After a steady decline during the early parts of the week the Dow Jones Industrial Average (DJINDICES:^DJI) and S&P 500 (SNPINDEX:^GSPC) climbed higher until Friday when a strong jobs report helped push them to a 0.60% and 0.43% weekly gain.
Diving into the jobs report, the U.S. economy added 255,000 jobs during July which helped reassure investors the economy is still healthy despite weaker than expected GDP growth in recent quarters. For more context, July's jobs figure was higher than the expected 179,000 jobs. Also, as usual, there were adjustments to previous months: 18,000 more jobs were added in May and June than previously estimated, according to the Labor Department.
Now, while it's true the average of 186,000 jobs added per month this year is down from the 2015 average of 229,000 per month, the slowdown is expected as the nation moves closer to full employment.
With the markets ending the trading week on a higher note, let's take a look at some stocks that made major headlines or big moves.
Growth story intact
Investors are typically willing to give young companies the benefit of the doubt on the bottom line as long as the rapid growth story remains intact – eventually, in theory, profits will be plentiful. That's the theme for shares of Fitbit (NYSE:FIT) this week when the share price bounced about 10% higher even after management reported that second-quarter profits plunged. On the bright side, its better-than-expected revenue growth meant the future was still bright.
More specifically, Fitbit's second-quarter revenue was up more than 46%, compared to the prior year, to $586.5 million – more than $8 million above the consensus analyst estimate. Though, as previously mentioned, the non-GAAP earnings-per-share checked in at $0.12, a decline from last year's $0.21 per share. Even with the decline it's worth mentioning the bottom line result was a penny above what analysts expected.
Further, on the point of a bright future, Fitbit's new products – including Alta and Blaze – generated 54% of revenue. In fact, two-thirds of those two products' activations came from new consumers which means the products are healthy and are still growing into their user base and revenue potential.
The rapidly growing revenue and new user base is a good sign for a stock that has been beaten down significantly since its IPO, but the R&D spending and innovation will have to continue for the stock to rise consistently in the years ahead.
Dealership pledge gains traction
Following the theme of stocks that have been beaten down, TrueCar, Inc. (NASDAQ:TRUE) investors know all about stock price plunges. The auto website information company has had a brutal twelve months that led to many executives leaving and bringing a new CEO, Chip Perry, on board. It was time to press the reset button and fix lingering issues.
Looking at the company's second-quarter figures, TrueCar's revenue was up 2% compared to the prior year to $66.4 million. Its users purchased 192,531 units from TrueCar dealerships and, while that was a meager 1% gain, the company's bottom line generated adjusted-EBITDA of $2.4 million. That's good news for a company that previously guided the full-year to be breakeven; now, management upped guidance for adjusted-EBITDA to be between $5 million and $6 million for the year.
Looking at the graph above, one of TrueCar's primary goals this year was to repair the tense relationship with its dealership network. As you can see above, the dealership network grew to a record number and, more importantly, sequentially improved its revenue per dealership. That suggests TrueCar is improving its dealerships' ability to complete a sales lead.
Pricing power is great... for investors
Ball Corporation (NYSE:BLL) was one of the S&P 500's best performers for the week with shares up about 11%. The driving force of that price increase was a strong second-quarter results and the fact that the company has set itself up for strong pricing power going forward.
During the second-quarter the company's comparable earnings per diluted share jumped 18%, from $0.89 per share to $1.05 per share. But the major story was what the company expects from its recent acquisition.
Ball's pricing power will be generated thanks to the company's recent acquisition of London-based Rexam, which will combine two of the largest companies within the industry and reduce competition. It was a large $6.1 billion acquisition, which completed June 30th, and management believes that half of the $300 million total expected synergies will be delivered by the end of next year.
"Given the strength of our underlying businesses and the value potential of the Rexam acquisition, we see a path to doubling Ball's long-term goal of 10 to 15 percent comparable diluted earnings-per-share growth over each of the next three years," Ball CEO, John Hayes, said in a statement.
It's true: combining the two largest companies in an industry will deliver strong pricing power and should set Ball up for strong earnings growth in the years ahead. And while it's a great move for Ball and its investors, it won't hinder the giant beverage companies you find in your local grocery aisle such as Pepsi, because they'll simple increase prices to cover it, and that gets passed down to you, the consumer.