What to Look for in July 18 Earnings Releases

Damon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Earnings season will officially be in full swing when July 18 rolls around. For one, a major auto parts supplier might help to indicate just how robust the automotive market rebound is. In addition, a wholesale food company, ground shipper, and travel website operator may provide a feel of how their respective markets are shaping up. Here's a look at the companies to watch:

Auto parts firm growing internally and through acquisition

I had first blogged about Genuine Parts Company (NYSE: GPC) back in January (see post). Since, the auto parts giant has acquired an Australia-based peer with $1 billion in annual sales, Exego. The Exego buyout provides it with 430 locations in a rapidly expanding market.

Meantime, Genuine Parts is also taking measures to lift gross profitability and reduce operating costs, such as cutting supply-chain costs, improving distribution efficiency partly through technology investments at its centers and stores.

Genuine Parts stock has incited investor buying activity this year. It may be a beneficiary of an acceleration in automobile sales. Plus, it is putting cash to good use. The shares are a worthy addition to most portfolios.

Transporter on pace for a good year

Hub Group (NASDAQ: HUBG) is essentially a contract transporter (see my March blog) that is gaining steam in terms of volumes and rates. Not an asset-based shipping provider, the company is not as susceptible to economic movements.

Analysts believe quarterly earnings were about $0.49, up from $0.46 in the previous year. Management's guidance is toward full-year EPS of between $2.00 and $2.15, a jump from the 2012 tally of $1.83. Growth drivers ought to be the increased business from a higher leased container and tractor count, as well as customer acquisitions.

In all, Hub Group's bottom line appears to be climbing and downside is limited by its operating model. I like the shares for the near term, in light of favorable freight and cargo shipping conditions.

Food wholesaler's acquisitions an overall positive effect

The buyouts by B&G Foods (NYSE: BGS) last October of the New York Style, Old London, Devonsheer, and JJ Flats brands has been a moderate boon to earnings. Meanwhile, the company issued new shares for proceeds of around $120 million.

Additionally, just prior to this writing, B&G bought out Pirate Brands, maker of Pirate's Booty and other natural snacks for $195 million, funded partially with newly issued debt.

Analysts estimate EPS of $0.35, up from $0.33 a year ago.

Much of the expected impact of acquisitions is already priced into BGS shares. That said, further profitable asset purchases could fuel long-term earnings gains. The shares are worth considering as a consolidator with growth prospects.

The travel website in transition

Judging by the recent spike in the price of shares of priceline.com, and that company's solid prospects, the travel information industry is as vital as ever. Travelzoo (NASDAQ: TZOO) is generating revenue growth, but is currently in the process of rolling out mobile and hotel booking products, eating into bottom-line results. Moreover, it continues to market and build its customer base.

Against that backdrop, the company is likely to have earned about $0.27 a share in the second quarter, versus $0.45 in the prior year.

Even in what is apt to be a down year in terms of profits, the shares have run up to new heights. They remain a good selection to hold for the long term. Travelzoo is poised to realize the income benefits of its current spending over the next several years. It also has a relatively clean balance sheet that may support growth projects.

What to look for

With the exception of Hub Group, these companies are relying heavily on investments in operations for current growth. It will be interesting to see how acquisitions and new offerings are faring in the marketplace, as respective companies' earnings could sway on such factors. Company guidance should provide an indication as to the impact of investments. As for Hub Group, the company is likely to have capitalized on an upward market trend, and would likely revise its outlook one way or another to reflect any changes in that environment. 

The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.


Damon Churchwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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!

blog comments powered by Disqus