Are Any of These Post-Earnings Companies a Buy?

Alcoa (NYSE: AA  ) has officially kicked off earnings season. Along with Alcoa, a number of other companies are showing volatility following their reports. A stock's initial post-earnings trend is not always a reflection of its future performance, however. Let's look to the analysts to determine what these reports may mean, and then determine if any of these stocks are a post-earnings buy.

Rip-off or bargain?
This earnings season was expected by many to be plagued with downward guidance and disappointing results. Alcoa, a company largely looked to as a first sign of strength or weakness, significantly beat on both the top and bottom line with revenue of $5.8 billion and earnings per share of $0.11. It also traded higher by more than 2%.

Moreover, the company reaffirmed its global aluminum guidance, saying it expects "balanced" markets. Alcoa sees growth of 9% to 10% in aerospace, 1% to 4% in automotive, 4% to 5% in commercial buildings and construction, and 3% to 5% growth in industrial gas turbine markets. This means strong growth in all of its segments.

Barclays is not impressed, however. The firm notes that Alcoa is generating annualized earnings per share of $0.44, which translates into 18 times earnings. It also notes that weak aluminum prices present more downside than upside.

With that said, 18 times earnings might be slightly more expensive than the S&P average, but it's hard to call it costly. Further, the low prices of aluminum could also be viewed as a good opportunity to buy cheap. Lastly, Alcoa trades at just 0.36 times sales, which is far below the S&P average of 1.5. It is also operating with historically low operating margins. This combination of factors might mean that Alcoa is presenting value and isn't as expensive as it appears.

Growth is a distant memory
YUM! Brands (NYSE: YUM  ) fell a whopping 7% on Wednesday after missing on both the top and bottom lines, with same-store sales essentially flat. The company announced that same-store sales declined 11% year over year in September and also noted that China is unlikely to produce positive growth in the fourth quarter.

Goldman came out with a note saying China's performance is worse than expected and shows no sequential improvement. The firm also said that "downward revisions are likely -- suggesting YUM's multiple is more extended than previously believed."

This is a company that's posting significant revenue and margin declines despite rapid store-expansion and menu innovations. Yum! trades at 22 times earnings, making it hard not to agree with Goldman. The company has performed exceptionally well over the last decade, but fundamentals don't appear to support the price of its stock at this moment.

Capitalizing on all fronts
Wolverine Worldwide (NYSE: WWW  ) dropped 1.5% after a strong earnings report, raising earnings-per-share guidance and seeing a 70-basis-point increase in gross margin. The company saw double-digit revenue growth in most of its brands, and overall sales were up 9%.

Brean Capital reiterated its buy rating and raised its price target from $63 to $70 on the strong report, which represents a projection of 19 times full-year EPS. The firm defended its pricing premium by saying that "companies with visible long-term growth stories, strong global brands and solid operational platforms are optimal investment opportunities, especially in a somewhat rich market."

All things considered, Brean is right. Wolverine has great growth and rising margins in a market that lacks these positives. Because of this, Wolverine might be a great long-term investment.

When did 7% become a negative?
Fastenal (NASDAQ: FAST  ) saw a 6% decline after missing on the top and bottom lines. The company saw revenue growth of 7% year over year, which was seen as unimpressive. Fastenal explained its disappointing sales by saying that global economic uncertainty and economic policy hurt volume. Still, gross margin ticked upward from 51.6% to 51.7% in a quarter in which many thought margins would decline. 

Equity research firm William Blair is not giving a bullish outlook for the company, at least through 2014, saying the industrial and nonresidential construction markets lack sustained momentum. Furthermore, the firm doesn't see a pickup until next year.

Due to rapid growth in recent years, investors and analysts expect double-digit returns from Fastenal on a year-over-year basis. Given the events mentioned by William Blair and the comments from Fastenal, however, investors should be happy with 7% growth. 

Fastenal is still outperforming its industrial peers, meaning it might be a good long-term opportunity. With that said, Fastenal does trade at 32 times earnings, so investors may want to keep an eye on the stock for now and wait until it's trading more cheaply.

Final thoughts
Right now, we can't say much positive about Yum! Brands, and Fastenal is a bit pricey. Therefore, we are left with Wolverine and Alcoa, both of which had great earning reports.

Wolverine has been a top market performer for the better part of five years. It has momentum in its favor. This small pullback could present a great opportunity.

Alcoa's report and growth across the board was impressive, especially considering the negative sentiment that has surrounded this company for the last few years. Thus, I think it might finally be time to buy Alcoa. It's ready to return long-term value to its shareholders.

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