The month of February usually means fourth-quarter and full-year earnings reports from many top companies. This year, the slew of incoming data happens to coincide with the recent coronavirus outbreak in China. That's adding a lot of uncertainty not only to Chinese companies, but also to global growth as well, since China makes up a huge amount of the world's demand for commodities and goods.
As such, investors may wish to look at more U.S.-focused companies in February. Here are three top U.S. companies set to report earnings later this month.
The first company to watch is Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B). Berkshire is a sprawling conglomerate that does own a few international businesses, such as its wholly owned Israeli metal tooling company Iscar and even a public equity holding in Brazil's fintech star StoneCo, Ltd. (NASDAQ:STNE).
However, the overwhelming majority of Berkshire's empire resides in the U.S. Berkshire reports fourth-quarter and full-year 2019 results on Feb. 24, but it's probably not Berkshire's results themselves that will be noteworthy. That's because it's also the time of year when Warren Buffett publishes his annual letter to shareholders.
Buffett's letters are rather famous and usually run about 15 to 20 quick pages, including charts. In them, Buffett discusses Berkshire's main businesses across insurance, wholly owned operating businesses, publicly owned equities, and cash levels. He also usually discusses several hot investing and economic topics of the day.
This year, I'm really hoping to hear some thoughts on a few topics. First, I'd love to hear his take on growth stocks continuing to trounce value stocks at an unprecedented pace, and whether Berkshire may tweak its investing practices accordingly. After all, Buffett just sold his beloved newspaper businesses, and recent investments by younger investing lieutenants Todd Combs and Ted Weschler include the aforementioned StoneCo., as well as Amazon.com (NASDAQ:AMZN), another "growthier" holding for the famously stingy value investor.
Second, I'd like to hear commentary on U.S.-China relations, which reached a tentative peace with the signing of the phase one trade deal in January, though relations between the two countries are still somewhat fragile. The recent coronavirus outbreak may also come up.
In any case, Buffett's upcoming letter is bound to include many insightful nuggets for sophisticated and novice investors alike.
Cleveland-Cliffs had an odd year in 2019. Iron ore prices surged in the wake of the January 2019 collapse of Brazil's Brumadinho dam, which is owned by competitor Vale (NYSE:VALE). And yet, Cleveland-Cliffs' stock actually finished down for the year, as the U.S.-China trade war dented demand for steel and caused prices to plummet over the summer.
On the February call, a number of issues will likely be discussed. Obviously, the acquisition of AK Steel will be a hot topic. Investors should watch for updated merger synergy targets, commentary on the overall strategic rationale for the merger, and further integration plans for the miner and high-end, auto-focused steelmaker.
Second, Cleveland-Cliffs is nearing completion of its hot-briquetted iron (HBI) plant, a massive $830 million project that took two years to build in Toledo, Ohio. The new plant will turn Cliffs' iron ore pellets into HBI, a feedstock for electric arc furnace (EAF) steel plants. EAFs are rapidly taking share from Cliff's traditional blast furnace customers -- including AK Steel. The HBI plant should be good for Cliffs' margins, and should begin producing soon, in the first half of 2020. Investors should keep an ear out for any customer contracts or revenue and profit projections from the plant, now that it is on the verge of completion.
Finally, management may comment on the recent USMCA trade deal with Mexico and Canada, which was meant to strengthen U.S. competitiveness in auto and steel manufacturing. Most steel executives have been positive on USMCA, as it requires a certain amount of U.S. autos to be made with steel produced by North American workers making a decent wage.
Super Micro Computer
Finally, you may not know that small-cap server manufacturer Super Micro Computer (NASDAQ:SMCI) is a U.S.-based company. Many such tech hardware companies are based in Taiwan or China. Yet Super Micro, run by Taiwanese-born and U.S.-educated CEO and founder Charles Liang, conducts most of its operations at its San Jose headquarters, with smaller subsidiaries in Taiwan and the Netherlands. In fact, the company owns a majority of its office and manufacturing facilities, with 1.3 million square feet of owned office and manufacturing space in San Jose, versus just 768,000 square feet of leased space across San Jose, Jersey City, the Netherlands, Taiwan, and very small spaces in China and Japan.
Super Micro had been under the cloud of being delisted from the Nasdaq since August of 2018, after failing to file timely financials. It has traded over-the-counter since that time. However, on Jan. 14, the company was finally relisted on the Nasdaq after submitting updated financial statements dating back to 2015. Management has long maintained that there were no "lost" sales, but rather the timing of many sales to Super Micro's hundreds of customers had been recorded in the wrong period at the end of many quarters.
That claim seems to be backed up by Super Micro's generally strong estimated numbers throughout this time. In conjunction with the relisting announcement, Super Micro raised its revenue guidance for the fourth quarter, and shares are up a whopping 20% in 2020 alone.
On Thursday, Feb. 6, Super Micro will report earnings -- the first time in a year and a half that it will do so as a listed company, and the first time in two and a half years that it will report earnings with accurate and detailed financials. The enterprise hardware and server industry is also thought to be entering an up-cycle after an 18-month slowdown caused by the trade war, so things may be turning around for this forgotten tech stock.