Decoding Another Round of Earnings

Apple is still a strong buy despite a disappointing quarter

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Decoding Another Round of Earnings

The earnings train is still rolling along. On Tuesday, I discussed several big blue chips that were set to report earnings this week and gave my full analysis on whether you should buy before the earnings deluge.

Today, I’d like to revisit these market-moving announcements and discuss whether my earlier recommendations held true. Plus, we’ll take a look at a fresh batch of upcoming earnings and make some predictions there as well.

Apple Posts A Rare Earnings Miss–But Shares Are Still a Buy

This week, all eyes were on tech giant Apple (NASDAQ:AAPL). Now some of the bears came out after Apple’s announcement because the company posted a 10% earnings miss for the second quarter. But anyone who got caught up in the selloff missed what I consider a great buying opportunity.

To break it down, Apple announced that it sold a record 17 million iPads in the quarter. This helped to fuel a 23% year-over-year jump in net sales, which rose to $35.02 billion. International sales accounted for 68% of total sales. Compared with the same quarter a year ago, net income climbed 21% to $8.82 billion, or $9.32 per share.

These numbers are still incredibly strong and I am personally very excited about the release of the iPhone 5 in the fall. Many Apple lovers are holding off until the iPhone 5 comes out and there’s a new story every day that speculates about what will be upgraded and changed. That being said, I consider Tuesday’s dip a buying opportunity; I reiterate my buy recommendation for AAPL.

Tesla Motors and Ford Hit the Brakes in the Second Quarter

On Tuesday I also highlighted two car companies–electric vehicle specialist Tesla Motors (NASDAQ:TSLA) and American institution Ford (NYSE:F). I advised that you stay away from these companies due to a poor earnings outlook. Given their mixed earnings announcements on Wednesday, I restate my recommendation. In the second quarter, Tesla Motors slipped to a $105.6 million net loss and its sales plunged. And Ford Motor’s sales dipped 7% and its earnings were cut in half! Continue to avoid these two.

The Dr. Doesn’t Disappoint with Its Third-Quarter Earnings

Dr Pepper Snapple (NYSE:DPS) was one of the company’s I recommended as a buy and the company didn’t disappoint. DPS reported particular success with its new Dr Pepper TEN soft drink as well as its line of Snapple teas. Compared with the same quarter last year, net income advanced 3% to $178 million; adjusted earnings weighed in at $0.85 per share, which topped the $0.82 consensus estimate by 4%. Over the same period, net sales climbed 2% to $1.62 billion. This just missed analyst estimates of $1.63 billion in third-quarter net sales.

Despite rising packaging and ingredient costs, the beverage giant reiterated its 2012 guidance of 3% to 5% in net sales and earnings per share in the range of $2.90 to $2.98. That being said, I still consider DPS a safe beverage play, and no one can argue with its 3.1% dividend yield!

A Stronger Dollar Hits 3M’s Sales

As predicted, 3M (NYSE:MMM) had a tough time growing its sales in the second quarter; as a multinational company it gets paid in different currencies and the stronger dollar depressed the value of these international sales. As such, net sales dropped 2% to $7.53 billion. The one bright spot of this earnings announcement was that 3M was able to pull off a 1% earnings surprise, but this isn’t enough to change my hold recommendation on MMM.

As busy as this week was, there are still plenty of earnings announcements–and profit opportunities–around the corner.

Friday, July 27th

On Tuesday I discussed Merck’s (NYSE:MRK) earnings announcement but we also have another big blue chip reporting earnings, and that’s Chevron (NYSE:CVX). As one of the world’s largest oil companies and with a solid one-month rally under its belt, it may be tempting to buy into CVX.

However, I must insist that you hold off until after this company’s earnings announcement because my Portfolio Grader screening tool picked up a few red flags with this company. Most importantly, analysts have been steadily downgrading their earnings estimates–this is coupled with a lackluster track record of earnings surprises. Also, analysts expect Chevron’s sales to dip 0.6% and earnings to drop a full 15.8%.  This makes me believe that Chevron is best left on the sidelines for now.


Article printed from InvestorPlace Media, http://investorplace.com/2012/07/decoding-another-round-of-earnings-aapl-tsla-dps-mmm-mrk-cvx/.

©2014 InvestorPlace Media, LLC

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