What a quarter! Right?
The market's best freshman quarter since 1998 was a beauty. The 8% pop in the Dow and 12% surge in the S&P 500 was outdone by the nearly 19% run by the tech-heavy Nasdaq.
Everyone who is long the market should be happy. Companies should be doing great fundamentally if share prices can pull off this kind of quarter.
Well, not exactly.
I recently went over some of the companies that are expected to post lower quarterly profits when they report this week.
Thankfully, they're the exceptions and not the rule. Let's go over some publicly traded companies that are expected to stand tall this week by posting year-over-year improvement on the bottom line.
Latest Quarter EPS (estimated)
Year-Ago Quarter EPS
|Monsanto (NYSE: MON )||$2.12||$1.87||Add|
|Conn's (Nasdaq: CONN )||$0.29||$0.00||Add|
|PriceSmart (Nasdaq: PSMT )||$0.69||$0.60||Add|
|AZZ (NYSE: AZZ )||$0.82||$0.73||Add|
|CarMax (NYSE: KMX )||$0.40||$0.38||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Monsanto.
The agricultural chemicals giant is making the most of emerging countries trying to make the most of their farmlands. It's not a surprise to see profitability growing here, but the one thing I really like at Monsanto lately is that it's blowing past the pros at an accelerating rate.
What do I mean? Well, Monsanto beat Wall Street's profit target by 44% in its previous quarter. It landed ahead of analysts by a margin of 19% three months earlier. It was 14% before that and 2% if we go all the way back to last April's report. In other words, Wall Street is underestimating Monsanto's actual bottom-line performance by growing degrees.
If you think that Monsanto will only earn $2.12 a share when it reports on Wednesday, you're just not paying attention to history.
Conn's is a regional chain of consumer electronics stores. This is a cursed retail specialty, and not just because the industry leader put out a gloomy quarterly report last week. Many players have liquidated as shoppers flock to cheaper Web-based merchants and digital delivery makes physical media items less desirable.
Conn's has managed to hold up by stocking appliances, furniture, and even lawn maintenance equipment to stand out from e-tailers that prefer to ship out lighter fare.
PriceSmart runs a chain of warehouse clubs, located primarily through Latin America and the Caribbean. Everyone loves a bargain in warehouse-priced goods, regardless of where they may live. It is somewhat a concern to see PriceSmart come up woefully short relative to analyst guesstimates in the two previous quarters, but that only opens the door for the chain to bounce back for a redemptive report.
AZZ is also charging higher. The hot-dip galvanizing and electrical power specialist is expected to earn $0.82 a share when it reports on Thursday, well ahead of the $0.73 a share it pocketed a year earlier.
Finally we have CarMax, the company that has revolutionized the selling of used cars -- for the better -- through its clean showrooms and haggle-free pricing.
CarMax will also buy your car. I had a great CarMax experience last year when I was ready to trade in my old ride. CarMax offered me a bit more than the new-car dealer wanted to give me on my trade-in, and the process was quick and painless.
Cross those fingers, but know the fundamentals
Investors in these five stocks have a right to be excited. They are all improving their financial situations. They are worthy of the gains that the market rally has bestowed upon them over the past year.
I wouldn't be uncomfortable owning any of these companies. They're doing the right thing, regardless of Mr. Market's mood swings.
The expectations may be high, but these five stocks wouldn't have it any other way.