Twitter's Earnings Egg, Coach's Poorly Made Earnings Handbag, and Solid Housing Data

The 3 things you need to know for April 30.

Apr 29, 2014 at 11:00PM

We know there's enough financial headlines out Wednesday on Wall Street to make you want to carbo-splurge on the least healthy burgers at every American fast food restaurant. But Tuesday had some earnings reports, too, as the Dow Jones Industrial Average (DJINDICES:^DJI) jumped 87 points -- including Twitter's (NYSE:TWTR) big egg.

1. Twitter's un-tweet-worthy earnings
#Thatwasbrutal. The young short-messaging giant Twitter reported highly anticipated first-quarter earnings that showed it continues to spend more than it brings in -- its quarterly loss grew to $134 million, but revenues more than doubled from last year to $250 million. There was good and bad in the report, but as any Twitter aficionado knows, "haters gonna hate."

So what's the good in 140 characters or less? User growth improved slightly, breaking a four-quarter trend of shrinking growth -- the 255 million monthly active users were up 5.8% from last quarter. But investors are still worried about Twitter's ability to become a mainstream advertising powerhouse. The problem: Most Americans aren't using Twitter.

Twitter is frequented by celebs publicly twitter-feuding with other celebs and companies with mediocre marketing units trying to appeal to "hip" youth. But it's still not mainstream with average Internet users. Most Americans are pretty lazy as they browse through TMZ's website photos, so Twitter has had to react, recently changing its profile pages to look pretty much just like Facebook's. #Borntobrowse.
The takeaway is that Twitter is a $25 billion company that still generates losses. To shareholders, sooner or later, growth companies like Twitter need to actually grow and put up huge ad money (as Facebook is finally doing now through mobile ads). Otherwise, Silicon Valley's chicklet could get the boot from the big birds on Wall Street (even if its logo is adorable).

2. Coach handbag sales (and stock) lose again
The bags are fancy, but the numbers aren't. Luxury fashion brand Coach (NYSE:COH) reported a 7% drop in revenues over the past year to $1.1 billion as (shocker) poor winter weather kept shoppers out of its retail stores. Even though the company also announced a cash dividend of 33.75 cents per share to stockholders, investors still sold Coach down 9.3% Tuesday.

Just because Coach bags are the No. 1 bat mitzvah gift east of the East River doesn't mean they're selling well. For the third quarter in a row, the big problem for Coach was domestic demand -- North American sales fell 18% to $648 million over the first three months of 2014.

We're not fashion icons, per se, but we do know what the trend is for Coach. According to CEO Victor Louis, within the company's core handbag unit, sales of simple leather bags are beating out logo-based ones at an increasing rate, and Coach is transitioning its manufacturing process to keep up with the style (we're cool with that).

The takeaway is that things are looking way better for Coach on international runways. Sales outside North America grew by 14% to $441 million over the past year, and the hardcore demand is coming from China, where sales jumped 25%.
3. Home prices surprisingly keep gaining
Check out these prices. According to the legendary monthly S&P Case-Shiller Home Price Index, housing prices in 20 major U.S. cities rose by 0.8% in February, just above the 0.7% economists' projected -- that's a 12.9% gain from last year, which represents a slight slowdown from what's been forecasted.

The takeaway is that despite the housing market's impressive improvement over 2013, 2014 has been off to a poor start -- home sales have slipped as slightly rising interest rates and cold weather froze potential homebuyers from hitting the market. With the S&P Case-Shiller price data a couple of months behind the sales numbers, investors are now expecting a slight price slowdown for the remaining winter figures.
  • The two-day Federal Reserve policy meeting ends
  • U.S. first-quarter GDP
  • ADP April jobs preview
  • First-quarter corporate earnings: Hyatt Hotels, MetLife, Yelp

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Jack Kramer and Nick Martell have no position in any stocks mentioned. The Motley Fool recommends Automatic Data Processing, Coach, Facebook, Hyatt Hotels, Twitter, and Yelp and owns shares of Coach and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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