Since earnings season has caused me to lose track of the world around me:
- Happy Passover to all.
- Happy Easter to all.
Moving right along, I am officially declaring myself over two particular earnings releases: those from Google (GOOG.L, GOOG) and Amazon (AMZN). Although Amazon's worldwide sales figures are always helpful, the report shares very little insight on what the overall market is thinking right now, and the same goes for Google's numbers. Furthermore, neither report has shed much light on the future of the companies themselves, given the inherently tight-lipped nature of these giants. In the heat of earnings season, SanDisk's (SNDK) earnings is of far greater use.
Below, then, are a quick analyses on the reports you should have read yesterday if you were too distracted by Google Fiber chatter and traffic acquisition costs.
SanDisk noted a "strong retail performance." I would love to tie this in with the 20% dividend hike from Whirlpool (WHR) earlier in the week, and I'd also like it to encourage me regarding Best Buy's (BBY) outlook. But, alas, I can't, in light of the electronics price war playing out across brick-and-mortar and online retailers.
Kansas City Southern
• "Business trends have improved in April," said Kansas City Southern (KSU), echoing comments from most companies this earnings season.
• Here's the auto-sector revenue trend: up 7% in the first quarter -- following climbs of 9%, 7% and 20%, respectively, in the fourth, third and second quarters of last year.
In B&G Foods' (BGS) base business, unit volumes and prices declined. This made me wonder about the potential for earnings misses among similar packaged-foods companies, and how quarter-to-date demand trends are shaping up at Wal-Mart (WMT) and Target (TGT).
Behind the Scenes: Interview with Camaro Team
I had the opportunity to interview the team lead for the Chevrolet Camaro at General Motors (GM). Here's one key trend he mentioned, and one that will only be gaining steam in the years to come: massive improvements in fuel efficiency. Not sure how Alcoa (AA) feels about that!
Investing Tip of the Day: Love to Be Gross
Among the early reporters this earnings season -- and other than the banks and global multinationals, which are vulnerable to foreign-exchange effects -- revenue has been either in line with estimates or slightly better than expected. Normally that would be exciting news following the pile-up of revenue misses that began later in 2013. However, a word of caution: Earnings aren't blowing anyone way due to pressured gross profit margins.
In many examples, say for a company such as W.W. Grainger (GWW), the quickest areas of sales growth have been among lower-margin accounts. When gross margin underwhelms, it places stress on managers to reduce structural costs and operating expenses -- and, thus far, this doesn't appear to be happening at a quick enough pace. Besides, more than five years into the recovery, how much is there left to cut operationally?
This is what Mr. Market is asking you to pay up for?