Never have I seen management execution matter more to stock prices than now. The abilities of CEOs and their teams to get the job done vary so widely that you have to marvel how ne'er do well companies just don't steal top-level executives from competitors. How can they not after the glaring disparities we are seeing in reports this earnings period?
Just take today. The Mexican/Latin restaurant chains have been on fire, right? We have seen tremendous numbers from Chipotle (CMG), Fiesta Restaurant Group (FRGI) and Jack in the Box's (JACK) Qdoba. Then along comes kindred spirit Chuy's (CHUY) and it totally blows up, down almost 30% in the session. The trend's your friend except for Chuy's. No excuses for that miss, just horrendous execution.
Or how about one of the major excuses that accessory maker Michael Kors (KORS) gave yesterday for its disappointing numbers: slowing mall traffic. Can we just tip the hat to almost totally mall-based L Brands (LB), the umbrella company for Victoria's Secret, Bath & Body Works and Bendel's, which just shot the lights out when it reported yesterday. Maybe people are only shopping for soaps, tchotchkes and racy lingerie at the mall and nothing else? I don't think so.
Looks like Expedia (EXPE) has cracked the code of travel this quarter, putting up terrific numbers. What excuse, then, does competitor TripAdvisor (TRIP) have for its disappointment? If you listen to their conference call, the answer is a resounding none, because TripAdvisor didn't even think it disappointed. That's unacceptable cluelessness.
We have seen huge disparities of performance in the oil patch. Exxon Mobil (XOM), Chevron (CVX) and Pioneer Natural (PXD) showed little to no growth at all. But EOG Resources (EOG)? It raised production and showed you that oil could keep plummeting and the company will make fortunes. EOG has the best properties but, arguably, also the best management in the industry.
How about programming? Discovery's (DISCA) got a terrific business model and amazing channels on cable, but it missed terribly and talked negatively about advertising and distribution. But Time Warner (TWX)? It delivered on all of these categories, plus it gave you an amazing buyback that was pretty much picture perfect. I am not tempted by Discovery, down 28% but I sorely want to buy Jeff Bewkes' Time Warner with its stock up 14% because it is obvious that this company, now shorn of Time and so many other slower-growing, cumbersome divisions, is now really ready to rock and roll, with HBO being just one of the major drivers. No wonder Bewkes fought off Twenty-First Century Fox (FOXA); Rupert Murdoch was about to steal the company.
While I think that Palo Alto's (PANW) stock is now too expensive, you have to recognize that it's been executing pretty darned perfectly. Its competitor, FireEye (FEYE), however, has just become a serial overpromiser and underdeliverer, as we saw from last night's less-than-robust report. Of course, they disagree; the stock, down 15%, says otherwise.
How about theme parks? Intrigued by SeaWorld (SEAS), with its 4.4% yield and shares down 34%? I'm not. I like Six Flags (SIX) because, unlike SeaWorld, which executed horribly, Six Flags put up fantastic numbers and gives you a 5.2% yield and it has rallied 8%. The big yield? Augmented by a huge 11% dividend boost, just what retail investors want.
You want disparity? Think about the sainted Coca-Cola (KO), up 2%, vs. the unheralded PepsiCo (PEP), up 16%. Sure, you could say, "Not fair, PepsiCo has Frito-Lay." But that's ridiculous. Coca-Cola has oodles of cash flow, yet has just endlessly bought back stock with it instead of purchasing Kraft Foods (KRFT) or Mondelez (MDLZ) and given itself the same diversification that PepsiCo has.
How about the difference between the spendathon that is Amazon (AMZN), with its miserable margins and endless expenses, and Alibaba (BABA), the tightest ship in the on-line navy? Amazon's down 24% for the year. Alibaba came public at $68 and is now at $109. I think that the stock goes to $120 without being expensive after that monster quarter and huge raise in estimates.
Finally, there's Twitter (TWTR) vs. Facebook (FB). Both thrive on user-generated content, which costs nothing to produce. Facebook's making fortunes, but Twitter's losing them. No wonder Twitter's down 35% for the year yet Facebook's up 38%. Time for a change at the helm for Twitter to someone who can harness the endless free promotion and content everyone gives it. This team? It has failed abysmally to do so. The stocks say it all. Time for a change at the very top.
