I've never used a motorcycle before in my life and don't know much about the vehicles, but I recognize that Harley-Davidson, Inc. (NYSE: HOG) is an American icon whose product represents an aspirational brand. Even so, the company and its stock finds itself on hard times. The company's latest earnings report is reflective of the current economic malaise.
The first paragraph of the Q2 release tells me almost all I need to know. Revenues declined almost 3% to $1.57 billion. Net profit on a dollar basis dropped sharply by 23%, coming in at $222.8 million. Diluted earnings per share decreased by nearly 17% to $0.95. These numbers are not good. Also, in terms of cash flow, cash was used to fund operations for the first six months of the fiscal year as opposed to being generated. Yet another negative.
As I write this, Harley-Davidson's stock is up well over 7%. Am I impressed? Not enough to buy. Undoubtedly some of this rise can be attributed to the retreat in oil futures. But do I believe the economy will now be nice to Harley-Davidson? Not yet. The company, like General Motors Corporation (NYSE: GM) and Ford Motor Company (NYSE: F), will still have a rough time selling things that require fuel to run. According to this article, Harley-Davidson did better than expected, but that's little comfort to me. You can make an argument that the stock is cheap, but at the very least, anyone interested in buying it (again, I'm not) better wait till the euphoric rally of the day has faded.
Disclosure: I don't own any company mentioned; positions can change at any time.
Classic blue-chip tech company IBM (NYSE: IBM), whose colleagues include Dell (NASDAQ: DELL), Microsoft (NASDAQ: MSFT) and Hewlett-Packard (NYSE: HPQ), is due to report earnings on Thursday after the market closes up shop. What are investors looking for? Growth, of course. Should they expect it?
Well, according to Trey Thoelcke's earnings data, Wall Street is looking for IBM to deliver earnings per share around the $1.82 mark for the second quarter. Revenues should be near $25.9 billion. If Big Blue hits both of these numbers, it would show that the company is coming along fine and that the current level of the stock price is justified. Of course, Wall Street doesn't want IBM to merely hit those numbers. Oh no, that would be too easy. Wall Street wants IBM to beat those expectations. In terms of the bottom line, there is positive recent history for an earnings beat. The company handily beat estimates in the last two quarters, and met expectations in the two quarters previous to that time frame.
Will the company beat expectations? I think it will. The momentum seems to be favorable for such an outcome. In fact, in a relative sense, the stock isn't signaling a terrible report by any stretch of the imagination. The 52-week low is $97.04 and the 52-week high is $129.99. IBM closed up on Wednesday over 2% to a share price of $125.94. Doesn't sound like the market is worried, does it?
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from Alcoa (NYSE: AA) and General Electric (NYSE: GE) kicking things off last week, here's a look at what Wall Street is expecting from many of the companies scheduled to report this coming week.
Analysts surveyed by Thomson Financial are expecting the following companies to report a rise in earnings when compared to the same period of the previous year.
Nucor Corp. (NYSE: NUE): $1.80 EPS (36.6%) on sales of $6.4 billion (+53.0%)
Google Inc. (NASDAQ: GOOG): $4.74 EPS (24.9%) on sales of $3.9 billion (+41.6%)
Nokia Corp. (NYSE: NOK): 56 cents EPS (23.2%) on sales of $19.9 billion (+17.8%)
CSX Corp. (NYSE: CSX): 90 cents EPS (21.1%) on sales of $2.9 billion (+12.8%)
Altera Corp. (NASDAQ: ALTR): 27 cents EPS (18.5%) on sales of $346.7 million (+8.4%)
IBM (NYSE: IBM): $1.82 EPS (+17.6%) on sales of $25.9 billion (+9.0%)
eBay Inc. (NASDAQ: EBAY): 41 cents EPS (17.1%) on sales of $2.2 billion (+18.0%)
Update July 7, 2008: Aluminum giant Alcoa Inc. (NYSE: AA) will post second quarter 2008 results after the close on Tuesday, July 8. Read our preview.
