Stock Market Analysis 101: what companies say about their businesses is the best outlook for the broader market.
While the Federal Reserve’s monetary policy is the single greatest catalyst for stocks on a short-term basis, corporate reporting is the most material information of all. Notably, two brand-name stocks have revealed soft numbers.
FedEx and Oracle Miss Expectations
Not only is the early reporting missing Wall Street consensus, but U.S. dollar strength is still having a negative effect.
The numbers from large-cap international businesses are so far unimpressive and not a good start to the upcoming earnings season.
It’s a telling early sign of just how slow global business conditions really are. For a number of quarters in recent history, companies were able to keep padding their earnings on strong expense controls and share repurchases. Now the earnings are materially affected by slower sales.
It’s going to be a choppy year.
Two Benchmark Brands Can’t Deliver the Bottom Line: A Stock Market Analysis
We knew the numbers were going to be lackluster. Earnings expectations have been coming down for months. (See “Stock Market Investing: Timing Really is Everything.”)
Oracle Corporation (NYSE/ORCL) saw recent quarterly earnings per share fall 23% comparatively to $0.62. The company’s fourth fiscal quarter of the year, ended May 31, 2015, saw revenues fall five percent to $10.7 billion. On a comparative basis, they would have been up three percent from the same quarter last year on a constant currency basis.
Oracle’s transition to being a cloud-operating business is clearly on track. But the company’s latest quarterly numbers were a disappointment.
It’s difficult to imagine this position doing anything for the remainder of the year. The stock has been trading flat since January.
FedEx Corporation (NYSE/FDX), which recently saw its share price reaccelerate on the stock market, disappointed investors, missing the Street on both sales and earnings.
This company’s fiscal fourth quarter of 2015 ended May 31, at which point FedEx’s total revenues declined four percent to $6.7 billion from $7.0 billion in the same quarter last year.
Citing lower fuel surcharges and unfavorable currency translation, the company’s U.S. domestic package volume grew two percent comparatively.
Operating income fell a substantial 40% in the most recent quarter to $322 million due to the retirement of a number of aircraft and engines.
On the cusp of another earnings season, it’s tough going already. Adobe Systems Incorporated (NASDAQ/ADBE) technically beat the Wall Street consensus earnings estimate in its latest quarter, but the company guided its next quarter downward from its previous outlook. The stock sold off on the news.
More difficulty from currency translation and generally slow economic conditions on a global basis are likely trends for the next two quarters.
It’s still all about the Fed in terms of short-term trading action. But the prevailing change in monetary policy isn’t the only catalyst for investment decisions.
If this market is solely focused on the Federal Reserve, lackluster corporate reporting—at least in the near term—could easily bring the broader market lower.