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After wrapping up an incredibly strong first quarter of earnings reports, we're more than three-quarters of the way through the second quarter with many reports still coming in better than expected. With so many companies reporting during the weeks that comprise earnings season, it's easy for some earnings reports to fall through the cracks.
Each week this year, I've taken a look at three companies that could be worth further research after either beating or missing their profit expectations. Today, we'll take a gander at three more companies that reported earnings last week. If they slid under your radar, they deserve a look:
|Michael Kors (NYSE: KORS )||$0.16||$0.22||38%|
|Smithfield Foods (NYSE: SFD )||$0.53||$0.43||(19%)|
|Coffee Holding (AMEX: JVA )||$0.23||($0.06)||(126%)|
Source: Yahoo! Finance.
For those of you (myself included) that thought the luxury and brand-name consumer had officially gone into hibernation, you can feel free to go grab yourself a slice of crow cake.
Apparel, footwear, and accessories maker Michael Kors didn't just beat Wall Street's expectations last week -- it chopped, marinated, broiled, and served up those expectations with a side of humble pie right back to those same analysts. For the quarter, Michael Kors boosted sales by 58%, with diluted earnings rising 120%! The gains came from every aspect of its business, as the company added 71 new stores from the year-ago period. North American same-store sales rose by a ridiculous 37.2%, while European same-store sales jumped 13.6%. Overall revenue soared 122.6% in Europe.
Although the run in Michael Kors look far from done given the above figures, one name to consider would be the downtrodden Fossil (Nasdaq: FOSL ) . If you recall, Fossil makes Michael Kors' watches, then allows Kors to rebrand the watches under its own label. With Europe being a primary growth concern for Fossil, Michael Kors' accessory growth in the region may be able to quell investor fears and boost Fossil's bottom line.
You could say Smithfield is playing a game of chicken with consumers, or that you'd like to know where the beef is behind its growth plan, but frankly that'd probably just annoy Smithfield's management team.
The company, which primarily supplies fresh pork as well as beef, reported results last Thursday that were well short of Wall Street's predictions. The company blamed weaker pork margins, higher costs associated with its business, and slow sales growth for the shortfall. What's more, Smithfield will likely need to raise its pork prices to counteract the 8% rise in costs it experienced in the quarter. That means these costs will be passed along to grocers and then on to you, the consumer. If Smithfield can successfully pull this off, it will have solved its margin issues, but it also runs the risk of alienating pork consumers and pushing them back to other forms of meat.
Smithfield is attempting to soften the blow to investors by announcing a two-year, $250 million share-repurchasing plan, but I doubt that's going to cure its woes. In my opinion, until feed prices become cheaper, Smithfield's pricing power will remain low, giving it little chance to really gain traction in the pork side of its business.
Good news, Coffee Holding shareholders: The wholesale coffee roaster and dealer "only" missed Wall Street's consensus by 126%, which is much better than the 230% it missed by in the fourth quarter.
OK, so comforting others after a poor earnings report isn't my forte, but don't say I haven't warned investors on numerous occasions about what pitfalls and warning signs Coffee Holding possessed.
In its latest quarter, the company reversed a solid profit of $0.22 from a year ago and turned it into a $0.06 per-share loss. The primary culprits, as management explained, were macroeconomic headwinds, lower coffee prices, and customers putting off orders on the hopes of even lower coffee prices. Coffee Holding's private label sales decreased 12% year over year. The bigger problem is that while the price of coffee fell, company expenses rose; that's never a formula for success.
Perhaps the biggest shot over Coffee Holding's bow is the ongoing uncertainty at Green Mountain Coffee Roasters (Nasdaq: GMCR ) . Green Mountain, which is far and away Coffee Holding's largest customer, recently cut its earnings forecast and proved to investors it really is driving blind and has no clue what the true demand for its products really is. That's bad news for Coffee Holding and affirms the fears I had last July of its reliance on one large customer. Even at just a fraction of its 52-week high now, Coffee Holding is a recipe for indigestion for investors.
Sometimes an earnings beat or miss isn't as cut-and-dried as it appears. I've given my two cents on what's next for each of these companies; now it's your turn to sound off. Share your thoughts in the comments section below, and consider adding these stocks to your free and personalized watchlist.
- Add Michael Kors to My Watchlist.
- Add Smithfield Foods to My Watchlist.
- Add Coffee Holding to My Watchlist.
If you'd like the inside track on three more companies that could wind up in the earnings beat column, then I suggest you get a copy of our latest special report: "3 American Companies Set to Dominate the World." Did I mention the best part? This report is completely free, so don't miss out!