Earnings: The Good, Bad, Ugly and ‘Applesurdity’

by Marc Bastow | June 1, 2012 9:00 am

The feeding frenzy that was earnings season isn’t quite over yet, as a number of companies are still waiting to report. But for the most part, the heavy lifting — not to mention breathing — is over.

It’s pretty much impossible to cull a specific list of the “winners” and “losers” because investors ultimately make those calls with actions, like buying or selling a particular stock, so I’ll leave a ranking to others.

Sector calls are somewhat easier: Bank stocks, such as Citigroup (NYSE:C[1]), Bank of America (NYSE:BAC[2]) and Goldman Sachs (NYSE:GS[3]), took it a little bit on the chin as earnings were generally in line with estimates but stock prices didn’t move significantly on the news. JPMorgan (NYSE:JPM[4]) hit one out of the park, but, of course, that didn’t work out so well.

Industrials, such as Caterpillar (NYSE:CAT[5]), Deere (NYSE:DE[6]) and Cummins (NYSE:DE[6]) showed solid earnings as the economy slowly moves forward and demand from China and Brazil holds up. Their stock prices were, at least in the short term, rewarded.

The retail sector that includes Wal-Mart (NYSE:WMT[7]), Target (NYSE:TGT[8]) and Dollar Tree (NASDAQ:DTR[9]) to name a few, fared well on both earnings, revenues and stock prices. But all was not equal, as luxury-goods makers like Tiffany (NYSE:TIF[10]) and high-end retailers like Nordstrom (NYSE:JWN[11]) flailed away with lower revenues, earnings and stock prices.

But instead of trying to find trends, or parsing results from an unwieldy list of companies, let’s instead look at a quick list we can call “The Good, The Bad and The Ugly” of earnings season. Oh, and at the end, we’ll add a special category. Of course, the list isn’t particularly scientific or analytical — we’ll leave that to the Street’s quants and analysts.

The Good

Make no mistake, these three stocks crushed it on all levels: revenues, earnings and appreciating stock prices, both on a quarter-to-quarter and year-over-year basis, and thus earn my next-to-highest award.

Amazon (NASDAQ:AMZN[12]): AMZN earnings actually declined compared to last year, to 28 cents vs. 44 cents, but since analysts expected 7 cents, the stock took off, leading AMZN up even further the absurd-valuation ladder (about 172). Can it stay that high? Keep on selling that Kindle Fire, and we’ll find out.

Boeing (NYSE:BA[13]): Well done. Earnings of $1.22 per share easily beat estimates of 29 cents despite lower revenues in the quarter — and the 787 waits in the wings for final delivery.

AOL (NYSE:AOL[14]): Is it possible that The Huffington Post is going to be the ultimate salvation for a company that has been looking endlessly for a follow-up success after virtually inventing dial-up Internet access? With a presidential election coming up, readership should increase for the politically correct blog. Lower operating expenses saved the day this quarter, however, with EPS of 22 cents blowing out estimates for 4 cents.

The Bad

In this case, the “bad” isn’t necessarily really bad — just not what was expected by either the company, investors or the Street. So, there’s still lots of hope for these companies … right?

Fifth & Pacific Companies (NYSE:FNP[15]): Not a very good showing for the former Liz Claiborne, with losses (22 cents per share against estimated 9 cents) incurred despite mild earnings growth. Luxury retailing is tough today — just ask Tiffany. Maybe FNP needs to call in What Not to Wear‘s Stacy and Clint for a makeover.

Cognizant (NASDAQ:CTSH[16]): The info-tech provider spoiled a nice quarter of revenues and earnings by warning that earnings may be down 7 cents to 8 cents in the next several quarters compared to analyst estimates because of weaker demand. Of course, Cisco (NASDAQ:CSCO[17]) said the same thing, so maybe they’re on to something — like maybe an overall slowdown in the IT sector.

Goodyear Tire & Rubber (NYSE:GT[18]): The tire maker ran flat all quarter[19], as really nothing went particularly right. Weak demand, plant-closing costs and what the company admits was “poor productivity” in its plant in France (surprise, oui?) triggered a net loss of 5 cents on the quarter, well below last year’s 44 cents per share in profit. Not a good sign for the auto industry, either.

