Earnings 'Big Guns' Batting 600

By James Brumley | April 24, 2009 AAA

I'm under no illusion that a mere five companies act as a total market index. On the other hand, the numbers from the five companies you're about to review are a pretty good proxy for the broad market. You've got earnings from a financial stock, a restaurant, a tech name, an internet retailer and a consumer goods company to think about. How'd they do overall? In baseball terms (though this is something of a judgment call), the market's batting about .600. Take a look.

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The $1.21 billion profit during the company's second quarter, which ended March 31, was a 15% improvement on earnings from the same quarter a year earlier. Macintosh computer sales fell about 11%, and iPod sales were only slightly higher. Of course, this only leaves one possible explanation for the big jump in the bottom line - superb growth in iPhone sales. Sure enough, Apple sold 123% more iPhone units than it did in Q2 2008. I cringe at the use of the cliche, but Apple has successfully retained its juggernaut status.

Side note: By having earnings per share (EPS) of $1.33 this time around - and topping analysts' expectations of $1.09 per share - Apple has "beat the Street" for at least five consecutive quarters. Whether the company is sandbagging or forecasters simply underestimate the company, the current quarter's estimate of $1.12 per share is likely to be too low again. The company is doing its part to set the bar low as well, only giving guidance of 95 cents to $1 for its fiscal Q3. In retrospect, last fall's 56% dip in the share price may actually be the mistake Apple feels that it was. (Learn more in Finding Profit In Troubled Stocks.)

Tupperware Brands (NYSE:TUP)
Boring can be beautiful, too, if you like money. Tupperware Brands topped earnings forecasts of 34 cents per share during the company's Q1. With extraordinary items factored in, Tupperware brought home 41 cents per share. Excluding those extraordinary charges, the company earned 45 cents per share. The "ex" numbers are better than the results from Q1 2008, while the all-inclusive earnings (with the one-time charges) are worse.

Though overall sales were down 15%, emerging market revenue was up nearly 50%. (Just wait until those emerging market consumers start losing either the tops or the bottoms to their Tupperware pieces, but not both - demand could really kick in then.)

Yes, eBay Beat Its Q1 Estimates, But...
The e-commerce site eBay (Nasdaq:EBAY) earned 39 cents per share, yet a one-time charge whittled the figure down to 28 cents. Wall Streeters were looking for 33 cents per share, or a penny less than what eBay earned during Q1 2008.

Had Apple, Tupperware and McDonald's (see below) not done so well during their first quarter, it might be a little easier to forgive the 16% dip in revenue. However, in reference to eBay's outlook, CFO Bob Swan's statement doesn't quite hold water: "[It] reflects weak consumer spending...and a negative impact from foreign exchange rates," Swan said. Clearly it was possible to grow the bottom line during the first quarter - just not for eBay.

Morgan Stanley (NYSE:MS)
No huge surprise here. Higher credit costs and real estate woes were expected to hurt earnings for the diversified mega banks, and they did. Morgan Stanley lost 57 cents per share and cut its dividend to boot. The stock took an 11% slap on the wrist over two trading days after its April 21 close at $24.65.

McDonald's (NYSE:MCD)
Quarterly earnings were up 4% despite the 10% tumble in revenue for the world's largest hamburger joint. Per-share earnings of 87 cents beat last year's Q1 earnings of 81 cents a share and topped analysts' forecasts of 82 cents per share. How'd it manage to do that? Though the stronger U.S. dollar hurt the top line, the same stronger dollar can help when it comes to expenses.

What's It All Mean?
Of the five key stocks reviewed above, I'd say two fell short of healthy results (even if topping estimates), and three did as well or better than we have a right to expect. That's a .600 batting average, which is strong no matter what kind of league you're playing in.

Bottom Line Drive
While five companies still don't represent enough of the market to call it "the" market, these names - along with some other majors that recently announced earnings - are putting up decent numbers as we wind down the first big week of earnings season. So far, the doom-and-gloom prognosticators are tasting a crow appetizer.

Get a fresh view on earnings releases; check out Five Tricks Companies Use During Earnings Season.

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