Second Quarter Surprises Send Shares Soaring
Nathaniel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As earnings season draws to a close, the excitement surrounding remains alive and well. Following the market close on Wednesday a number of large companies reported market-moving earnings results. In this article I would like to give investors the key metrics from the results, while providing forward-looking guidance for the remainder of the year.
Oh wait, profitability matters?
Shares of Groupon (NASDAQ: GRPN) traded higher by more than 25% early Thursday morning as the company reported its earnings after the market close on Wednesday. While the company is well off the highs seen after its initial public offering near the end of 2011, shares have done exceptionally well over the last 6 months as fears of bankruptcy no longer weigh on the minds of investors.
Groupon reported a net loss of $7.6 million, or $0.01 a share, compared to net income of $28.4 million, or $0.04 a share reported in the second quarter of last year. Revenue increased 7.2% to $609 million from $568 million a year ago. The results came in largely in line with analyst expectations, excluding items of $0.02 a share on $606 million in revenue.
The Street has realized the daily deals space isn't all that profitable, and companies that derive the majority of their revenues from this business segment have been pushed by shareholders to leverage their brand across other revenue streams. Earlier in the month Groupon announced it would be looking to make its way in the increasingly competitive online dining arena through a hybrid service. The service, Groupon Reserve, is said to be "the premiere destination for the finest things to eat, see, do and buy." Customers were welcomed to steep discounts of almost 40% to some of the best local restaurants.
The launch comes at a time of an increasing focus on mobile. More than 7.5 million people downloaded a Groupon mobile app worldwide in the quarter, bringing the total count above 50 million. Groupon is not alone in this regard--a number of competitors, including Yelp and Travelzoo, have worked hard over recent quarters to develop a strong mobile platform. I would remain on the sidelines after this move--consistent profitability is still a ways down the road, while competition remains fierce in everything and anything online these days.
Shares of Mondelez (NASDAQ: MDLZ) beat analysts earnings estimates of $0.34 per share with $0.37 in EPS. However, revenues came in light at $8.6 billion; analysts had expected $8.62 billion.
While these results may sound rather boring, the company did confirm its focus on creating shareholder value through steep dividends and buyback increases. Mondelez raised its divided by 8% to $0.14 a share, the first increase in the company's dividend since the financial crisis in 2008. More importantly, Mondelez increased its stock buyback plans to $6 billion through 2016 from the previously announced $1.2 billion. Mondelez stated that it expects to purchase $1 billion to $2 billion worth of stock annually. I always love to see these types of shareholder programs from moderate growth companies.
Over the last few weeks shares have done well, in large part due to speculation by some large institutional investors that the company may be an acquisition target of consumer favorites Pepsico and Coca-Cola. I would bless an investment in the company here, as investors gain easy exposure to the fast-growing snack and consumer discretionary foods space within both domestic and emerging markets.
Electric's the new black?
The days of Hummers and carbon-killing automobiles may be coming to end as we know it as a number of large, and small, automakers look to get some skin in the all-electric game. Tesla Motors (NASDAQ: TSLA) reported its second quarter results after the market closed on Wednesday. After the unheard of 300% year to date rise some investors, myself included, feared stretched valuations and increasing competition ahead. However, the company crushed analyst consensus estimates, sending shares soaring in the extended hours sessions.
The sharp move to the upside was a result of a the automaker reporting an unexpected profit during its second quarter operations. The company reported earnings excluding items of $0.20 per share, compared to a loss of $0.89 a share in the second quarter of last year. Revenue improved drastically to $405 million from $27 million a year ago.
Tesla announced it increased its rate of production by 25% to 500 cars a week, surpassing its expected sales of 4,500 vehicles for the second quarter by 650. Going forward, the company needs to cement its presence and reputation before every automaker has a comparable product. In statements following the announcement the company hinted it would be doing just that. Strong European and Asian demand out of previously untapped markets should help the company justify its outlandish multiple.
If demonstrated demand in North America and Europe is matched by similar demand in Asia, annualized sales for Model S could exceed 40,000 units per year by late 2014
For the conservative investor it may be best to wait for a pullback before jumping into the stock today. High growth names offer great potential, but unfortunately carry a great deal of risk and should only be included in a diversified portfolio.
Groupon, Mondelez, and Tesla gave the Street a good amount of data to pour over in the weeks ahead. I remain on the sidelines when it comes to Groupon and Tesla, as both stocks have moved dramatically higher year to date. The risk-adverse investor could, however, step in an start a long term position in Mondelez after this solid quarter.
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.
Nathaniel Matherson has a long position in Mondelez. The Motley Fool recommends Tesla Motors . The Motley Fool owns shares of Tesla Motors . 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!