Alright guys, it’s time for earnings reports to come out. I tend to follow some blue chips as well as overall-industry related trends. I would like to present the first in a series of blogs in which I give some market commentary that sums up weekly trends in industries/sectors/companies that are making the news (and some that aren’t). In the news last week Google was all over the Wallstreet Journal, MSNBC and every other news syndicate that sought to expand its viewer base. Google is a household name these days despite the recent dark cloud undercutting its potential earnings. While Google surprised us last week with positive earnings, don’t be deceived by inflated earnings. Simply look at the earnings report and you’ll see that the company’s operating margins remain under compression, which hurts the stock despite how impressive it appears to be. These inflated earnings stemmed from poor operating margins, and a falling tax rate that was artificially inflated. Inflated earnings will only get you so far, then reality tends to set in. Simply put, Google is having a hard time getting users to click click click….something us consumer driven Americans had grown accustomed to……..for a while……when we had credit to spend. For an internet company that relies primarily on ad revenue to remain afloat, internet surfers passing the ads without a second glance portends a low tide for Google profit margins. Looking at the big picture, browsers ignoring ads does not bode well for companies which rely on user “clicking” habits. That’s my two cents on Google.
Other stocks that follow posted earnings: CSX corp (CSX), Gilead Sciences (GILD), Nokia (NOK), SunPower (SPWR) all reported earnings. Industry Leaders in the Commission Fund should take a closer look at some of these blue chips. They posted great earnings.
In short, CSX Corp. first-quarter earnings rose 63% to $351 million (translates to 85 cents a share). This surge in profits surpassed analyst expectations of 64 cents per share. According to the report this increase was due to increased shipments in ethanol, grain and coal.
Gilead Sciences (GILD), a long-time favorite of mine, saw first quarter profits increase by 22%, a result of the continued success in AIDS drug sales. Net profits increased $496.1million (51 cents per share) which beat out analyst expectations. Like I said, Gilead Science has been a favorite of mine for quite some time….check it out.
Interestingly enough, although SunPower (SPWR) announced a profit increase of 15 cents per share, Wall Street was not pleased. Evidently analysts expected more which lead to disappointment in the financial sector. I think SunPower is a good buy personally. Anytime a company’s first-quarter revenue increases by 92% IN ADDITION TO the perceived rise in its second quarter and full year expectations, there are good things to come. Here are some stats: Net income rose 14%, overall earnings were 1.34 billion (1.09 per share), Revenue increased to 6.29 billion from 5.46 billion last year. With oil prices seeing no ceiling in sight, and the OPEC gurus refusing to pump out more, oil prices are going to continue to increase.
On a side note, oil prices advanced 6% last week, the largest weekly gain in 14 months. Oil is up 77% from a year ago. IEF is holding the third annual conference in Rome. The general consensus among oil ministers and some CEO’s is that the fundamentals are sound; they cite speculation as the culprit behind high oil prices. 117 dollars a barrel…..ouch. The top Libyan official that represents the country said that he predicts oil will hit over $120/barrel and overall volatility will increase. This is based on the presumption that money is moving from fixed income and equities into commodities. We have seen huge rises in agricultural commodities in addition to the weak dollar which has made commodities very cheap. Historically speaking, last year when OPEC increased production by half a million barrels a day, oil prices still went up by 20 dollars. So they are assuming supply/demand doesn’t really dictate prices. Of course our academic hunches suggest otherwise. IEA outlook has demand for oil at 87.23MLN barrels per day, down from 310,000 from the March forecast. US demand is expected to fall 410,000/day. As you know commodities and oil are all traded in the US dollar. That means there’s a direct correlation between the two.
Look for earnings reports on some of my other favorites:
Jacobs Engineering (JEC) April 22nd
Apple (APPL) April 23
Praxair (PX) April 23
PepsiCo (PEP) April 24
Potash (POT) April 24
Thanks for reading blog 1. I will update as frequently as I can with market commentary. Look for brief updates since it’s earnings season. Any suggestions….let ‘em rip……
