Earnings Duds and Earnings Studs

Who performed like a champ, and who went down for the count

   

On Thursday, I ran through the results of Morgan Stanley (NYSE:MS) and Bank of America (NYSE:BAC) — two stocks I named as “earnings duds.”

Today, we have another dud that reported earnings and shocked Wall Street — but not me.

Earnings Duds

Poor, poor Google Inc. (NASDAQ:GOOG). On Friday, revenues and profits failed to meet analyst expectations, and the stock got a quick $50 haircut.

As I mentioned in my earnings preview for GOOG, this stock is just too much of a wild card to be a good investment right now, and this earnings report proves it. Until it’s clear that their new growth initiatives are really boosting sales and earnings, my advice remains the same: Avoid this stock.

Earnings Studs

We covered UnitedHealth Group’s (NYSE:UNH) results a couple of days ago. This superior company blasted through analysts’ estimates. The stock did not gain the immediate momentum as I had expected, but I do expect these results will prove to be another stepping stone to higher investor returns in the weeks to come.

Since Thursday, I’ve also seen three more earnings studs report. Here are the results and my take on each:

Expectations were low, and IBM (NYSE:IBM) took full advantage of the situation. Revenues were up 1.6%, gross margins increased to 49.9% and the company met analyst expectations on earnings per share.

There will continue to be the naysayers that point to weak technology spending as a reason not to buy IBM, but the company is well-diversified, has the right management in place and has a 100-year history of proving people wrong. Shares have risen over 4% since Friday’s earnings announcement, making this company in “earnings stud” territory.

Intel (NASDAQ:INTC) pleased investors with its report as well. Revenues were up 21%, and earnings came in 7 cents, or 11% higher than analysts were expecting. Forward guidance was in range of what analysts were expecting, and all is well with the semiconductor giant.

Friday’s news should add some stability to the stock, which will entice more investors to pile on. I expect solid performance from the company, and here’s the best part: INTC pays a 2.1% dividend!

Intuitive Surgical (NASDAQ:ISRG) nailed it with earnings. Total sales jumped 28% year-over-year thanks to increased sales of its patented da Vinci surgical system. This trumped the consensus sales estimate by 3%. Net income jumped 25%, and the company posted a 12% earnings surprise. However, despite the fantastic news, share dropped sharply — down over 3% since the earnings announcement.

I still consider this stock to be a strong buy, and as I’ve stated before, I expect ISRG to have plenty of upside left.

More Earnings Fun This Week!

The Big Kahuna, of course, is Apple (NASDAQ:AAPL), reporting Tuesday. This stock earns an “A” rating according to my stock-screening system, so you know I’m expecting good things.

Also reporting are important market leaders like McDonald’s (NYSE:MCD), Caterpillar (NYSE:CAT) and Johnson & Johnson (NYSE:JNJ). Of course, let’s not forget the telecom twins, Verizon (NYSE:VZ) and AT&T (NYSE:T).

So far, the good earnings reports seem to be outweighing the bad: The S&P closed above 1,200 for the first time since July 2011. I predicted before the year began that 2012 could see as much as a 20% gain in the major indices, and I’ve seen nothing so far in these earnings reports to change my forecast.

If you want your share, you just need to stay invested in America’s best companies.

And if you want to do even better than the market averages, just follow me to the strongest, most fundamentally sound companies. That’s the best way I know to make up the ground you’ve lost over the past five years.


Article printed from InvestorPlace Media, http://investorplace.com/2012/01/earnings-duds-and-earnings-studs-preview-ms-bac-goog-unh-ibm-intc-aapl-mcd-cat-jnj-vz-t/.

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