by Hilary Kramer | April 25, 2014 11:48 am
Earnings season is well underway, and I’m pleased with four of my favorite stocks have performed so far. Their reports have been solid, and I’m confident that each company is positioned to move higher.
Let’s take a closer look at each of these reports, and I’ll share the numbers I believe are most important and where I see the companies heading next.
AutoNation (AN) is a standout in the auto retailing industry, and it’s changing the way cars are sold in the United States with a “no fuss, no muss” approach to the disdainful art of haggling. The company reported strong first-quarter results on April 17 that indicated the company has considerable momentum going forward.
Earnings for the quarter, which had been marked by slowing growth in the retail giant’s year-over-year vehicle sales in the first part of the year, came in at 75 cents per share adjusted for one-time items (outpacing the expected 73 per share). Revenues were also strong for the period, up 6.5% to $4.36 billion, while the Street had been looking for $4.32 billion.
AutoNation showed growth across all segments, including both new and used vehicles, as this means that the momentum can continue for AN stock.
Cree (CREE) is at the forefront of LED technology and creates LED lighting at a consumer-friendly price. Management reported third-quarter results this week that were in line with the Street’s expectations. Earnings came in at 39 cents per share, beating analysts’ estimates. However, revenues were a touch light, at $405 million versus the expected $407 million.
Management also plans to continue investing in growth initiatives, which means that there could be lingering margin pressure for the short term. Although the stock pulled back on the report, I still like the opportunity CREE represents. Volume growth is truly impressive, and I expect lighting products to continue to grow north of 20%. And though margins have been and will be diluted somewhat, earnings should grow even faster than 20% over the next two years.
EMC Corp. (EMC) is the world’s largest data storage provider, with about a 20% share of the huge market, focusing on cloud computing and big data. EMC reported solid third-quarter results on Wednesday, including earnings of 35 cents per share — in line with expectations — and revenues of $54.8 billion that outpaced the Street.
I continue to expect enterprise spending to pick up in the latter half of the year, tied to budget flush and the growing need for storage, where EMC saw double-digit growth in the quarter. EMC stock remains an attractive growth play within an in-demand tech industry.
Fortinet (FTNT) specializes in network security, focusing specifically on unified threat management, where the typical firewall has evolved into an all-in-one product that detects and prevents intrusions. The stock popped after the company reported solid first-quarter earnings after the close on Wednesday.
Revenue growth beat analyst expectations at $168 million versus $157 million. That growth flowed through to the bottom line, boosting earnings to 11 cents per share versus expectations of 8 cents per share. The report indicated strong deferred revenue and billings growth, up more than 20% for each metric, which points to solid revenue visibility and demand going forward.
Hilary Kramer is the Editor of GameChangers.
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