The Day Ahead: $Cashtagging

 | Jul 18, 2013 | 8:00 AM EDT  | Comments
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Stock quotes in this article:

ibm

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sndk

,

mat

,

pkg

,

intc

,

amzn

,

ebay

,

pnc

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txt

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usb

The "$" sign tossed around in Twitter land, in case you weren't aware, is used to signify when financial folks such as yours truly are giving shout outs to stocks.

This simple putting of a "$" in front of one, two, three or four letter stock symbols is now part of financial media folklore, to an extent that I actually "cashtag" in media appearances and in real life settings. That's pretty creepy, indeed, and it truly signifies that I need a hobby in the worst possible way before I shrivel up and die.

I want to spotlight the cashtag because if I were an alien creature with the power to view every financial pro's cashtags this week, there would be certain negative rhythm to the dialogue. Don't be woefully misled by the couple of tech earnings beats from the likes of IBM (IBM) and SanDisk (SNDK), and jaw-dropping results from regional banks, as the reality is that earnings has been subpar at best.

Household companies are delivering revenue misses (against lowered sell-side estimate) that seem to be worse in magnitude relative to the first quarter of 2013.  That occurrence can't all be blamed on currency translation. Executives, meanwhile, are backfilling that storyline with guidance that is nowhere near deserving of presently QE-inflated price-to-earnings multiples (the heavily marketed Shiller P/E multiple is in excess of 23x). Strip out the mega powers of extraordinary Fed accommodation and look at the dung companies have shoveled into burning brown paper bags to their eager shareholders.

  • Mattel (MAT): U.S. revenue -2% versus GDP maybe near 2%.
  • Marten Transport (MRTN): "Continued slow economic growth" and a "challenging rate environment." Packaging Corp. (PKG) had to do well, higher stock prices and home values meant the faux wealthy were ordering useless junk from Amazon (AMZN) (which prior eBay (EBAY) earnings bomb was a stock riding in rarified air).
  • PNC Financial (PNC) and U.S. Bancorp (USB): Sequential average loan growth of a mere +2% and 1.2%, respectively.
  • Intel (INTC): Still in in search of the rest of the company's quarterly revenue and guidance!
  • IBM: $24.90 billion in revenue compared to a reduced consensus of $25.36 billion (remember, Goldman downgraded the stock pre-earnings); tepid second half 2013 outlook was supplied.

And this collective fun is from this week alone.

Bigger thought: June housing starts (starts in the West are on a downtrend since January 2013), were a kick in the face (wakeup call) that as June/July macro data is unwrapped, nasty, higher rate fueled surprises are lurking.

Rewind: TXT

I came out negative on Monday on Textron (TXT) for a trade into earnings. Here is how I ran through things before suggesting clients book profits at the open on Wednesday:

Although Textron didn't miss on earnings and drop its full guidance as anticipated, the quality of the report was quite poor. I believe the market will view Textron as still at risk of an earnings warning in the third quarter.

Four Things That Make Textron's Quarter Poor

  1. Earnings beat highly due to a lower income tax rate and reduction in average shares outstanding.
  2. Backlog declined materially on a sequential basis (which suggests current guidance is not attainable).
  3. Operating profit margins down in all divisions except for Industrial. FYI, the Industrial segment for Textron is its second lowest profit margin business behind Systems, so to see it be a larger contributor to earnings is a red flag.
  4. Pricing and product mix remains weak.

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