Alcoa Inc. (NYSE: AA) will officially kick off earnings season when it reports its fourth quarter figures Wednesday following the market close.
When we get Wednesday's report, analysts are expecting to see the numbers impacted by a lower dollar and falling metal prices. Estimates for the quarter are running at 39 cents per share. During the fourth quarter last year Alcoa posted earnings per share of 74 cents.
The market can definitely use some positive news from Alcoa when it reports. With this mornings employment data stoking fears of an upcoming recession, the market could definitely benefit from a injection of positive earnings news.
Yum Brands Inc. (NYSE: YUM) beat Wall Street's EPS expectations by a nickel, due largely to strength overseas. Profit was up 17%, revenue 13%, from a year ago.
Earnings are released this week and for the next several. Investors will be scouring the headlines, looking for their stocks' results. Here are some things to check.
Earnings: They're the first number every investor wants to see. But just seeing the earnings per share (eps) isn't enough. You want to know how those earnings were achieved. The ideal: eps grew because more widgets were sold or more hours were billed or more of whatever the company sells is being sold. That's in contrast to eps increasing because of asset sales or a division being sold or some other extraordinary event. Those will only happen one time and won't continue to increase earnings in the future. You'd like to see earnings growing faster than revenues. It shows better efficiencies at the company and suggests future growth will be as profitable or more so because of these efficiencies.
Just call it the "half a loaf is better than none" or "the glass is half-full" earnings quarter, or... well you get the point.
Wall Streets' analysts expect earnings growth from S & P 500 companies to slow in the second quarter, but that doesn't mean that there won't be stand-out sectors.
For example, energy companies are expected to benefit from elevated oil prices, barely-adequate gasoline refinery capacity, and solid demand for petroleum-based products.
Also, the industrial and technology sectors are expected to fair well: the industrials boosted by continued strong global growth, the techs aided by corporate information technology spending.
On the downside, likely to post sub-par earnings results include the auto and housing companies: U.S. automakers are battling operational restructuring and a slowdown in consumer spending, while the housing sector continues to correct, due to a large supply of unsold homes, rising interest rates, and subprime loan defaults.
Market-wide, analysts expect S & P 500 companies to post Q2 year-over-year earnings growth of 4.4%, according to Thomson Financial. If that sounds like a modest slowdown compared to the double-digit earnings growth prior to 2007, you're right, and Wall Street has, accordingly, "lowered the earnings expectations bar" for this quarter. Hence, in general, companies that fail to exceed analysts' earnings estimates by 10% are not likely to face as harsh a treatment by investors as they would in quarters past, when the earnings expectations bar was higher.
Still, given the strong correlation between earnings growth and stock prices, lowered expecations or not, this quarter's earnings performance will provide investors with a telling data point regarding whether there's fundamental evidence to drive stock prices higher, and by extension, to continue the market's bull run of 2007.
Nike (NYSE: NKE) took its turn in the earnings confessional last night, announcing a 32% jump in fourth-quarter profit. The athletic-apparel giant said net income for the latest reporting period hit $437.9 million, or 86 cents per share, up from $332.8 million (64 cents per share) in the year-ago period. Revenue was 9% higher for the quarter at $4.4 billion. According to MarketWatch, these figures were on par with analysts' expected per-share earnings of 86 cents and revenue target of $4.36 billion.
A global look at the company's fundamentals reveals that markets are stabilizing in France and the U.K., according to executives. Additionally, Asian revenue rose 7% during the latest quarter, with China poised to become Nike's second-largest market in a matter of years. In the U.S. (Nike's largest market), revenue rose 10% to $1.6 billion.
The company's other brands, including Cole Haan and Hurley International, collectively expanded by 16%. The Converse brand was a particular overachiever, with revenue spiking 23%. Which reminds me, I still need to pick up some hot-pink "Chucks."
Inventory levels were improved at Nike, down from double-digits to just 2%.
