Posts Tagged ‘earnings’
The stock market in France has been on a tear! Below, I present a chart of the French CAC 40 Index, the main stock market index in France.
Looking at the chart, we see the French stock market is trading at a five-year high. With such a strong stock market, one would expect France, the second-largest economy in the eurozone, to be doing well. But it’s the exact opposite!
As its stock market rallies, France’s economic slowdown is gaining steam. In January, the unemployment rate in France was unchanged; it has remained close to 11% for a year now. (Source: Eurostat, February 28, 2014.) Consumer spending in the French economy declined 2.1% in January after declining 0.1% in December. (Source: National Institute of Statistics and Economic Studies, February 28, 2014.) Other key indicators of the French economy are also pointing to an economic slowdown for the country.
Chart courtesy of www.StockCharts.com
And France isn’t the only place in the eurozone still experiencing a severe economic slowdown. In January, the unemployment rate in Italy, the third-biggest nation in the eurozone, hit a record-high of 12.9%, compared to 11.8% a year ago.
I have not mentioned Greece, Spain, and Portugal because they have been discussed in these pages many times before; as my readers are well aware, they are in a state of outright depression.
Just like how investors have bought into the U.S. stock market again in hopes of U.S. economic growth, the same thing has happened in the eurozone. Investors have put money into France’s stock market in hopes of that economy recovering—but it hasn’t. We are dealing with a … Read More
Earnings estimates for Microsoft Corporation (MSFT) are going up and the stock, which recently accelerated, finally looks like it has broken out of a 13-year consolidation.
Microsoft has been an income play for quite a while. Currently yielding three percent, the company’s forward price-to-earnings ratio is around 12.5 and is not dissimilar from many other blue chips.
Then there’s Intel Corporation (INTC). This company has been struggling for capital gains, but it’s yielding 3.6% and isn’t expensively priced.
What these technology companies illustrate so well is the business cycle, both in terms of operational growth and also as equity securities. Getting the cycle correct (the right place/stock at the right time) is the toughest thing for any investor or businessperson.
Regarding stocks, both Microsoft and Intel’s long-term charts clearly show how extremely overpriced their share prices were during the bull market of the 90s. Intel’s long-term stock chart is featured below:
Chart courtesy of www.StockCharts.com
The benefit of the very long term is that it provides a normalized but still decent rate of return with these kinds of stocks. No enterprise or investor can escape the business cycle, whether it is industry-specific, a local reality, or the general economy.
Railroad stocks have been super hot over the last several years, but for long periods of time, they were not. The solid dividend-payers that they are, you’d be hard-pressed to find Union Pacific Corporation (UNP) competing with Apple Inc. (AAPL) or Google Inc. (GOOG) for headlines.
I feel that stocks have broken out of their previous consolidation phase in favor of a new long-term cycle. But while last year’s stunning … Read More
Among blue chips, 3M Company (MMM) is getting a lot of increased earnings estimates from analysts. For such a mature company, 3M’s been doing very well on the stock market, and it looks to be well-positioned for more capital gains.
At the end of 2013, 3M had approximately 89,000 employees (full-time equivalent), of which 60% were based abroad. The company spends a lot on new research and development, and while many blue chips have been doing everything they can to squeeze costs, 3M keeps spending on new scientific and technology development ($1.57 billion in 2011, $1.63 billion in 2012, and $1.72 billion in 2013).
The largest component of the company’s sales is its industrial business, which makes a lot of product for automotive original equipment manufacturers (OEMs) and the automotive aftermarket. Products like tapes, sealants, ceramics, vinyl, polyester, and adhesives are sold to this market, but they’re also sold to electronics, appliance, food and beverage, construction, and paper and printing customers.
Thanks to the acquisition of Ceradyne Inc. in the fourth quarter of 2012, 3M is now one of the top manufacturers of advanced ceramics used for solar, electronics, and defense applications.
The company’s industrial business was 34% of last year’s total sales, growing the most over other operating divisions at 6.5% in U.S. dollars comparatively.
3M has paid a dividend to stockholders since 1914 and just recently increased its first-quarter dividend 34.6% to $0.855 per share, representing the 56th consecutive year of dividend increases. (See “The Six Things I Look for in a Company Before Buying Its Stock.”)
No wonder this stock is doing well. Its … Read More
“Outback Steakhouse,” “Carrabba’s Italian Grill,” “Bonefish Grill,” “Fleming’s Prime Steakhouse and Wine Bar,” and “Roy’s” are all owned by Bloomin’ Brands, Inc. (BLMN). With 1,500 restaurants in the U.S. and 21 other countries, business for the company is solid.
Fourth-quarter sales grew 5.1% to $1.1 billion due to new restaurant openings and an increase in comparable restaurant sales. The company opened 15 new locations during the quarter and completed 36 restaurant renovations. This resulted in bottom-line earnings of $59.0 million, or $0.46 per share (with a one-time gain), or $34.2 million, or $0.27 per share, on an adjusted basis for a 35% gain over adjusted earnings in the same quarter of the previous year.
