There are several companies that have produced good earnings reports and are making money for shareholders in this difficult stock market; I think they are worth going over. So far, a lot of earnings reports were mediocre this second quarter, basically meeting expectations with reduced outlooks. But a number of existing stock market winners that pay decent dividends to shareholders are announcing solid earnings reports with good expectations for the bottom half. Even in this fragile stock market environment, there are companies out there generating great earnings reports.
Consider The Hershey Company (NYSE/HSY), which is a business that pretty much everyone recognizes. The chocolate maker’s latest earnings report saw revenues of $1.4 billion, up 6.7% from revenues of $1.3 billion in the same quarter last year. Net income for the second quarter of 2012 were just under $136 million, or $0.59 per diluted share, compared with $130 million, or $0.56 per diluted share, in the second quarter of 2011.
Hershey said that its been able to increase its prices without affecting demand; the company expects volumes to increase in the bottom half of the year, and management increased the company’s earnings outlook for all of 2012 from the previous $3.11 to $3.17 per share to a range between $3.17 and $3.23 per share. In my opinion, for such a mature business and brand, this is a great earnings report. On the stock market, the position is trading just below its all-time high, with a current dividend yield of 2.2%.
Then there’s PepsiCo, Inc. (NYSE/PEP), which is a benchmark stock I always follow. (See “My Favorite Benchmark Stocks That Lead the Stock Market.”) The company just reported a great second-quarter earnings report that beat consensus. The company is still going through a global restructuring, and it did have some one-time charges in its earnings report. PepsiCo’s net income was $1.5 billion, or $0.94 per share, in the latest quarter, down from net income of $1.9 billion, or $1.17 per share. Excluding one-time items, PepsiCo earned $1.12 per share, beating Wall Street consensus of $1.09 per share.
As we know, PepsiCo is a very mature business, but on the stock market, it’s a genuine leader. The stock was strong before the company’s latest earnings report; after the earnings report was released, the position broke through to a new 52-week high of just over $70.00 a share. All this, and a dividend yield of just over three percent.
Just like the economy, things are choppy in industry, and not all companies are able to produce good earnings reports that beat consensus. Today’s stock market leaders, however, will be best positioned to weather the next recession, and it’s great to see companies able to increase their selling prices without affecting demand.
Right now, the stock market continues to be trendless, trading off the news of the day, which doesn’t show any consistency. Expectations are now tempered for the bottom half of the year, and stock market investors can’t expect third- and fourth-quarter earnings reports to show a lot of growth. Going forward, the stock market leaders that report stability in their earnings reports will continue to outperform. This is a market that doesn’t require a lot of growth, but only stability of business conditions going into 2013.