On Monday evening, I noted the recent struggles Nike stock has had with its 10-day and 20-day moving averages. Today's jump in the shares - a 5.5% rise out of the gate - has been enough to lift the stock solidly through these technical barriers. The next challenge for the stock is its all-time high of $57.58 (pegged earlier this month), currently less than 2% away.
Sprinting into the earnings confessional tomorrow after the closing bell sounds is Nike Inc. (NYSE: NKE), the ubiquitous maker of stylish kicks and apparel for fitness-and-fashion-minded folks. According to Briefing.com, analysts with Reuters are expecting the king of the "swoosh" to bank 85 cents per share in its fourth quarter; analysts polled by Zacks expect 86 cents; both projections exceed year-ago estimates of 69 cents per share.
Technically speaking, Nike has been in rally mode since last August, gaining more than 45% in slightly more than 10 months. The stock has benefited from support at its 10-week and 20-week moving averages; while last week's broad-market pullback dropped the stock below these short-term trendlines, Nike has risen 3% today to retake control of these supportive averages.
My mentor Bernie Schaeffer has taught me to always gauge investor and analyst expectations ahead of an earnings release, as inflated expectations can lead to a disappointing reaction following the report. It seems as though optimism is running fairly high on the footwear retailer. Options players are showing a preference for call positions, which means a sense of bullishness, especially among short-term speculative players. Short interest is low -- the latest numbers show a short-interest ratio of just 2.1 days to cover despite a 19% jump in NKE shorted shares. Finally, analysts are already favoring the bullish camp. Recent Zacks data indicates six "buy" ratings and two "holds," leaving precious little room for upgrades.
It is true that Nike's recent uptrend provides some justification for this optimism. But when expectations are bloated, there is the concern that earnings will not be well received, even if they manage to match or exceed analysts' estimates.
A couple of months ago, I mentioned that while a Coach (NYSE: COH) handbag can be quite the splurge, shares of the luxury-goods retailer could potentially be a prudent investment. Since this posting, the stock has gained nearly 15%, hitting a new all-time high in Monday's session.
This morning, the company said its third-quarter net income surged 38 percent, to $150 million, or 40 cents per share. Revenue increased 30 percent to $625.3 million. Both of these figures surpassed analysts' expectations of 38 cents per share and $617.6 million, respectively.
Peeking in on sales, direct-to-consumer sales rose 29 percent to $481 million, while same-store sales expanded 20 percent. The newly introduced Coach fragrance accounted for three percent of retail sales during the latest reporting period. No word on what percentage of COH sales came from various car trunks in Manhattan.
Earnings season has gotten a "solid kickoff" from Alcoa (NYSE: AA) according to Standard & Poor's, noting in it's The Outlook, "Riding robust metals prices helped the aluminum producer top Wall Street forecasts."
S&P explains, "Alcoa is finally beginning to see the payoff from its global expansion. On Apr. 10, the aluminum giant got earnings season into gear by reporting stronger earnings and sales in the first quarter, thanks to higher metal prices and strength in the aerospace industry."
The company, which it notes sells everything from Reynolds Wrap to electrical distribution systems for trucks, said its net income for the first quarter rose 9%, to $662 million, or 75 cents a share. Alcoa's revenues, S&P reports, increased 11% for the quarter, to $7.9 billion, about $300 million above forecasts.
S&P adds, "Alcoa has been benefiting from improved aluminum prices during recent years, as the industry continues working off its excess capacity and consolidates. At the same time, developing economies have been buying metals during their expansion and airplane makers have been busy building more planes."
According to S&P analysts, the aerospace, building and construction, and industrial product markets also gave Alcoa a boost, which they say is offsetting losses in struggling sectors such as the auto industry.
Longer term, Standard&Poor's sees Alcoa "benefiting from gradually rising aluminum prices, better working capital management, consolidation of the global aluminum industry, and production from new plants."
S&P also cites Morningstar analyst Scott Burns, who called Alcoa's cash flow "impressive." Burns says, "It shows that the company is starting to knuckle down on getting its capital expansion spending in line, after having positioned itself for a growing global aluminum market."
