Free Annual Reports
The Rest Of The Earnings Story
Wednesday's big rally was fueled by some very impressive earnings results. Before jumping to bullish conclusions though, some perspective the "quick hit" media didn't offer needs to be put on the table. Here's the rest of the story for three companies that made waves before investors had a chance to slice and dice the numbers.
IN PICTURES: 5 "New" Rules For Safe Investing
Shrinking Its Way to Success
Building materials supplier Eagle Materials (NYSE:EXP) posted a nice improvement in income. It Q3 profits were up 17% on stronger concrete and cement profits, translating into earnings of 12 cents per share against expectations of 10 cents. Be careful though, as the quarter in comparison - Q3 of 2009 - was already tepid with an EPS of 11 cents. Both are still well short of 2008's third quarter profit of 50 cents per share.
The fact is, revenue was actually down for the quarter - lower costs were the sole reason for the improvement. All well and good, but it's not a formula for growth longevity.
Gaming Back in Business
Video gaming investors were largely waiting on Electronic Arts (Nasdaq:ERTS) to post its holiday-shopping-related numbers to really confirm - or not - that the gaming industry is healing. Confirmed.
Though the gaming software designer actually lost 97 cents per share, the income of 59 cents per share topped the forecasted 57 cents on an operating basis. More important, it nearly doubled year-over-year third quarter numbers (the company's third fiscal quarter falls in the holiday shopping season), and stopped a two year downtrend in Christmas-season income.
On a related note, Activision Blizzard (Nasdaq:ATVI) may be able to seal the deal for the video gaming industry when it announces its Q4 numbers on February 9. Forecasters expect to see per-share profits of 50 cents which would be a penny better than the last quarter from 2009. More important though, it would translate into the fourth consecutive year of stronger per-share income for Activision.
That's Not Even the Really Good News
Kudos to Broadcom Corp. (Nasdaq:BRCM) for more than quadrupling its fourth quarter profit. The semiconductor maker earned 47 cents per share in Q4 of 2010 versus 11 cents in Q4 of 2009 and expectations of 46 cents this year. On an operating basis, the company earned 75 cents against expectations of 74 cents.
So what? Isn't that all good news? The market didn't think so, as the immediate reaction after hours (the news came out after the market was closed on Tuesday) was a whole lot of selling. The thing is, the complicated quarterly numbers disguised something more important - Broadcom just turned in its best full-year EPS ever.
If things go as expected in 2011, Broadcom will bring home even more bacon than it did in 2010. And, considering the company has either topped or met EPS estimates in the last four years (with no misses), it may not be wise to bet against BRCM despite a major rally in the fourth quarter. (For related reading on earnings surprises, see Everything Investors Need To Know About Earnings.)
Bottom Line
There's always more to the story than the media reports, and in some cases it's far more important information than just the bottom line number for the quarter. In these three cases, the other data may change an investment decision.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 5 "New" Rules For Safe Investing
Shrinking Its Way to Success
Building materials supplier Eagle Materials (NYSE:EXP) posted a nice improvement in income. It Q3 profits were up 17% on stronger concrete and cement profits, translating into earnings of 12 cents per share against expectations of 10 cents. Be careful though, as the quarter in comparison - Q3 of 2009 - was already tepid with an EPS of 11 cents. Both are still well short of 2008's third quarter profit of 50 cents per share.
The fact is, revenue was actually down for the quarter - lower costs were the sole reason for the improvement. All well and good, but it's not a formula for growth longevity.
Gaming Back in Business
Video gaming investors were largely waiting on Electronic Arts (Nasdaq:ERTS) to post its holiday-shopping-related numbers to really confirm - or not - that the gaming industry is healing. Confirmed.
Though the gaming software designer actually lost 97 cents per share, the income of 59 cents per share topped the forecasted 57 cents on an operating basis. More important, it nearly doubled year-over-year third quarter numbers (the company's third fiscal quarter falls in the holiday shopping season), and stopped a two year downtrend in Christmas-season income.
That's Not Even the Really Good News
Kudos to Broadcom Corp. (Nasdaq:BRCM) for more than quadrupling its fourth quarter profit. The semiconductor maker earned 47 cents per share in Q4 of 2010 versus 11 cents in Q4 of 2009 and expectations of 46 cents this year. On an operating basis, the company earned 75 cents against expectations of 74 cents.
So what? Isn't that all good news? The market didn't think so, as the immediate reaction after hours (the news came out after the market was closed on Tuesday) was a whole lot of selling. The thing is, the complicated quarterly numbers disguised something more important - Broadcom just turned in its best full-year EPS ever.
If things go as expected in 2011, Broadcom will bring home even more bacon than it did in 2010. And, considering the company has either topped or met EPS estimates in the last four years (with no misses), it may not be wise to bet against BRCM despite a major rally in the fourth quarter. (For related reading on earnings surprises, see Everything Investors Need To Know About Earnings.)
Bottom Line
There's always more to the story than the media reports, and in some cases it's far more important information than just the bottom line number for the quarter. In these three cases, the other data may change an investment decision.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
James Brumley
James Brumley is a freelance writer and registered investment advisor. He began his career as a broker with a major Wall Street firm, where fundamentals and long-term holding periods were core strategies. After that, he switched gears completely, becoming an analyst at a short-term trading newsletter that focused on technical analysis. He now manages client money using the best of both philosophies. His company, Bluegrass Portfolio Management, offers investors an opportunity to reap superior returns with minimized risk.
Free Annual Reports
