Is it just me or does it seems that earnings season should no longer be called a season but rather an ongoing activity? Alcoa’s $AA
results usually mark the beginning of the season and, as they come up
next week, I guess it’s time to declare a new season open.
It’s been a good quarter for equities but some recent weakness in the ISM data is causing a bit of a pause for reflection. In my opinion the markets have priced in a recovery in the US but the relative over evaluation of sectors like food (as opposed to say technology) suggests that there still is an element of uncertainty out there. If I am right then –provided the upcoming earnings confirm an ongoing economic recovery- there is still some upside likely in sectors like technology and industrial cyclicals but less so with others like food and high yield consumer staples.
Monday
As mentioned above Alcoa gives results today. I’ve looked at the company at length in a previous article and it was notable to me that the company is really relying on China for its growth this year. It was pretty bullish on China last time around and investors will want to see that tone repeated in these results. Some of the data has been looking a little stronger recently and forecasters have been coming round to the view that 8% growth is achievable in China this year.
Regarding sectors, with the positive commentary from General Electric in its last results the aerospace and industrial gas turbine sectors should be okay. The automotive and construction sectors are more interesting. Autos and housing have been doing well in the US lately and if China’s plans to stimulate domestic demand are working than we could see some improvement in this segment for Alcoa.
Tuesday
PriceSmart is the sort of stock that investors who are bullish on Latin America should be looking it. It’s hard to find this kind of play and I think its worth looking at their results for this reason alone.
Wednesday
Adtran is the first of the telco plays to report and the sector will be looking out for some more positive noises over spending in the industry. In a similar vein-but completely different industry- Family Dollar will give earnings. The discount sector fascinates me. It looked overvalued in the first half of last year and then same store sales started slowing for the sector amidst citations of increased pricing competition. With that said the underlying fundamentals remain positive and the fall in the share prices is starting to bring them into value range.
The stocks I want to highlight today are the industrial supply companies Fastenal (NASDAQ: FAST) and MSC Industrial Direct $MSM. I’ve long been an admirer of Fastenal but not of its evaluation. As can be seen here the company has significant opportunities to grow revenues, margins and cash flows via increasing its number of stores and sales via vending machines. This is all well and good but it won’t achieve these things unless the industrial market holds up and its commentary on industrial fastener sales is a key indicator of current trends.
MSC Industrial talked of ‘paralysis’ in its end markets in December and its guidance for this quarter was based on the weakness at the end of the quarter but since then the manufacturing data has been good. In other words it is not unreasonable to expect that it will beat estimates this time around. As the chart in this link suggests when political fears rise, industrial manufacturers tend to run down inventory only to replenish them when the fears pass. Thinking longer term investors should look out for commentary on its e-commerce and vending machines initiatives.
Thursday
Today’s highlights are two vastly different retailers in Pier 1 Imports and Rite Aid Corporation . Pier 1 has benefited from a better housing market and its e-commerce initiatives are generating strong growth. I felt its guidance was a bit cautious and while the Christmas season wasn’t great for retail overall, it was relatively better for companies like Williams-Sonoma. With this in mind investors can expect some decent results from Pier 1. It will be interesting to see if there is any acceleration in its e-commerce plans and how it is dealing with its in-store collection policy.
Pier 1’s turnaround story is something that Rite Aid’s investors will be hoping to emulate. The stock is not for the faint hearted and is best advised towards risk seeking investors. The stock bulls will be heartened by the positive trends in the industry. Generics sales have expanded well in the industry and it benefited from the Walgreen/Express Scripts debacle. In addition its same store prescription sales have been growing and there will surely be a short term benefit from a bad (good) flu season this year. Well worth a look.
It’s been a good quarter for equities but some recent weakness in the ISM data is causing a bit of a pause for reflection. In my opinion the markets have priced in a recovery in the US but the relative over evaluation of sectors like food (as opposed to say technology) suggests that there still is an element of uncertainty out there. If I am right then –provided the upcoming earnings confirm an ongoing economic recovery- there is still some upside likely in sectors like technology and industrial cyclicals but less so with others like food and high yield consumer staples.
Monday
As mentioned above Alcoa gives results today. I’ve looked at the company at length in a previous article and it was notable to me that the company is really relying on China for its growth this year. It was pretty bullish on China last time around and investors will want to see that tone repeated in these results. Some of the data has been looking a little stronger recently and forecasters have been coming round to the view that 8% growth is achievable in China this year.
Regarding sectors, with the positive commentary from General Electric in its last results the aerospace and industrial gas turbine sectors should be okay. The automotive and construction sectors are more interesting. Autos and housing have been doing well in the US lately and if China’s plans to stimulate domestic demand are working than we could see some improvement in this segment for Alcoa.
Tuesday
PriceSmart is the sort of stock that investors who are bullish on Latin America should be looking it. It’s hard to find this kind of play and I think its worth looking at their results for this reason alone.
Wednesday
Adtran is the first of the telco plays to report and the sector will be looking out for some more positive noises over spending in the industry. In a similar vein-but completely different industry- Family Dollar will give earnings. The discount sector fascinates me. It looked overvalued in the first half of last year and then same store sales started slowing for the sector amidst citations of increased pricing competition. With that said the underlying fundamentals remain positive and the fall in the share prices is starting to bring them into value range.
The stocks I want to highlight today are the industrial supply companies Fastenal (NASDAQ: FAST) and MSC Industrial Direct $MSM. I’ve long been an admirer of Fastenal but not of its evaluation. As can be seen here the company has significant opportunities to grow revenues, margins and cash flows via increasing its number of stores and sales via vending machines. This is all well and good but it won’t achieve these things unless the industrial market holds up and its commentary on industrial fastener sales is a key indicator of current trends.
MSC Industrial talked of ‘paralysis’ in its end markets in December and its guidance for this quarter was based on the weakness at the end of the quarter but since then the manufacturing data has been good. In other words it is not unreasonable to expect that it will beat estimates this time around. As the chart in this link suggests when political fears rise, industrial manufacturers tend to run down inventory only to replenish them when the fears pass. Thinking longer term investors should look out for commentary on its e-commerce and vending machines initiatives.
Thursday
Today’s highlights are two vastly different retailers in Pier 1 Imports and Rite Aid Corporation . Pier 1 has benefited from a better housing market and its e-commerce initiatives are generating strong growth. I felt its guidance was a bit cautious and while the Christmas season wasn’t great for retail overall, it was relatively better for companies like Williams-Sonoma. With this in mind investors can expect some decent results from Pier 1. It will be interesting to see if there is any acceleration in its e-commerce plans and how it is dealing with its in-store collection policy.
Pier 1’s turnaround story is something that Rite Aid’s investors will be hoping to emulate. The stock is not for the faint hearted and is best advised towards risk seeking investors. The stock bulls will be heartened by the positive trends in the industry. Generics sales have expanded well in the industry and it benefited from the Walgreen/Express Scripts debacle. In addition its same store prescription sales have been growing and there will surely be a short term benefit from a bad (good) flu season this year. Well worth a look.
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