Earnings reports are the key to finding stocks on the move. The reports tell investors how well the company did last quarter, what the company expects moving forward and what the overall economic conditions are like.
In this article I'll examine three stocks that recently released earnings to see where they are headed: Union Pacific (NYSE:UNP), Dow Chemical (NYSE:DOW) and Amazon.com (NYSE:AMZN). (To learn more, read Trading On News Releases.)
Union Pacific Beats Estimates
Union Pacific beat estimates with earnings of $703 million, or $1.38 per share, on $4.85 billion of revenue. This compared with the Thompson Reuters estimate of $4.74 billion or $1.30 per share. The company also had positive comments about future with. "UP expects to produce strong year-over-year earnings growth in the fourth quarter despite the continuing effect of the economic slowdown on our business," said Jim Young, chairman and CEO. Union Pacific is thriving in the current economic environment. It would not be surprising to see the company continue to provide solid earnings growth for the foreseeable future. Shares of Union Pacific are trading down 13% in the last year which has held up considerably well compared to the S&P 500 which is down almost 45%.
Dow Chemical's Dividend is Safe
Dow Chemical reported earnings per share of 60 cents, before one-time expenses, compared with the Thompson Reuters estimate of 57 cents per share. Once you account for these one-time items, Dow earned 46 cents per share or $428 million, up from 42 cents per share one year ago. Chairman and CEO Andrew Liveris said a global recession is likely through most of 2009, but the company is well positioned to weather the economic downturn, adding that the dividend is "safe and secure". What investors should take from the earnings report is that Dow Chemical will face several challenges in the year ahead but the company is financially strong. Dow Chemical shares closed Monday's trading at $22.81 near their 52-week low of $21.72
Amazon cuts Guidance
Amazon reported revenue of $4.26 billion last week compared with estimates of $4.27 billion. This is a 31% increase from one year ago. Net income saw a 48% increase to $118 million, or 27 cents per share, from $80 million, or 19 cents, a share a year ago. The company lowered its fourth-quarter guidance saying revenue will be $6-7 billion compared with the estimate of just over $7 billion. While the company had good earnings report for the quarter, the lowering of guidance will put pressure on the shares as many investors wonder how the company will do in the slowing economic environment. Shares of Amazon closed Monday's trading up 1.27% at $49.57 but have fallen about 32% in the month of October. (Explore the controversies surrounding companies commenting on their forward- looking expectations in Can Earnings Guidance Accurately Predict The Future?)
Earnings news has a major impact on the movement of a stock. The most important factors to look for are how the company did and what it expects for the future. This will determine if shares are ultimately going higher or lower. However, we need to watch to see if the stock can hold its opening gains or losses. If it can hold these levels then it may be a good situation to go into on the long or short side. If it can't then it would be prudent to wait and see what happens.