After 1Q14, Are Business Conditions Improving?

1Q14 Looking Good ContinueIt’s still earnings season and countless businesses are reporting their financial results.

Echoing the strength in the auto manufacturing sector, American Axle & Manufacturing Holdings, Inc. (AXL) announced double-digit growth in its sales and bottom line.

As a leader in driveline and drivetrain systems for light trucks, sport utility vehicles (SUVs), and cars, the company’s first-quarter sales grew 14% to $859 million, with non-General Motors Company (GM) sales leaping 53% over the first quarter of 2013 to $289 million.

Citing much-improved sales for the “Jeep Cherokee” and “Dodge Ram” full-sized trucks, management expects a strong year. (See “Five Reasons This Tech Stock Tops My List.”) The company’s content per vehicle grew 10% to $1,655 and earnings improved 360% to $33.6 million.


And good numbers aren’t just related to the auto sector; The Estée Lauder Companies Inc. (EL) just hit an all-time record-high on the stock market after beating the Street on revenues and earnings; the company also increased its earnings-per-share (EPS) forecast for the year.

Announcing results for its third fiscal quarter (ended March 31, 2014), the company’s sales improved 11% over the same quarter last year to $2.55 billion.

The company said it experienced solid growth in all its operating regions, as well as margin expansion, which resulted in a 19% comparative gain in quarterly earnings to $213 million.

The numbers beat management’s own expectations for the quarter, and the company produced double-digit growth in all five of its main operating categories with the exception of hair care products.

In local currency, all of the company’s operating regions, being the Americas, Europe, the Middle East and Africa, and Asia/Pacific, produced double-digit net sales growth.

And in the heavy equipment business, H&E Equipment Services, Inc. (HEES) saw its revenues climb 12% to $237 million in the first quarter.

Serving the U.S. market selling and renting construction equipment, cranes, lift trucks, and earthmoving equipment, the company’s bottom line leapt 56% to $7.4 million, with rental revenues growing 14% and new equipment sales jumping 30%, comparatively.

Company management sees a positive year in 2014, and they said that the recovery in domestic construction markets is gaining momentum.

Generally, my economic outlook and stock market view are shaped more by what corporations actually report about their businesses and their forecasts for the future.

Now, not all of first-quarter reporting was good; but for the most part, my read on the numbers is that business conditions are improving. And while the first quarter was soft for a lot of businesses due to the weather, corporate outlooks are holding firm. I expect corporations to boost their own earnings forecasts in the bottom half of the year.

From pharmaceuticals to software, railroads to toothpaste, it’s been a pretty good quarter, and this market is not overvalued.

Stocks are due for a break, and I expect share price action to be soft for the next several months. But with plenty of double-digit gains in corporate revenues and earnings, the outlook is improving. It should be another good year, with share price strength weighted to the fourth quarter.