Wall Street’s positive reaction to strong earnings in January and February showed us that earnings were working.
However, then we had the banking scare, and now the market has been reshuffled.
But right now we’re in the midst of quarter-end window dressing where a lot of fundamentally superior stocks are firming up very, very quickly.
This is when professional money managers have to make their portfolios “pretty,” so they shore up on fundamentally superior stocks to help boost their portfolio returns.
When quarter-end window dressing ends, I do expect this strength in fundamentally superior stocks to continue in the second quarter. The first-quarter earnings season will kick off in a few weeks, and I think we could be in for a strong earnings season. Analysts have been revising their earnings estimates higher, which bodes well for earnings surprises.
That said, it’s still a fairly narrow market. In today’s Market 360, I’ll share my thoughts on the state of the economy and the upcoming earnings season… and how you can position yourself to profit.
Earnings Season Is Around the Corner
First things first: We’re not in a recession, folks.
Although the Atlanta Fed revised its fourth-quarter GDP estimates from 2.7% to 2.6% today, the U.S. economy is expected to grow over 3%. We also just had a great consumer confidence report from the conference board.
So, we are recovering – we’re just not firing on all cylinders.
But as I shared last week, we don’t have to worry about the Federal Reserve Chairman Jerome Powell and friends anymore because they’re likely done raising rates. They made that very clear in the Federal Open Market Committee (FOMC) meeting statement. If they tighten further, they’ll do it with their open market action.
There are wild cards out there to be aware of. We’re lobbing missiles at Iran-backed folks in Syria, so that escalation is pretty scary, as is their attacks on our troops. The situation in Ukraine and Russia will hopefully be resolved with some sort of cease eventually – but there is still a lot to be worked out there.
We live in interesting times in the world. But the bottom line is, as long as you have good stocks and post good earnings, you’ll be fine.
While egg prices dipped 6.7% in February, prices were still more than 55% higher than prices back in February 2022 – and these elevated prices added handsomely to CALM’s top and bottom lines in its third quarter in fiscal year 2023. For the third quarter, Cal-Maine Foods achieved total sales of $997.5 million, up 109% from $477.5 million in the same quarter last year.
Third-quarter earnings surged 718.2% year-over-year to $323.2 million, or $6.62 per share, which compared to $39.5 million, or $0.81 per share, in the third quarter of 2022. Analysts expected earnings of $5.47 per share, so Cal-Maine Foods posted a 21% earnings surprise.
The company reported earnings after the bell on Tuesday. On Wednesday, CALM shares rallied as much as 11.6% following the strong earnings results.
The reality is simple: Earnings work.
So, as the next earnings announcement season draws closer, expect for Wall Street to refocus on fundamentals and for stocks with superior fundamentals to reassert themselves as the market leaders.
Ensure You’re Well-Positioned to Prosper
Until then, I encourage you to load up on fundamentally superior stocks so your portfolio is well-positioned for profits once the first-quarter earnings season begins.
If you’re not sure where to look, then consider my Growth Investor service.
My average Growth Investor stock is characterized by 39.2% average annual sales growth and 292.1% average annual earnings growth. Our average earnings surprise was 7.9% in the previous quarter and due to positive analyst earnings revisions, plus expanding operating margins, so I am expecting wave after wave of positive earnings surprises.
I should add that my average Growth Investor stock dividend has increased 166.3% in the past year, so our average dividend yield has risen to 3.79%. This combination of strong sales, earnings and dividend growth is actually quite rare.
To be successful in a narrower market, it is imperative that you control your own destiny by investing in fundamentally superior stocks that are impervious to economic cycles. My Buy List is locked and loaded for what’s to come.
To position my Growth Investor subscribers for even further growth, I will be adding five new fundamentally superior stocks in tomorrow’s Growth Investor Monthly Issue for April. I will also release my latest Top Stocks lists.
P.S. On August 19, 2022, the Fed released a 43-page report explaining how bad the economy really is. This report was not talked about during the press conference, but it suggests policymakers can’t do the jobs by themselves and actually could make matters worse.
The reality is the Fed popped another bubble. But this time not just in tech or real estate – but the entire stock market as a whole. That’s why I am urging you to get the details of this report and take action before it’s too late.
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:
Cal-Maine Foods, Inc.’s (CALM)