For more stock picks from the leading financial newsletter advisors, visit Steven Halpern's free daily website, TheStockAdvisors.com.
Earnings season has begun to wind down, what with the March 1 deadline that many companies face having just passed. But we've seen plenty over the past week or so on the quarterly reports of some of our favorite stocks.
Blogging Stocks readers were pessimistic ahead of the release from Home Depot Inc. (NYSE:HD), 57% of you predicting in our poll that it would fall short of analysts' expectations. Only 17% thought HD would beat expectations, but 26% of you were correct that the earnings were in line with, admittedly low, expectations.
Readers were also pessimistic on Viacom Inc. (NYSE:VIA). 41% of you voted in our poll that VIA would miss expectations, though a respectable 32% predicted that it would meet analysts' expectations. But the 27% who thought it would beat expectations turned out to be correct, as the purchase of DreamWorks helped lift Viacom.
You were split on Dell Inc. (NASDAQ:DELL) ahead of its earnings release. 36% predicted earnings would be in line with expectations and 35% of you thought it would fall short. But on March 1 we saw that strong competition, weak sales, and legal entanglements were too much for Dell and it missed expectations.
Speaking of splitting your votes: XM Satellite Radio Holdings (NASDAQ:XMSR) and Sirius Satellite Radio Inc. (NYSE:SIRI), the only two real players in the satellite radio market, reported quarterly earnings just a day apart. To the casual observer, these companies may look more similar than different, which was reflected in the recent announcement of their intention to merge. Yet clearly our readers have a favorite, as 57% of predicted XM would fall short of analysts' expectations, while 61% thought Sirius would beat expectations. Your favoritism aside, XM ended up beating expectations (which only 19% of you predicted), while Sirius's earnings were in line with expectations (which 27% predicted). Still, they were more alike than different when you take into account that XM only beat expectations by a penny.
Quarterly reports continue to roll out, as we're in the thick of earnings season. This past week we asked you, Blogging Stocks readers, for your expectations ahead of earnings reports from some of our favorites -- namely, eBay Inc. (NASDAQ:EBAY), McDonald's Corp. (NYSE:MCD), Johnson & Johnson (NYSE:JNJ), Advanced Micro Devices Inc.(NYSE:AMD), Sun Microsystems Inc. (NASDAQ:SUNW), Yahoo! Inc. (NASDAQ:YHOO), AT&T Inc. (NYSE:T), Ford Motor Co. (NYSE:F), and Microsoft Corp. (NASDAQ:MSFT).
So how did readers do at predicting earnings when compared to Wall Street? It looks like a tie to me, seven out of nine predicted correctly in each case. Let's look a little closer at what you expected.
You had little doubt that several of these stocks would beat expectations: EBAY (70% for beat), MCD (72%), SUNW (72%), T (73%), and even JNJ (59% for beat, against 39% for meet). You correctly picked MSFT to beat expectations as well, but with a bit more uncertainty -- 45% picked beat, against 40% just to meet. And while YHOO beat analysts' expectations, too, only 34% of you thought it would; 39% picked meet.
Ford was one of our favorite underdogs in the Best & Worst of 2006. Perhaps such sentiment played a part in why you were nearly split three ways on Ford in this poll, with 35% to beat, 34% to meet, and 31% to miss expectations. Unfortunately, despite your optimism Ford fell spectacularly short.
Poll results were fairly close on AMD as well, perhaps because of AMD's ongoing rivalry with Intel Corp.(NASDAQ:INTC) -- 26% of you picked it to beat, 32% to meet, and 42% to miss expectations. Despite Wall Street's low expectations, AMD fell short, as the largest portion of you predicted. Congratulations.
Upcoming earnings reports include Sony, Google, Starbucks, and Time Warner. Check out these and other earnings reports that we're following, and let us know what you're expecting.
Classic blue-chip tech company 
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from 
Ted Allrich is the founder of 
Nike
Sprinting into the earnings confessional tomorrow after the closing bell sounds is 
A couple of months ago, I 
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