The Ugly

By “ugly,” I mean really downright nasty surprises both in quality and quantity of earnings, or losses. The kind that make investors get out in a hurry to avoid a run on their brokerage accounts and make short sellers the happiest folks in the room. Sometimes this is just a matter of bad luck, or bad timing, and for these three, it’s probably a combination of both. Ouch.

Avon (NYSE:AVP[20]): Coty came calling[21], offering to buy Avon for over $24 per share, but Avon paid no attention to the bell despite tanking across the earnings board[22]. Next time, answer the door.

J.C. Penney (NYSE:JCP[23]): One-price shopping means lower revenues, earnings and stock prices as Ron Johnson struggles with a new approach[24] at an old-line retailer. Think you’re in the boat alone? Say hello to Sears (NASDAQ:SHLD[25]).

Green Mountain Coffee (NASDAQ:GMCR[26]): The first-quarter poster child for short sellers’ euphoria with bad earnings, a high level of insiders dumping shares[27] ahead of its earnings release and a snub from benefactor Starbucks (NASDAQ:SBUX[28]), which has decided to offer up its own single-cup brewing system[29]. It all adds up to a tanking stock price. Everybody out of the pool!

The Applesurdity

I mean, Apple‘s (NASDAQ:AAPL[30]) earnings were just out-of-this-world absurd. Plus, the company announced a juicy new dividend, demand for iPads and iPhones appears to be unlimited and analysts are dreaming up reasons why Apple stock will get to $1,000 per share within two years.

Can anybody beat that? Of course not, which is why Apple gets its own category.

See you again in July.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he was long AAPL and AOL.

  1. C: http://studio-5.financialcontent.com/investplace/quote?Symbol=C
  2. BAC: http://studio-5.financialcontent.com/investplace/quote?Symbol=BAC
  3. GS: http://studio-5.financialcontent.com/investplace/quote?Symbol=GS
  4. JPM: http://studio-5.financialcontent.com/investplace/quote?Symbol=JPM
  5. CAT: http://studio-5.financialcontent.com/investplace/quote?Symbol=CAT
  6. DE: http://studio-5.financialcontent.com/investplace/quote?Symbol=DE
  7. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT
  8. TGT: http://studio-5.financialcontent.com/investplace/quote?Symbol=TGT
  9. DTR: http://studio-5.financialcontent.com/investplace/quote?Symbol=DTR
  10. TIF: http://studio-5.financialcontent.com/investplace/quote?Symbol=TIF
  11. JWN: http://studio-5.financialcontent.com/investplace/quote?Symbol=JWN
  12. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  13. BA: http://studio-5.financialcontent.com/investplace/quote?Symbol=BA
  14. AOL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AOL
  15. FNP: http://studio-5.financialcontent.com/investplace/quote?Symbol=FNP
  16. CTSH: http://studio-5.financialcontent.com/investplace/quote?Symbol=CTSH
  17. CSCO: http://studio-5.financialcontent.com/investplace/quote?Symbol=CSCO
  18. GT: http://studio-5.financialcontent.com/investplace/quote?Symbol=GT
  19. ran flat all quarter: https://investorplace.com/2012/04/forget-goodyear-loss-gt-will-keep-rolling/
  20. AVP: http://studio-5.financialcontent.com/investplace/quote?Symbol=AVP
  21. Coty came calling: https://investorplace.com/2012/05/coty-will-no-longer-call-on-avon/
  22. tanking across the earnings board: https://investorplace.com/2012/05/avon-earnings-plunge-shares-fall/
  23. JCP: http://studio-5.financialcontent.com/investplace/quote?Symbol=JCP
  24. Ron Johnson struggles with a new approach: https://investorplace.com/2012/05/jcpenney-turnaround-turns-ugly-jcp/
  25. SHLD: http://studio-5.financialcontent.com/investplace/quote?Symbol=SHLD
  26. GMCR: http://studio-5.financialcontent.com/investplace/quote?Symbol=GMCR
  27. insiders dumping shares: https://investorplace.com/2012/03/insider-selling-at-green-mountain-coffee/
  28. SBUX: http://studio-5.financialcontent.com/investplace/quote?Symbol=SBUX
  29. offer up its own single-cup brewing system: https://investorplace.com/2012/03/starbucks-single-serve-coffee-may-kill-green-mountain-sbux-gmcr-keurig-verismo/
  30. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL

Source URL: https://investorplace.com/2012/06/earnings-the-good-bad-ugly-and-a-special-category/
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