The company’s shares rose 12% on the earnings report.
If there’s one restaurant stock that continues to amaze with its share price performance, it’s Chipotle Mexican Grill, Inc. (CMG). This stock has more than doubled over the last 16 months and, while expensively priced, is still a powerhouse of growth.
The company’s earnings estimates have continued to increase since I last wrote about the stock in October. (See “Two Old Restaurant Stocks Offer Investors Growth.”) Fourth-quarter 2013 revenues grew 21% to $844 million, which is a huge accomplishment, all things considered.
Fourth-quarter earnings grew 30% to $80.0 million. The cost of food is the company’s single largest expenditure at 34% of total sales, followed by labor at 23%. Fourth-quarter comparable restaurant sales grew 9.3% and there were 56 new locations for a total of 1,595.
Anything double-digit is a big deal in today’s world, and you can find it in the right restaurant stocks. … 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
Playing turnaround situations is a tough thing to do in the stock market. If a company’s share price experienced a material price retrenchment, it’s usually done so for a very good reason. Penny stocks are that way not because they want to be.
It’s useful scanning the market for 52-week lows and 52-week highs; the process of doing so helps in the generation of lists of stocks for further research.
One company that just experienced a major price reversal on the stock market is Strayer Education, Inc. (STRA). This company provides postsecondary education and degrees online and on campus, and offers executive Master of Business Administration degrees in collaboration with the Jack Welch Management Institute.
The company’s share price bounced off a 52-week low, soaring approximately $13.00 a share to just over $47.00 after announcing 2013 fourth-quarter earnings that substantially beat the Street. Strayer Education’s one-year stock chart is featured below:
Big price moves like this on the back of much higher-than-average trading volume are worthy of further examination as a potential turnaround trade. A stock market speculator could have bet on the company’s earnings results, but this would’ve been total guesswork and an enormous risk. A better bet might be one directly related to the price reversal’s continued momentum on a near-term basis.
Strayer Education said that its fourth-quarter revenues fell 13% to $124.1 million compared to $141.9 million for the same period in 2012. The company experienced higher revenues per student but lower enrollment.
2014 winter term student enrollment dropped 14% to 41,098 students and company management implemented a restructuring of campus operations, … Read More
Deutsche Bank just issued new “Buy” ratings on Caterpillar Inc. (CAT), Cummins Inc. (CMI), and Deere & Company (DE), which is quite a bold move.
It’s an early call on a sector turnaround. All three of these companies recently announced mediocre fourth-quarter earnings. Deere & Company expects its total sales to decline this year.
Caterpillar really hasn’t done anything on the stock market for the last couple of years, and Cummins has actually been kind of volatile on declining trading volume. Cummins is the outperformer among these stocks by a wide margin.
Anytime you get large, industrial equipment manufacturers being upgraded, it postulates a view that global economic growth is about to accelerate.
Whether this happens or not, it’s actually very useful to read what Caterpillar, Cummins, and Deere & Company have to say about their businesses. All three companies have tried to keep their earnings elevated in the face of weak or declining top-line growth.
Cummins’ largest customer (12% of total sales) is PACCAR Inc. (PCAR), which manufactures “Kenworth” and “Peterbuilt” trucks domestically, and “DAF” trucks for Europe and other international markets.
Cummins’ 2013 global sales were down slightly not only from 2012 but also from 2011. Management said that it expects market share gains in North American medium-duty trucks, but domestic and international mining markets as well as foreign currency instability are headwinds for earnings.
Caterpillar recently turned higher on the stock market, but the company’s most recent quarter wasn’t that great. It beat Wall Street’s consensus on revenues and earnings, but total sales were still down comparatively.
There are a lot of reasons why a Wall … Read More
Good businesses have a tendency to remain that way, and when they experience a material price retrenchment on the equity market, it’s often worth a look.
Chart Industries, Inc. (GTLS) is a company we’ve looked at before in these pages. This enterprise operates as part of the energy infrastructure build-out that’s such a strong investment theme.
The company, out of Garfield Heights, Ohio, is a specialized metal fabricator that manufactures storage solutions for liquefied natural gas (LNG), petrochemical and natural gas processing, gases for medical use, and related storage equipment. Quite a bit of the company’s specialized containers are sold to PetroChina Company Limited (PTR).
Chart Industries reports its fourth-quarter financial results next week. In its third quarter, sales grew 19% to $301.8 million. Earnings increased to $24.4 million, or $0.74 per diluted share, up from $18.5 million, or $0.61 per diluted share, in the same quarter of 2012. The company’s backlog grew 12% to a record $743 million.
In the company’s third-quarter financial report, management slightly reduced their expectations for revenues and earnings going forward due to changes in customer schedules and higher-than-anticipated costs. But the company still has a solid outlook for 2014, and this is very much a growth story, as order activity for LNG equipment is strong.
The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
Another stock that’s following a similar trading pattern is A. O. Smith Corporation (AOS), which is a water heater business that sells its product all over the world. (See “The One Place New Money Can Go to in This Stock Market Right Now.”)
For a mature, … Read More
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