by Hilary Kramer | January 22, 2013 11:00 am
For a stock junkie like me, quarterly earnings seasons are times when I can be like a kid in a candy store. You can analyze stocks up, down, left and right, but it always comes back to how much money a company is making, and even more importantly, how much it is likely to make in the future.
In addition to releasing actual numbers — sales, earnings, costs, debt, etc. — most companies also hold conference calls when management discusses the results, growth initiatives, expectations for the future, and more.
The result is a sea of information about how companies are doing. As investors, we want to find the oysters with the valuable pearls inside and avoid the ones that are empty.
Take Goldman Sachs (NYSE:GS), for example. They reported January 16, and I was looking for a strong report thanks to narrowing credit spreads that I expected to result in improved fixed income operations. GS did in fact blow past expectations, earning $5.60 per share when analysts were looking for $3.78, and the stock gained 4% the next day.
On the flipside, I expected Citigroup (NYSE:C) to start to struggle with their earnings, which have grown as the company released funds it set aside to cover potential bad loans. That’s not a sustainable way to grow earnings, and Citigroup’s earnings of 69 cents a share badly missed analysts’ estimates for 96 cents per share.
There are still a ton of reports to come, so let me share a few companies with you that I believe are good buys because of their earnings reports:
Avoiding stocks that take a hit after earnings is just as important as picking the winners, and one big company you should beware of is Yahoo (NASDAQ:YHOO). They will be reporting January 28, and while I expect results to be roughly in line with what analysts expect, I believe investors will focus more on guidance for 2013, management’s strategy for driving growth and controlling costs, the balance sheet assets, and the ongoing buyback.
Unfortunately, even with the buzz surrounding new CEO Marissa Mayer, all of the headcount reduction, strategic investment, reorganization of the sales organization, are not likely enough to compensate for the headwinds in the core business.
I just talked about various “winners” and “losers” for the season on Bloomberg TV, and you can see what I had to say in the video below (please note: my segment appears two minutes into the video).
More and more companies will be announcing earnings over the next few weeks, so I expect things to be pretty crazy on Wall Street. I will be watching Checkpoint and Microsoft very closely, but I think that these stocks are in good position to bounce after releasing results.
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