4 Last-Minute Third-Quarter Earnings Plays

by James Brumley | December 3, 2012 8:54 am

Philosophically, third-quarter earnings season is over.

Technically, it’s not.

About 15 more major and semi-major names will try to shout out their results above the din of holiday shopping and fiscal cliff headlines for the next couple weeks — of those, four of them might be worth a swing before they reveal their numbers:


AutoZone (NYSE:AZO[1]) is the first of the four names in focus that will report Q3 numbers.

Look for a bottom line of $5.39 before the bell Dec. 4. That’s 21% stronger than the $4.44 it earned a year ago. If it hits that mark — and it would be shocking if it didn’t — it will be the sixth straight time the auto parts retailer’s calendar Q3 (fiscal Q1) bottom line has improved. It also will be at least the 17th consecutive quarterly beat for the company.

This outfit has been freakishly consistent with its earnings growth, but that’s not the sole reason traders would want to consider taking a swing on AutoZone now.

One of the toughest parts about investing in AutoZone since early 2010 has been finding a point where the stock wasn’t technically overbought during that time; even the pullback to the 200-day moving average line in August 2011 was very short-lived. But, over the course of 2012, AZO shares have made a major pullback and burned off any overbought pressure that had been baked in. With a proverbial hit of the reset button in place, the bounce effort since September looks like it could have legs.

Just for the record, Advance Auto Parts (NYSE:AAP[2]) met its Q3 earnings estimates of $1.21 per share, and O’Reilly Automotive (NASDAQ:ORLY[3]) also topped estimates of $1.27 by earning $1.32 per share.

Toronto-Dominion Bank

Toronto-Dominion Bank (NYSE:TD[4]) releases its fiscal fourth-quarter earnings the morning of Dec. 6. The pros are expecting a per-share profit of $1.81, up from the year-ago number of $1.69.

While it might have ebbed and flowed in the short-term, over the long haul, TD has advanced in conjunction with the steady increase in its bottom line. Anyone who has bought on the dips — or bought on the way up after a bottom has formed — has been rewarded rather well. And it looks like Toronto-Dominion Bank shares have just started a new rally after a decisive bottom in early November.

One thing investors should know about Toronto-Dominion: Although it has been mostly reliable on the earnings front, earnings growth has been painfully slow. That’s not expected to change at any time in the foreseeable future.

Joy Global

Joy Global (NYSE:JOY[5]) will post earnings of $1.91 per share before the bell Dec. 12 if the company meets analyst estimates. That’s 5% better than the $1.82 it earned a year earlier.

The mining equipment manufacturer hasn’t been anywhere near as consistent with its earnings growth as Toronto-Dominion has, and actually has missed estimates in three of the last four quarters. But, following the 50% pullback between early 2011 and mid-2012, the pessimists might have overshot — earnings still have been respectable.

The forward-looking P/E of 8.4 is a bargain no matter how you slice it, so unless the company completely botches third-quarter numbers or offers a horrible 2013 outlook, there are a lot of ways the company could put itself back in a (relatively) positive light next week.

Darden Restaurants

Darden Restaurants (NYSE:DRI[6]) — parent of Olive Garden, Red Lobster and other popular chains — will unveil its most recent quarter’s results early on Dec. 14. Forecasters say the restaurateur is going to earn 47 cents per share, well up from the 41 cents it earned in the same quarter from 2011.

Not unlike Toronto-Dominion Bank shares, anybody who has bought into DRI on a dip since 2009 has done pretty well as a result; the longer-term trend has been a positive one. The recent push off of the 200-day moving average after the September/October pullback could make now the ideal entry time.

Any chance a brewing lawsuit[7] over low wages could make things difficult in the future? Anything’s possible, but the claims might have as little merit, as the company suggests. So far, 50 employees have decided to become plaintiffs in the case that alleges the company required unpaid work time for its workers. But, given that Darden is the same company that has received high accolades[8] for specifically creating a diversity-friendly workplace, it’s tough to imagine its attitude in terms of general work expectations would be so far at the other end of the spectrum.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

  1. AZO: http://studio-5.financialcontent.com/investplace/quote?Symbol=AZO
  2. AAP: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAP
  3. ORLY: http://studio-5.financialcontent.com/investplace/quote?Symbol=ORLY
  4. TD: http://studio-5.financialcontent.com/investplace/quote?Symbol=TD
  5. JOY: http://studio-5.financialcontent.com/investplace/quote?Symbol=JOY
  6. DRI: http://studio-5.financialcontent.com/investplace/quote?Symbol=DRI
  7. a brewing lawsuit: http://www.reuters.com/article/2012/11/16/usa-darden-lawsuit-idUSL1E8MGDGD20121116
  8. received high accolades: http://investor.darden.com/investors/news-releases/press-release-details/2012/Darden-Restaurants-Scores-100-Percent-on-the-Human-Rights-Campaign-2013-Corporate-Equality-Index1131960/default.aspx

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