Earnings Round-up: It’
The first-quarter earnings season is upon us again and, depending on the results, it could help to drive trading over the next several months. Traders are looking for direction and reasons to invest, but the overseas risk in European debt and higher interest rates in China are not making it easy.
As was the case in the fourth quarter, there are some high hopes of seeing Revenue Growth in addition to earnings acceleration as the economy recovers. Whether they are penny stocks, micro-cap stocks, or blue-chip stocks, you want to see growth.
The fourth quarter, in my view, showed promise. What was disappointing was the lack of strong revenue growth in the fourth quarter, an indication that spending is still sluggish.
I think that the key in the first quarter and beyond will continue to be the ability of companies to report higher revenues, which is what you want to see during an economic recovery, as it indicates increased spending.
The reality is that earnings can be made to look better via cost cuts and control. In addition, you must watch for guidance going forward, as this will also be a key factor.
Two key sectors will be Technology and banking. Traders are looking for leadership from these groups.
The NASDAQ has been struggling in recent weeks, but I continue to believe that the technology area will be a critical area, since this sector has provided much of the leadership over the last several years.
The start did not look promising.
Texas Instruments Incorporated (NYSE/TXN) announced a shortfall in both its Q1 revenues and earnings, but it was largely due to the production halts in Japan resulting from the earthquakes. The upper end of the Q2 earnings per share (EPS) guidance was also short of estimates, yet we need to see what the impact of the situation in Japan is going forward.
We then saw an impressive blow-out quarter from Intel Corporation (NASDAQ/INTC), which was the big winner after blowing away Street estimates on revenues and earnings. The strong results from Intel are critical, as they indicate strong chip demand.
Technology companies also delivering better than expected results were Yahoo! Inc. (NASDAQ/YHOO) and International Business Machines Corporation (NYSE/IBM).
The area to watch for in technology will be mobility applications for tablets and smart phones, as users shift away from the more cumbersome PCs and laptops. Apple Inc. (NASDAQ/AAPL) is the best of breed in my view. Research In Motion Limited (NASDAQ/RIMM) has launched its PlayBook tablet, but, based on the reviews, the iPad 2 has nothing to worry about.
In banking, Wells Fargo & Company (NYSE/WFC) beat by a penny in its EPS, but fell short on revenues. On the plus side, The Goldman Sachs Group, Inc. (NYSE/GS) beat on adjusted EPS and revenues and State Street Corporation (NYSE/STT) also beat on revenues and EPS.
These are just some of the companies and areas to watch for during the First-Quarter Earnings Season.
As I have said, the key will be revenues, especially organic growth. We want to see revenues grow to drive earnings instead of cost cuts. Without revenues growing, it is difficult to imagine a healthy economy and its my worry that this could hamper growth.
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Learning How To Make Bank With Penny Stocks
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