Two Very Different Stocks That Could Beat the Street
If there was a surprise in corporate reporting this quarter, it’s Walgreen Co.’s (WAG) earnings, which soared due to an increase in generic prescriptions. Total quarterly sales grew 5.1% to $17.9 billion, of which prescription sales accounted for 64%, representing 203 million prescriptions during the quarter, for a comparable gain of 8.2%.
Those are good numbers, especially in tandem with the company’s reporting a 19.1% increase in filled prescriptions for all of fiscal 2013.
Walgreen has been making acquisitions on a consistent basis, but at the same time, sales from stores open at least a year grew by 4.6%, which is a very good metric for any mature company.
With those numbers, Walgreen’s share price is poised to keep moving higher. Reliability and consistency is what Wall Street wants in a slow-growth environment. (See “Consistency, Rising Dividends Make This Benchmark a Possible Winner for Savers.”)
Another company that surprised the Street with good earnings results was Global Payments Inc. (GPN). This is a very interesting enterprise; the company does electronic payment processing for merchant and institutional customers like financial institutions, big corporations, and even government agencies.
The stock’s been in consolidation for years, but I think it’s on the cusp of a major breakout.
The company beat on consensus earnings per share and revenues, while revising its fiscal 2014 earnings per share to above the previous outlook.
In its 2014 fiscal first quarter, the company’s revenues grew seven percent to $629.7 million, up solidly from $590.3 million in the comparable quarter.
Fully diluted GAAP earnings per share were $0.87, way up from $0.59 per share in the fiscal first quarter of 2013.
This is a very interesting business and a company worth keeping on your radar. Management said that the company plans to buy $100 million of its own stock this month. Street estimates for Global Payments are going to go up.
While it’s very early days this reporting season, I am seeing some decent financial results from companies that already had fairly low expectations for growth. It’s mostly single-digit growth, but at least bigger companies aren’t reporting contractions from the previous and comparable quarters.
There has been a pullback in the stock market’s strongest blue chips over the last two months. They can, however, reaccelerate if their numbers are good. Balance sheets continue to be excellent and earnings productivity is very much the result of strong cost control.
Recognizing that quarterly earnings results are a game of managed expectations, the combination of balance sheet health and revenue and earnings growth among many brand-name companies so far has been quite positive.
It’s a good sign in a stock market that is fully valued. Good numbers from corporations help justify current share prices; however, they don’t make the case for buying this market currently.