This Week's Key Earnings Reports
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Earnings season starts to wind down this week, but that doesn’t mean that there aren’t some fascinating results to look forward to. The main bellwethers have already reported, so this week it is all about filling in the gaps in your view of the economy and looking for individual stock ideas. As usual I’m going to highlight a few that I think are interesting and suggest some things to look out for.
There is a kind of ‘mini healthcare’ theme to today’s earnings with a few interesting small to mid cap names giving results. I confess Bruker (NASDAQ: BRKR) is a name that worries me a bit going into these results. Its rival Agilent reported Academic and Governmental sales down 7% in its last set of result, but Bruker (which has a lot of exposure to this end market) reported strong growth in the last quarter yet cited weakness at the end of the quarter. Will that have seeped over into the last quarter? We shall see. Moreover, I’m not really confident in the management’s previous assertion that its business was ‘somewhat immune’ to the European situation over the last year means that it will be so going forward.
The medical theme extends with health care insurance company Humana giving numbers and contract research organization stalwart Covance reporting too. Biotech and pharma spending has actually been pretty robust this year, and investment is ongoing by big pharma in order to deal with the patent cliff. The last of my picks would be molecular diagnostic test company Myriad Genetics which is an intriguing company that probably needs to demonstrate to the market that it can establish meaningful revenues in a test other than BRACanalysis (breast & ovarian cancer). It has plenty of tests in the pipeline and plans to expand geography and product range; investors will be looking to see ongoing development.
Tuesday’s theme is ‘recession resistance.’ Two favorite recession proof companies Church & Dwight (NYSE: CHD) and Cinemark will both give results. The former’s recent dip is very interesting, and with Procter & Gamble reporting a decent quarter for a change perhaps the market thinks it took back some market share from CHD? Who knows? Investors should be looking to see if CHD has managed to get the higher margin Orajel product sales back on track. This issue affected its personal goods earnings in the last quarter.
Going to the cinema is traditionally a counter cyclical activity, which is why Cinemark is interesting for a balanced portfolio.. It’s a cheaper night out, and with the economy still plagued by relatively high unemployment, the mass market consumer can be expected to favor this activity. However, longer term she (because nearly all movies seem to be made for women or saps these days) can also be expected to watch the movie in a home theater, download it or buy the dvd a couple of weeks after the film is showing in theaters. None of which is good news for Cinemark.
Cloud computing play Rackspace Hosting also gives results.
Just in case you haven’t had enough healthcare this week, Becton Dickinson, Mako Surgical, and Perrigo Co will all give results. Media attention will focus on Mako, but I quite like Perrigo’s long term prospects in offering private label nutrition and OTC products. Qualcomm and Dryships are two cyclicals in vastly different industries, and it will also be interesting to hear what they have to say. It’s a big week for retail with Macy’s amongst others giving results.
One company that grabbed my eye was Whole Foods Market (NASDAQ: WFM). There is a kind of curious bifurcation going on in the US whereby the discount stores are benefiting (as the mass consumer trades down) and the specialty stores are flourishing (as the wealthy get more discerning). In addition, there is also my conception of the ‘third woman’ who trades down so that she can buy certain items at the specialty store. Whole Foods is an attractive company but the evaluation is hardly cheap. I’m looking for some kind of ‘growth hiccup’ here and hoping for a more interesting entry point.
I’m going to select retail as the theme for Thursday. Wendy’s, Kohl’s and Nordstrom (NYSE: JWN) are all giving results. I like the way Nordstrom is run and think its initiatives al make sense. It’s management is making aggressive moves into e-commerce and rolling out its successful lower priced Rack stores in order to differentiate its offering to consumers. In addition, increasing credit quality should add its credit arm. Investors should keep an eye out for inventory build-up as Nordstrom is opening new stores, so don’t be alarmed if it starts to grow.
Groupon and Nvidia also give results.
This is usually a quiet day for results but there are a few intriguing earnings reports. Foster Wheeler will update on the state of utility and infrastructure spending and J.C. Penney is going to complete reporting for the department stores this week. My main focus will be on Covidien’s (NYSE: COV) discussion of results. The company is splitting into separate pharmaceutical and medical device companies. My interest is on the medical device side where Energy and Endo-mechanical products have been growing strongly. Increased hospital admissions and elective procedures suggest that Covidien could report some decent results, but Johnson & Johnson did not report strong numbers in Surgery, so we shall see. Vascular is another area where we can expect good results from Covidien. The stock doesn’t look expensive to me.
SaintGermain has a position in Covidien. The Motley Fool owns shares of Whole Foods Market. Motley Fool newsletter services recommend Covidien Ltd. and Whole Foods Market. 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.If you have questions about this post or the Fool’s blog network, click here for information.