AZO, TD, JOY and DRI all worth a ride before their reports
Philosophically, third-quarter earnings season is over.
Technically, it’s not.
About 15 more major and semi-major names will try to shout out their results above the din of holiday shopping and fiscal cliff headlines for the next couple weeks — of those, four of them might be worth a swing before they reveal their numbers:
AutoZone (NYSE:AZO) is the first of the four names in focus that will report Q3 numbers.
Look for a bottom line of $5.39 before the bell Dec. 4. That’s 21% stronger than the $4.44 it earned a year ago. If it hits that mark — and it would be shocking if it didn’t — it will be the sixth straight time the auto parts retailer’s calendar Q3 (fiscal Q1) bottom line has improved. It also will be at least the 17th consecutive quarterly beat for the company.
This outfit has been freakishly consistent with its earnings growth, but that’s not the sole reason traders would want to consider taking a swing on AutoZone now.
One of the toughest parts about investing in AutoZone since early 2010 has been finding a point where the stock wasn’t technically overbought during that time; even the pullback to the 200-day moving average line in August 2011 was very short-lived. But, over the course of 2012, AZO shares have made a major pullback and burned off any overbought pressure that had been baked in. With a proverbial hit of the reset button in place, the bounce effort since September looks like it could have legs.
Just for the record, Advance Auto Parts (NYSE:AAP) met its Q3 earnings estimates of $1.21 per share, and O’Reilly Automotive (NASDAQ:ORLY) also topped estimates of $1.27 by earning $1.32 per share.
Toronto-Dominion Bank (NYSE:TD) releases its fiscal fourth-quarter earnings the morning of Dec. 6. The pros are expecting a per-share profit of $1.81, up from the year-ago number of $1.69.
While it might have ebbed and flowed in the short-term, over the long haul, TD has advanced in conjunction with the steady increase in its bottom line. Anyone who has bought on the dips — or bought on the way up after a bottom has formed — has been rewarded rather well. And it looks like Toronto-Dominion Bank shares have just started a new rally after a decisive bottom in early November.
One thing investors should know about Toronto-Dominion: Although it has been mostly reliable on the earnings front, earnings growth has been painfully slow. That’s not expected to change at any time in the foreseeable future.
Joy Global (NYSE:JOY) will post earnings of $1.91 per share before the bell Dec. 12 if the company meets analyst estimates. That’s 5% better than the $1.82 it earned a year earlier.
The mining equipment manufacturer hasn’t been anywhere near as consistent with its earnings growth as Toronto-Dominion has, and actually has missed estimates in three of the last four quarters. But, following the 50% pullback between early 2011 and mid-2012, the pessimists might have overshot — earnings still have been respectable.
The forward-looking P/E of 8.4 is a bargain no matter how you slice it, so unless the company completely botches third-quarter numbers or offers a horrible 2013 outlook, there are a lot of ways the company could put itself back in a (relatively) positive light next week.
Darden Restaurants (NYSE:DRI) — parent of Olive Garden, Red Lobster and other popular chains — will unveil its most recent quarter’s results early on Dec. 14. Forecasters say the restaurateur is going to earn 47 cents per share, well up from the 41 cents it earned in the same quarter from 2011.
Not unlike Toronto-Dominion Bank shares, anybody who has bought into DRI on a dip since 2009 has done pretty well as a result; the longer-term trend has been a positive one. The recent push off of the 200-day moving average after the September/October pullback could make now the ideal entry time.
Any chance a brewing lawsuit over low wages could make things difficult in the future? Anything’s possible, but the claims might have as little merit, as the company suggests. So far, 50 employees have decided to become plaintiffs in the case that alleges the company required unpaid work time for its workers. But, given that Darden is the same company that has received high accolades for specifically creating a diversity-friendly workplace, it’s tough to imagine its attitude in terms of general work expectations would be so far at the other end of the spectrum.
Consumer buying patterns produce big holiday winners
Attention shoppers! That pretty much includes all of us at this time of year. And to add to the mania, we’ve got an extra long holiday season this year because of the early Thanksgiving. If moneymaking stocks are on your shopping list this year, I have three ideas for you that we’ll get to in a moment.
Early projections are for the 2012 holiday season have been a bit mixed. The National Retail Federation estimated sales in November and December would be up 4.1% this year, which would be slower growth than the last two years. Still, it’s growth, and the Thanksgiving weekend numbers were encouraging. According to a survey from BIGinsight, the number of shoppers over the weekend increased 9.2% to 247 million, with the average person spending $423, up 6% from $398 last year.
Before I get to the stocks I like, I wanted to give you a heads-up as to where not to invest. I know you might think that your safest bet would be with the big retailers, like Walmart (NYSE:WMT) and JCPenney (NYSE:JCP), but I would be leery of those.
Why? The main one is bargains. They are great for us as consumers, but they eat into profit margins at the retailers.
Instead, I like other companies that should do well this holiday shopping season but not depend on deep price cuts to make their money. Here are three I expect to do well:
1) Amazon (NASDAQ:AMZN). Let’s start with how more of us are doing our shopping: online. And the king of the cyber world is Amazon, which continues to grow in popularity. The Kindle was especially popular this year, and the devices actually doubled their sales from 2011 on Cyber Monday!
We already know that AMZN has pricing power because of their scale and reach, but the company has become even more successful because of their execution of the growing Groupon(NASDAQ:GRPN) style business. This makes the company one step more advanced because AMZN customizes the offers by “knowing” their customer and by having access to location. This is a website that is only going to get bigger and better.
