The market is chopping around a bit this week as it continues to digest the latest earnings from some of the big-name companies. Earlier today some of those big-names earnings came from 3M Company (MMM), General Electric (GE), Johnson & Johnson (JNJ) and Verizon Communications (VZ) – all of which fell under pressure as they announced weak earnings results and/or provided poor earnings guidance.
The fact of the matter is we’re in an environment where fundamentals matter. So the companies that miss analysts’ expectations or give soft forward-looking guidance are punished, while companies that top analysts’ estimates and have a more positive outlook for the coming quarters are rewarded.
Let me give you another example: Lockheed Martin Corporation (LMT) also released its latest results this morning, and it climbed higher as the numbers came in better than expected. For the fourth quarter, the defense contractor reported earnings of $1.9 billion, or $7.40 per share, and sales of $19.0 billion. The consensus estimate called for earnings of $7.39 per share on $18.27 billion in sales. The company also noted that its backlog rose 11% to $150 billion in the fourth quarter.
For fiscal year 2022, Lockheed Martin achieved earnings of $5.7 billion, or $21.66 per share, and $66.0 billion in sales. These results also topped estimates for earnings of $21.56 per share and total sales of $65.24 billion. Looking forward to fiscal year 2023, Lockheed market expects total sales between $65.0 billion and $66.0 billion and earnings per share between $26.60 and $26.90.
Given investors’ reactions to companies’ earnings results so far, it’s clear that it’s going to be every stock for itself as the market grows increasingly more narrow. So, it’s important to be invested in the crème de la crème to prosper in the current environment.
With that in mind, I took a closer look at the latest institutional buying pressure and each company’s fundamental health over the weekend, and decided to revise my Portfolio Grader recommendations for 80 blue chip stocks, and 19 downgraded from a Hold (C-rating) to a Sell (D-rating). I’ve included the first 10 stocks that were downgraded from a Hold to a Sell in the chart below, but for the full list of 80 stocks – including their Fundamental and Quantitative Grades – click here.
|Ticker||Company Name||Total Grade|
|ABNB||Airbnb, Inc. Class A||D|
|ATVI||Activision Blizzard, Inc.||D|
|BIP||Brookfield Infrastructure Partners L.P.||D|
|CSCO||Cisco Systems, Inc.||D|
|EA||Electronic Arts Inc.||D|
|HRL||Hormel Foods Corporation||D|
|ICE||Intercontinental Exchange, Inc.||D|
Personally, I expect real fireworks from my Growth Investor stocks (like with Lockheed Martin today) in the coming weeks. My average Growth Investor stock is characterized by 65.5% annual sales growth and 217.7% annual earnings growth. I should also add that in the past three months, the analyst community has revised their consensus earnings estimates up by an average of 24.8%, so I am expecting wave-after-wave of positive quarterly announcements, as well as positive future guidance!
Earnings season for my Growth Investor stocks will heat up in the next few weeks, so I encourage you to join me today so your portfolio is positioned to benefit from their strong earnings earning results.
Plus, you’ll be just in time for my newest recommendations. On Friday, I will be releasing three exciting new buys in my Growth Investor Monthly Issue for February, as well as my latest Top Stocks lists. If you become a member now, you’ll receive the new buys as soon as the Monthly Issue is available on my subscribers-only website.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Electronic Arts Inc. (EA), Lockheed Martin Corporation (LMT)