More good numbers are coming down the earnings pipeline, and if the broader stock market is going to take a well-deserved rest, corporate results are a positive indicator going into 2015.
Global Payments Inc. (GPN) is a very good business in terms of its financial growth. The Atlanta-based company is one of the world’s largest processors of credit and debit card payments and business is growing by the double-digits.
The company’s first fiscal quarter of 2015 (ended August 31, 2014) produced total sales of $705 million for a comparable quarterly gain of 12%. GAAP diluted earnings grew 26% to $1.10 per share or 18% to $84.4 million.
Management increased its fiscal 2015 full-year sales estimate to between $2.74 and $2.79 billion, representing comparative growth of between seven and nine percent. Plus, the company expects margin expansion going forward, which will go right to earnings.
Global Payments has been in a prolonged consolidation on the stock market and finally broke out of this trend about this time last year. Given the company’s solid fiscal first quarter, further price appreciation from this position is likely.
Also announcing better-than-expected numbers was McCormick & Company (MKC). The iconic spice and condiment manufacturer is often cited as a more risk-averse stock for income-seeking investors.
This business is very mature and no one expects it to grow by double-digits. But the company just experienced very good growth in its bottom-line and the stock jumped on the news.
McCormick’s third-quarter sales grew three percent to $1.04 billion. The company’s Chinese operations produced 15% comparative growth in the most recent quarter.
Higher operating income and a lower tax rate contributed to the company’s substantial increase in earnings per share, which improved 21% to $0.94.
Management increased its adjusted earnings per share range for 2014 to between $3.30 and $3.37, and the stock now looks to be breaking out of its recent price consolidation following a huge run up between 2010 and 2013.
The numbers are coming in pretty good and we’ll soon be getting into a flurry of companies reporting.
But just because financial results are good that doesn’t mean that the stock market will head upward. Share prices are leading indicators with investors and speculators betting on a future stream of earnings before they actually appear.
Good corporate results are confirmation of where the stock market has come from. Future gains over the coming months will likely be incremental, but the fundamental backdrop going into 2015 remains favorable for equities. (See “Best Stocks Going Into 2015.”)
The investing landscape is actually shaping up quite well for 2015. Corporate balance sheets are top-notch among large-caps and the cost of capital, even in the face of rising interest rates, remains low.
Corporations are running lean operations and any small change, like increased selling prices or, in the case of McCormick, a better tax position, translates right to the bottom line.
The third quarter should be a good earnings season, just like the second quarter.