2) FedEx (NYSE:FDX): Now think about how those purchases will be delivered. That’s where FedEx comes in. Now, the preferred delivery may not be the higher-priced priority deliveries, but volume on the less-expensive slower delivery options should be robust. Those who are mailing their gifts are going to need a way to deliver them, and FDX will be one of the leaders.
3) Abercrombie and Fitch (NYSE:ANF): Last, think about what’s popular. On that score, it’s hard to beat Abercrombie and Fitch right now. People love this store. ANF was one of the Black Friday winners, and what’s interesting is that they are an extremely popular brand that did better this year with less advertising, which means lower costs. This retailer is still the best of the breed with juniors clothing. Their less expensive, Hollister branded stores are also very popular.
I look for these three companies to have strong holiday seasons, and now is a good time to consider them before any “Santa Claus rally.” Stocks pulled back after the last earnings season, which was the worst in five years, and a lot of the bad news is now priced in. I know the market will move based on fiscal cliff headlines, but I do expect to see some of the usual seasonal strength, especially if the news out of Washington gets more positive.
If you’re tired of government and central bank policy being the most important driver of financial market performance, some good, old-fashioned stock charts ought to be a tonic for your fiscal cliff blues.
As we move into December, 11 charts point to potential opportunities — and they won’t necessarily depend on the latest quotes from John Boehner to provide traders with a little extra bang for their buck. Five are big-name stocks that are close to breaking out to new highs, while six others are resource picks that could be poised to move off bases they have established over the past year.
December Breakout Candidates
If you’re a bull on the broader market, a few select names could deliver outperformance in the months ahead:
Bank of America (NYSE:BAC) Macy’s (NYSE:M) Salesforce.com (NYSE:CRM) Adobe Systems (NASDAQ:ADBE) Stryker (NYSE:SYK).
It’s a diverse group of stocks, but they do share an important common trait: With the exception of Macy’s — which has traded down this week — all of these stocks are just pennies from breaking out to 52-week highs. The charts speak for themselves:
The story with this group of stocks from the energy and materials sectors is less clear-cut since they are trading at a roughly equal distance between downside support and the resistance created by their 200-day moving averages. Traders can therefore look at this group for opportunities in either direction … but stops are essential.
In the materials-related group, Alcoa (NYSE:AA), Caterpillar (NYSE:CAT) and Potash (NYSE:POT) are among those trading just above long-term support but within striking distance of their 200-day moving averages. The proximity to the 200-day is a common trait among many materials stocks right now, as illustrated in the charts of the Market Vectors-Coal ETF (NYSE:KOL) and the Market Vectors-Steel ETF (NYSE:SLX).
Together, all of these stocks are important to watch not just for potential trades, but to see whether support or resistance is broken first. This could provide a key indication of what’s in store for the rest of the market in the months ahead.
Also, the energy sector is home to three charts that signal potential opportunity: Baker Hughes(NYSE:BHI), McDermott International (NYSE:MDR) and Nabors Industries (NYSE:NBR). All three stocks have tested established support and begun to climb higher. And as is the case with the materials stocks mentioned above, all are very close to their 200-day moving averages. What’s more, a look at the two-year charts shows that the upper trendlines aren’t far above the 200s.
Watch these names closely for a trade as we approach year-end, but hold onto long-side trades only as long as crude oil can hold above $80/barrel.
AIM-listed tube manufacturer Tricorn surged on Monday following the release of its interim results, in which it reported a decent increase in the half-year dividend.
The company, which operates in three main segments - Energy & Utilities, Transportation and Aerospace - is to pay shareholder 0.1p per share in respect of its first-half performance, up 43% on the 0.7p a share paid out last year.
Revenue in the six months to the end of September fell from £12.42m to £11.55m as a result of "softening markets" in the second quarter.
Nevertheless, improvements in operating profit margins across all three businesses helped group pre-tax profit grow from £0.72m to £0.85m.
Tricorn said that its plan to establish a manufacturing facility in China is "on track" and shipments of first products are expected later this month.
Chairman Nick Paul said: "We have delivered a strong set of half year results demonstrating continued improvements in operating margins, strong cash generation has led to a considerably strengthened balance sheet and we have made encouraging progress in establishing our manufacturing facility in China. This, alongside the pipeline of opportunities for new business positions us well for further growth.."
While Paul admitted that, in the shorter term, the softening in markets seen is likely to continue into the second half, investors didn't seem too bothered, with shares up 6.47% at 18.10p by 15:40.
Evocutis, the skincare products testing group, managed to double revenues in the year to July 31st.
Turnover from commercial deals jumped from £0.22m to £0.46m, helped by collaboration and consultancy agreements with consumer healthcare companies.
The large increase in revenue was mainly as a result of the full-year trading revenues from Leeds Skin Centre for Applied Research which was acquired in May 2011.
The adjusted operating loss narrowed to £0.91m, from £1.09m previously. The loss per share reduced from 0.90p to 0.88p.
"These results show that the integration of Syntopix and Leeds Skin into Evocutis has led to significant growth in collaborations with major multi-national companies. Our collaborators are seeking the skill base at the core of Evocutis that enables them to strengthen their brands by providing scientific data that supports product claims," said interim Chief Executive Officer Gwyn Humphreys.
"Evocutis aims to grow these relationships over the coming twelve months, and to increase the availability of LabSkin™ for those companies who wish to carry out research in-house rather than by contract relationships with Evocutis."