, both operationally and on the stock market. This oil and gas equipment and services company is seeing solid sales growth in North American operations as well as the Middle East.
In spite of unusually cold weather accounting for a drop in North America’s well count, the company was able to grow domestic first-quarter sales by 6.7% to $2.78 billion. Total sales for the first quarter grew 10% to $5.7 billion, while earnings grew 23% to $328 million.
Baker Hughes has been buying back a lot of its own shares (3.4 million in the first quarter), and the stock recently began a new uptrend. The company’s two-year stock chart is featured below:
Halliburton Co. (HAL) is also experiencing renewed operational and price momentum on the stock market.
The largest oil and gas services company by revenue is Schlumberger Limited (SLB). Its first-quarter sales grew to $11.2 billion, up from $10.6 billion comparatively.
Diluted earnings per … Read More
Being financial reporting season, it’s important to discern between results that beat Wall Street consensus and real economic growth.
Abbott Laboratories (ABT) just announced better-than-expected first-quarter earnings, but they weren’t better than the comparable quarter of 2013. Operating earnings, earnings from continuing operations, and diluted earnings per share were all down significantly compared to the first quarter of 2013.
So, the illusion can definitely become real in hot markets. Investors are always better off ignoring headlines and going right to the financial statements. Managed earnings are just that—managed.
One company that just produced a very good quarter was The Charles Schwab Corporation (SCHW). The stock broker’s first-quarter sales grew 15% to $1.48 billion on strong growth in asset management and administration fees.
Net earnings leapt 58% to $326 million, or 60% to $0.60 in diluted earnings per share. Top-line growth and strong expense control were the reasons for the strong bottom-line growth.
There’s no real reason why Charles Schwab’s share price should keep on appreciating near-term. All the good news is priced into the shares. The company beat consensus earnings by $0.02 a share, while revenues were in line.
This reporting season, earnings are here to justify current share prices.
I’d be very wary of buying corporate good news now. Market jitters aren’t going away and all it takes is a small catalyst for institutional investors to pull the sell trigger again.
A meaningful correction or price consolidation would be a positive development for the longer-run trend and a good opportunity to consider adding to blue-chip positions.
A good deal of speculative fervor has come out of this market, … Read More
Trading action in stocks has been all over the map so far this year, while investor sentiment remained generally positive. The fact that there was a bunch of profit-taking after the solid recovery in February and March is neither a surprise nor unnatural for a market at a high.
The Federal Reserve continues to be more than accommodative to Wall Street with its words of comfort and its willingness to provide continued monetary stimulus past previously stated benchmarks.
Near-term, geopolitical events in Ukraine are likely the biggest risk for stocks. It’s been a slow start this earnings season with unremarkable results, but the numbers aren’t that bad. Growth is growth.
The NASDAQ Biotechnology Index has just now crossed its 200-day simple moving average, if that’s meaningful. It’s done so several times over the last five years and recovered after a period of consolidation.
Biotechnology stocks aren’t worth paying a lot of attention to in terms of portfolio strategy. These risk-capital stocks trade on their own unique set of business fundamentals. They’ve been powerhouse wealth creators for sure over the last few years. They are due for an extended break.
I think the best plays in this market are still with dividend-paying blue chips as they experience price retrenchments. These stocks continue to have a tremendous amount of favor with big investors in a slow-growth environment. Dividend income is very important when top-line growth is in the single digits.
For those equity investors wanting to take on positions in this market, I’m still a fan of existing winners, particularly among the brand-name stocks that have distinguished themselves with long track records … Read More
The significant price reversal in biotechnology stocks is very meaningful and appropriate, considering the massive capital appreciation the sector provided over the last three years.
There’s a reset going on with stocks, even with the Fed still onside. Earnings are not expected to grow that much in the first quarter of 2014, and big investors are booking profits as investment risk for both new and existing positions is going up.
This has been a very tough market for buyers, as stocks have already gone up in anticipation of decent earnings and revenue growth. There is very little in the way of value for investors, and there hasn’t been for a while.
This choppy action is a good reason not to get complacent when stock market indices are hitting new records. As prices go up, so does investment risk. Portfolio risk management is more important than the expectation for potential returns with stocks. Price trends easily last beyond reasonableness, but as history proves, the bubbles do eventually burst.
Right now is a great time to be reevaluating portfolio risk and identifying great stocks that you’d like to own if they were much better priced. (See “Risk vs. Reward: Is It Time to Cash Out of This Bull Market?”) There’s no reason to be a buyer in a market right near its highs with slowing expectations for growth.
One company that I think is worth having on your radar now is NIKE, Inc. (NKE); a position appropriate for long-term portfolios.
This stock experienced a substantive run up over the last five years, but with this in mind, the stock is … Read More
Lots of companies have broken out of their previous long-term trends on the stock market, and it’s a positive, contributing signal to a secular bull market.
One company that recently beat Wall Street consensus and just broke out of its previous price trend is A. Schulman, Inc. (SHLM) out of Akron, Ohio.
This business deals with resins and plastic compounds. It’s not very exciting, but the company is growing, it pays a dividend, and its corporate guidance is rising.
A. Schulman is one of the few companies that actually file their SEC Form 10-Q commensurate with their earnings press releases. It’s something that’s very much appreciated because this information is typically more in-depth than a plain earnings report. Even if you aren’t interested in the resins and plastics business, what a company like A. Schulman says about its business conditions is helpful in shaping your own market view.
The company just reported solid growth in its second fiscal quarter of 2014 (ended February 28, 2014). Management said that business in Europe is getting better, with noticeable sales gains in the automotive and electronics markets.
Most of the company’s sales come from Europe, the Middle East, and African regions, which is often described by the acronym EMEA. Sales to these countries gained 12% in the most recent quarter to $383 million.
