There’s plenty of corporate reporting and many companies are worth following, even if you aren’t interested in them specifically as stock market investments.
Market intelligence is available from many sources. But it’s the businesses themselves that offer up some of the best data on individual industries and general business conditions. The stock market always dances to its own tune, sometimes even ignoring good corporate earnings. And while some companies do manage their earnings to a certain extent, quarterly results are a great way to hone your own market view.
A. O. Smith Corp. (NYSE/AOS)
A. O. Smith Corp. (NYSE/AOS) is a company we’ve considered several times before in these pages. This Milwaukee-based manufacturer produces boilers and hot water heaters.
On the stock market, the company’s shares have been on a tear the last few months. This “old economy” business continues to prove its excellent wealth-creating potential. (See “How to Find a Solid Stock Investment in a Market Lacking Value.”)
The company produced record first-quarter earnings of $58.4 million, or $0.65 per share. They also had record first-quarter sales of $618.5 million, up a solid 12% over first-quarter sales in 2014.
Revenues in the U.S. and Canada increased 10% comparatively, while the rest of world sales, comprising China, Europe, and India, grew 13% to just under $200 million in total.
The company is still buying back its own shares; it has plenty of cash in the bank and management just increased its earnings per share guidance for all of 2015.
So, the residential and commercial water heating business is still a good one. A. O. Smith has proven to be a solid performer on the stock market. It’s just another non-headline, “boring,” esoteric company that happens to be a really good business.
And the enterprise itself is a good barometer on the housing market, both in North America and in China. So even if you’re not interested in this business as a stock market investment, it is worth following.
Watch the Technology Sector
The financial results from transportation stocks like trucking, airline and railroads are very worthy of perusal. So are those from mature, big-name technology companies—the previous generation of wonder stocks. Oracle Corporation (NYSE/ORCL) and Microsoft Corporation (NASDAQ/MSFT) fall into this category. Their earnings results offer up great market intelligence regarding information technology spending.
Fiesta Restaurant Group, Inc. (NASDAQ/FRGI)
Also worthwhile are restaurant stocks. Without question, their numbers tell the story on consumer spending and confidence. And on the stock market, these positions become telling indicators of where institutional investors are putting or pulling their money.
Fiesta Restaurant Group, Inc. (NASDAQ/FRGI) is an up-and-coming restaurant business operating the Pollo Tropical and Taco Cabana chains.
The company beat the Street in its latest quarter. The stock, which has been on a tear lately, is currently turning over. Valuation for this position and many other restaurant stocks has been on the high side lately. And there’s been some selling.
So far, first-quarter earnings are okay and stock market action has been better than at the beginning of the year.
Now is the time of the earnings onslaught. It’s the best time of the year to develop your market view.