Corporate earnings are flooding in, and while there are always disappointments—typically in not meeting Wall Street expectations—the numbers are pretty good.
The stock market was relieved when conglomerates started reporting. 3M Company (MMM) saw its share price pop almost five percent higher after beating estimates and reporting a solid improvement in U.S. market demand.
I continue to like this position for long-term, income-seeking investors. (See “Off-the-Radar Company Delivering Attractive Earnings.”)
The company reported record third-quarter sales growing a modest 2.8% comparatively to $8.1 billion, with local currency sales growing 3.9% and acquisitions adding 0.1% to sales.
Currency translation, which is a big issue for any company with international operations, reduced third-quarter revenues by about 1.2%, according to the company.
Net income came to $1.3 billion, or $1.98 per share, representing an 11% gain over the same quarter last year with operating margins exceeding 22% in all of the company’s operating subsidiaries.
It was a very good quarter for 3M Company. It’s important to remember that this is a mature conglomerate, so nobody is expecting double-digit top-line growth in this environment.
Still, the bottom line was impressive along with management tightening its 2014 earnings range to between $7.40 and $7.50 per share from the previous $7.30 to $7.55 per share.
Also jumping on the stock market after announcing its financial results was Alaska Air Group, Inc. (ALK). The company is up almost seven percent after reporting a record third quarter.
This airline has been a very hot stock over the last five years. Passenger revenues in the third quarter grew a solid seven percent over last year. Excluding some one-time items, the company’s adjusted earnings came to $200 million, or $1.47 per diluted share, which is a big improvement over comparable adjusted earnings of $157 million, or $1.11 per diluted share, in the third quarter of 2013.
Lower fuel costs should help the company post very good earnings in the fourth quarter this year. This stock is likely to convincingly break above the $50.00-per-share level.
With so many prognosticators professing doom and gloom, that expectation is not representative in corporate reporting, which is why it’s so important to ignore the equity market’s noise and just focus on what corporations are saying about their businesses.
Alexion Pharmaceuticals, Inc. (ALXN), which is a company I’ve covered for years, leapt more than seven percent higher after beating consensus on revenues and earnings.
The company increased its 2014 full-year guidance over its previous forecast. The stock is now back up to where it was in February.
A lot of stocks are fully priced in this market, but expectations for corporate performance in 2015 are going up; that means that stocks can still tick higher and not be unreasonably priced, even though they are at record-highs.
Second-quarter earnings season quietly beat what a lot of investors were expecting. It was a strong quarter and so far, the third quarter reveals much of the same.