Sales in the Americas grew nine percent to $157 million, but they would have been stronger if not for foreign currency impacts, particularly in Argentina. Management is also de-emphasizing commodity-related sales, which are less profitable. Asia Pacific (APAC) sales grew 67% to $48.4 million, mostly due to an acquisition.
Last … Read More
Those who follow the stock market closely know that on days when we hear the chairwoman of the Federal Reserve speak and she mentions something about “easing” or how the central bank will continue to use its “extraordinary measures” for a long period of time, the stock market jumps.
I’ve talked about this phenomenon many times in these pages. Another example of this happened on March 31, when the Fed chairwoman spoke in Chicago. Please see the chart below. It’s a minute stock chart of the S&P 500. I’ve circled a rough area around the time when Janet Yellen spoke.
As she spoke more of that “easing” talk, the stock market jumped, as usual.
So it has come to the point where the stock market rises when it hears the Fed will keep interest rates artificially low for a prolonged period of time and when a poor jobs report comes out (like last Friday morning’s), saying jobs have been created in spite of the fact that there is a heavy concentration of jobs growth in low-paying sectors and millions of people have given up looking for work.
In other words, we have reached the point where the stock market takes any news as a reason to move higher; this is characteristic of a market top.
When we look at the fundamentals of the stock market, we see companies in the S&P 500 are using financial engineering to boost per-share earnings. These companies have bought back their shares and have been cutting costs to boost profits as revenue growth just isn’t there anymore.
The proof? In the … Read More
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
There’s a boom going on, and it’s old economy. The railroad business is alive and well. And equally as impressive as the freight and earnings results, railroad services and related businesses are benefitting.
Over the near-term, it’s likely there’s going to be further legislation regarding the safety of oil railcars, meaning the retrofit market will be substantial. I think investors should have the entire sector on their radar. Many of these stocks have already done well.
One company we looked at last year in these pages is The Greenbrier Companies, Inc. (GBX), which has plans this year to double its manufacturing capacity of tank cars, which are in high demand. (See “How to Play the Bakken Oil Boom While Oil & Gas Companies Are at Their Highs.”)
The company’s latest earnings results actually missed consensus, as the business wasn’t quite able to keep up with the hype. But this doesn’t mean that the future isn’t bright for this industry. Greenbrier’s one-year stock chart is featured below:
One company that only recently experienced new interest from equity market investors is American Railcar Industries, Inc. (ARII). This firm, out of St. Charles, Missouri, sells hopper and tank railcars.
It’s a mature company, but earnings estimates are going up for 2015. The stock is not expensively priced, and its recent breakout from its previous consolidation is very interesting.
Another company that’s waiting for its stock market breakout to occur is FreightCar America, Inc. (RAIL), which has been trading in a range for the last five-and-a-half years.
This year, Wall Street analysts expect a big resurgence in top-line … Read More
There’s one company that is likely to have a very good year in 2014.
As my readers will know, the most valuable information going as an equity investor (businessperson) is what an enterprise says about its business conditions. And according to this company, business conditions are looking up.
Acuity Brands, Inc. (AYI) is a well-known lighting company out of Atlanta that serves mostly commercial and industrial markets. The company operates a number of brands, selling through independent agents, electrical wholesalers, and sales reps.
Total sales for the company’s fiscal second quarter (ended February 28, 2014) grew a solid 12% over the comparable quarter to $546 million.
Earnings grew substantially, up 32% in the quarter to $32.7 million. Earnings per share also grew 32% over the comparable quarter to $0.75.
Sales in the most recent quarter actually grew 13%, but this growth was reduced by one percent due to unfavorable currency translation.
Company management cited an improving marketplace for retrofit and renovation lighting applications. Fiscal 2014 should experience mid- to high-single-digit growth over the last fiscal year, with March order rates showing solid improvement.
Acuity Brands actually missed Wall Street consensus on both revenues and earnings, but the stock went up anyway after management said its order trend was improving. The company’s one-year stock chart is featured below:
But even with the relative good news and positive market reaction to the company’s latest results, Acuity Brands remains one expensive stock. And this is the dilemma for a good portion of this market.
Stocks have already gone up. Many good businesses have seen their valuations and share prices … Read More
Earnings season is here and a number of companies have already reported. Some offer more useful information about the general economy and their earnings are a decent barometer.
Paychex, Inc. (PAYX) is the second-largest U.S. payroll company. It just beat Wall Street consensus on revenues and earnings.
The company said its fiscal third quarter of 2014 (ended February 28, 2014) saw revenues climb seven percent to $636.5 million, which is a very healthy comparable gain.
Payroll service revenues grew five percent to $413.9 million, based on growth in checks per payroll and revenues per check. Human resource service revenues improved 12% to $212.1 million due to client-based growth.
This produced a gain in bottom-line earnings of 11% to $160.1 million comparatively. Diluted earnings per share grew 10% to $0.44, up from the comparable figure of $0.40. Paychex reiterated existing revenue guidance for fiscal 2014. Earnings are expected to be higher than previously forecast.
Decent growth at payroll companies is a positive sign. With an attractive dividend yield of approximately 3.3% currently, this stock has room to tick higher if the broader market doesn’t come apart.
Paychex’s one-year stock chart is featured below:
Automatic Data Processing, Inc. (ADP) is slightly more than double Paychex’s market capitalization.
This large-cap is trading only a few points from its all-time record-high, and it currently has a 2.5% dividend yield.
The company doesn’t report its next set of earnings until April 30, but in its second fiscal quarter of 2014 (ended December 31, 2013), total sales climbed nine percent to $3.0 billion. (See “Stocks: Why I’m Starting to Favor the … Read More
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