Watching the corporate and earnings news will give us an idea of how to make money in the markets. It is when this news comes out that companies will talk about the overall health of the economy, how the company has been performing relative to analyst estimates, and the future prospects for earnings. By paying close attention we can find both good long and short investment ideas.
Some companies that have news out that can affect the price of the stock include: Johnson Controls (NYSE:JCI), Heidrick & Struggles International Inc. (Nasdaq:HSII) and Daimler AG (NYSE:DAI).
Johnson Controls is Cautious
Johnson Controls is cautious about the future and cut its 2009 earnings estimates to $1.95-$2.10 per share. This is versus the analysts estimates of $2.47 per share and 10-16% lower than 2008. The company further added that its diversification and overall cost structure should allow it to have a cushion from the current economic conditions. "At the same time, we are entering fiscal 2009 with record backlogs in our automotive and building efficiency businesses and confidence in our ability to improve our cost structure," Chairman and CEO Stephen Roell said. "Based on what we see today, we believe we can achieve solid financial performance during this volatile economic environment." What this tells us is that, despite tough economic conditions, over the long run management believes they will be able to adapt and overcome the potential challenges that they face. Shares of Johnson controls were trading down $1.58 at $22.50 by 1:00pm EST on Tuesday.
Heidrick & Struggles Lower Outlook
Executive search firm Heidrick & Struggles is continuing to face many challenges in the weak economic environment. Today it cut its revenue estimate for 2008 to around $630 million from the previous estimate of $650-660 million. CEO L. Kevin Kelly said, "We are all acutely aware of the challenging, and in many respects unprecedented, economic environment in which we are operating today. Our business, like most others around the world, is being impacted." This shows that the company is continuing to face many challenges for the foreseeable future. It would not be surprising to see shares remain weak for the time being. Heidrick & Struggles was trading at $23.78 down $2.00 by 1:00pm EST on Tuesday. Operating margin expectations were also cut to 10% from the previous 13%. (For more on determining potential earnings, read Great Expectations: Forecasting Sales Growth.)
Daimler Closing Plants
Daimler AG is facing many challenges like so many of the other automakers world wide. Recent evidence of this came when the company announced that it will be closing two plants; the St. Thomas Ontario plant in early 2009, and A Portland Oregon plant in June of 2010. This will cause its North American Truck Division to lose 3,500 jobs. The company also said that it will be closing it Sterling Trucks line.
The company said the changes will cost about $600 million but will add $900 million in net income by 2011. What we are seeing is the major automakers adjusting to the changing market conditions around the World. While there is short term pain being felt by the group, over the long run these changes that are taking place will increase the overall profitability. Hopefully this will make it a stronger and more competitive company. Shares of Daimler are trading at $38.46 up $1.31 by 1:00pm EST on Tuesday.
As we can see the corporate and earnings news that comes out gives us an excellent idea of how to find great potential long and short ideas. The key to success is to pay attention to what the company is saying about the next year and if they have any comments about what effects this new news will have on the company over the next several years. By doing this we can gain a glimpse into tomorrows winners today.
Read about other factors which can impact a stock's price in Eight Items That Impact Daily Trades.