Thursday, January 31, 2013

The Key Earnings This Week

It's another huge week for earnings and while two weeks ago it was all about banking and one week ago it was mainly technology, this week it’s a broad based reporting week. As ever I will try and pick out some highlights or stocks that are emblematic of industry trends or investment themes. I will try to cover some of these companies so if readers have any favorites they want written up then message me in the comments section or through Google+.


One of my favorite stocks in the industrial sector Roper Industries gave results and readers can read a review of the company linked here.  Investors will be looking to see if its compelling mix of niche industries continues its growth path.

The pick of the day’s results was Caterpillar (NYSE: CAT) but I don’t know why! If Caterpillar’s prospects are guided by China’s growth prospects and the latter is critical to how the global economy fares then Caterpillar should be an important bellwether right? Well, yes and no. Yes because the argument does hold with regard assessing the current situation in China (which is unlikely to be great in mining) and no because I don’t find CAT’s guidance to be particularly useful. The company did say some positive things about China, but overall I felt the underlying trends are not great here. No matter the market is in bullish mood.


Harley Davidson is interesting to see how its international expansion plans are going. EMC Corp is a value play in technology. Pfizer's results were pretty good and Xeljanz (rheumatoid arthritis) could turn into a blockbuster especially as it is being trialled in other indications.

Robert Half (NYSE: RHI) was my pick of the day. You would be surprised to see how closely its metrics correlate with employment data elsewhere and I will try and cover the earnings in more detail shortly. A quick look at the American Staffing Association Index confirms that this is the strongest start to a year since 2007 and I think RHI could have some good things to say. Granted it may well already be in the price but this is such an important component of the US economy that it can’t be ignored.  The company's message was a positive one for the US, but Europe appears to be lagging.


Keeping up the theme of the US economy, Fair Isaac’s commentary may give some color on the potential for increased lending in 2013. Boeing will naturally attract a lot of attention following the dreamliner battery debacle. Core Labs has long been one of the best ways to play oil and investors will be keen to see what it has to say about US rig counts and how the majors are spending on reservoir management. It’s also an important day for technology with IT security company Fortinet reporting results. The sector is doing okay, but there appears to be some disruption from the likes of Palo Alto Networks so there could be some volatility in the mix. I think Fortinet could do well from the type of trading down that has negatively affected others.

However my tech highlight has to be Facebook (NASDAQ: FB). The company produced some excellent results when it integrated advertising into its mobile activities via sponsored stories, but the question is how long can this growth last? It’s easy to project out growth but it’s far harder to predict user behavior and whether it will start to react to having advertisements interspersed within finding out what their friends are up to. I think this is a key issue and I also question how the shift to mobile and tablet is changing the content of what people put on line.


Thursday sees my favorite stock in the aerospace sector BE Aerospace give results and another company with aviation exposure Ball Corp will also report. Sherwin-Williams has been on a great run and investors bullish on housing will want to take a closer look at it. Another stock with heavy US housing exposure is Whirlpool. I like the stock and its prospects and will watch the results closely. My only concern here is with its exposure to Brazil. There appeared to be a slowdown there in the second half, but anecdotal evidence suggests things are getting better of late.

My two highlights are in the personal care sector. Colgate-Palmolive (NYSE: CL) is a superbly run company that has been executing very well over the last few years. It seems to have taken share from Johnson & Johnson with oral care in the US and is aiming for 8-9% growth from emerging markets. I think the latter could prove tough. Yum Brands and others have seen some slowing growth in China and while the Government may be able to spend money Chinese consumers may not be so willing if the export factory that they work at is seeing slowing growth.

It is a similar story with Mead Johnson (NYSE: MJN). The company has been losing market share in China as conditions there have got tougher. Danone is aggressive in the market and when Mead Johnson tried to increase prices earlier in the year and it then promptly lost market share.  Bad timing.  In response Meade embarked on promotional activity and increased trade execution. Such measures can only go so far and it is far from clear what the company will report.


Friday’s are usually pretty quiet but health care plays Merck and Perrigo will create some interest. I love Perrigo’s end markets of generic pharmaceuticals and OTC nutritionals. The problem is I think its guidance may prove hard to hit. The picture will become clearer after these results and it will be good to see the company return to form after two disappointing quarters

No comments:

Post a Comment