Four Upcoming Earnings Reports
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During the week of January 21st, we will learn how some of the most significant companies fared in the final quarter of 2012. These few firms are disparate and sometimes at odds with one another.
Textron (NYSE: TXT)
Like General Electric, Textron’s profits are seeing gains from an improved performance in its Finance unit. The liquidation of finance receivables and ridding of bad loans is allowing for a doubling of financing earnings. That initiative has been in the works for several years.
Its core subsidiaries are also faring better, including the business jet segment, Cessna. Management has turned around that formerly unprofitable operation. Keep in mind that orders for Citation jets typically fluctuate on the economy, financing availability and the aftermarket environment. As for Bell helicopter, sales of military V-22s and commercial offerings have been rising, supporting the bottom line.
Textron’s Industrial arm is benefiting from increased sales of Golf and Turf Care products, as well as its automotive-related fuel systems.
Overall, despite softness in its Systems (weapons systems) unit, earnings are poised to continue to climb, albeit at a slower rate. The question is whether Cessna can further build upon its recovery and provide a boost to the operating margin. Barring any unfavorable news on the 23rd, TXT shares are worth consideration.
Celestica (NYSE: CLS)
The electronics manufacturing services (EMS) provider has had a tough time counteracting the loss of Research in Motion as a customer this past June. In fact, analysts believe that earnings dipped to $0.15 in the December quarter, from $0.32 in 2011.
Toronto-based CLS will now undertake a restructuring, something EMS companies are accustomed to as production cost requirements decline and customers come and go. The company’s focus on reducing supply chain expenses may well be conducive to a rebound over the long term.
Other potential catalysts for a bounceback may well be its strong pipeline of new production contracts, particularly with the aerospace and defense industry, where outsourcing demand is currently growing.
Given the low expectations for earnings, the possibility of an outperformance is raised, and the stock could jump when results are released on the 27th. Otherwise, look long term.
Polycom (NASDAQ: PLCM)
This company built a solid revenue base a couple of years ago, meeting demand for video and voice teleconferencing products. However, sales have waned in recent quarters, bringing down profits. Shareholders reacted by selling off PLCM shares through most of 2012.
Still, there seems to be some opportunity here. Polycom is expanding its market share by way of new product launches as it pursues its unified communications strategy. It is targeting small-to-medium-sized businesses with its cloud and software related offerings. Investments in R&D and operations that are restraining profitability now ought to result in a sales rebound during 2013.
Factoring in also a heightened awareness of “telepresence” capabilities in the U.S. and China as a means to reduce corporate travel expenses, there is the potential for earnings surprises. On the 23rd, PLCM will announce results. Analysts think earnings were $0.05 a share, versus $0.31 in the 2011 fourth quarter.
Delta Air Lines (NYSE: DAL)
The nation’s second-largest carrier in terms of revenues recently purchased a 49% stake in Virgin Atlantic, giving it a broadened share of the London market. Delta continues to realize the positive impact of its merger with Northwest in 2008, after when it pared down its fleet size, allowing for increased efficiency and aircraft occupancy.
Regardless of its December-period performance, the airline is likely to perform well if conditions persist. Revenues-per-available-seat-mile, an important metric for airlines, is on the upswing thanks to airfare hikes. Plus, costs are being kept in check.
If oil prices are stable and the economy improves, DAL stock could well outperform the broader market averages. For those seeking air transport sector exposure, and can withstand the risks, Delta is a good selection.
In conclusion, the direction of the stock market will rest largely on upcoming earnings reports across the manufacturing and services sectors. Keep an eye on Celestica and Polycom for signs of a turnaround as well.
dctotal has no position in any stocks mentioned. The Motley Fool recommends Polycom. The Motley Fool owns shares of Textron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!