Earnings season is still in overdrive. Many companies are meeting or just beating earnings expectations, but the bias has been toward coming in light on revenues. We have seen many corporate earnings crush stocks or reverse big gains, and we have seen some real earnings season darlings. What makes the darlings so interesting is that the judge of character is truly upon their post-earnings reaction and what has happened to the stock since then. After all, it is hard to say there is a great earnings report if a stock rolled over and damaged shareholders.
24/7 Wall St. wanted to take a look at some of the bright spots in the earnings season so far to see which companies are leading the pack. Perhaps even more important than just leading other stocks is why. The list was frankly surprising, and some were charging to new multiyear or all-time highs. In order to qualify as a top earnings report, the companies had to be considered sector or economic barometers on their own right. They are all multi-billion-dollar companies, with large shareholder bases, that are either leaders in their sector or that can influence a broad group of companies.
The first-quarter earnings season winners include Intel Corp. (NASDAQ: INTC), Microsoft Corp. (NASDAQ: MSFT), Verizon Communications Inc. (NYSE: VZ), Johnson & Johnson (NYSE: JNJ), Netflix Inc. (NASDAQ: NFLX), Google Inc. (NASDAQ: GOOG), Peabody Energy Corp. (NYSE: BTU) and Caterpillar Inc. (NYSE: CAT). None of the banks made it on the list, and the oil giants are still on deck.
Of the eight companies in this list, all but one have been publicly traded for more than 10 years, and all but two have been public companies for more than 25 years. Perhaps only Netflix is still considered a growth stock, but all eight put up growth-company style share price increases after reporting first-quarter earnings. And why not? All except Netflix pay a dividend yield that is currently better than bank interest on savings and all are virtually equally liquid.
Intel Corp. (NASDAQ: INTC) and Microsoft Corp. (NASDAQ: MSFT), the Wintel duo, were not expected to show much in the first quarter. Fourth-quarter PC shipments were down and not expected to improve, while Microsoft’s Windows 8 operating system was generating some buzz, but not much in the way of sales. The two companies offered surprising, if not exciting results. Both companies’ share prices have remained above their prerelease levels, even though both remain well within their 52-week ranges. One possible note of caution going forward is that the channels may be stuffed with product that is not moving and we will not know that until next earnings season. Intel’s shares closed at $21.38 the day before the company’s earnings release and have risen more than 9% since then. Microsoft closed at $28.79 before reporting earnings last Thursday, and the shares rose to about $31.10 before pulling back slightly yesterday to close at $30.60.
Verizon Communications Inc. (NYSE: VZ) seems to post a new 52-week high every day. Perhaps there is increasing optimism that the company will buy out Verizon Wireless partner Vodafone Group PLC (NASDAQ: VOD). That buyout would be immediately accretive to revenue and profit, but it would leave Verizon with a punishing debt load. This may be one of those situations where everything is fine until it’s not. Verizon closed at $51.02 before reporting quarterly results and shares have climbed to $52.32, a level not seen in more than 10 years.
Johnson & Johnson (NYSE: JNJ), like Verizon, seems to make a new high every day. The company appears to have fixed its quality control issues, and many of its most important lines of business are growing again. As we noted last week, we expect the 2.9% dividend yield to get a boost any day now. Johnson & Johnson closed at $81.71 the day before it reported quarterly earnings, and the stock now trades at $85.45, up 4.6% in just four trading days to a new all-time high.
Netflix Inc. (NASDAQ: NFLX) absolutely shattered expectations, and the shares have been on a tear for the past couple of days, posting another 52-week high yesterday of just under $220. Subscriber numbers were up, and much of the credit is going to the company’s original production of “House of Cards.” Original programming is expensive and eats into the bottom line, but given the demands for licensing content from other media houses, Netflix’s original programming should carry it to more growth going forward. Shares closed at $174.48 before Netflix reported earnings and have risen to a new high of $219.38, up 25%.
Google Inc. (NASDAQ: GOOG) earnings beat estimates and were just a bit shy on the top line. Paid clicks were up 20%, but the amount the company received for each click fell by 4%. That is still a net positive, however, and the plain fact is that Web searching is massive, and Google simply owns search in much of the world. That is not likely to change anytime — sooner or later. Shares closed at $765.91 just before Google announced earnings last Wednesday and have risen to $807.90, up 5.5%.
Peabody Energy Co. (NYSE: BTU) did not post a profit in the first quarter, but its loss was only a third as large at analysts had expected. Peabody and Arch Coal Inc. (NYSE: ACI), which reported in-line results yesterday, both expect sales to improve as natural gas prices rise for the rest of this year. The entire coal mining sector could begin to see improvements, based on these two miners’ results. Peabody’s shares have not held the 10% gain the stock posted last Thursday, mainly due to the overall weakness in the coal sector.
We said at the beginning that we would cover bright spots so far this earnings season, but there is one storm cloud that deserves to be mentioned as well. As we have noted before, Caterpillar Inc. (NYSE: CAT) may be very bad news, not just for the mining and heavy equipment sector, but for the whole mining group. The big miners have struggled with rising costs and surging stockpiles. It could be several quarters before the mining sector sorts itself out. Caterpillar’s stock has not suffered though. The stock already had been battered and very weak numbers ahead were priced in. A large concentrated share buyback also will add support under the share price. Shares closed last Friday at $80.43 and have since risen to $84.10, up 4.6%, for a stock that is trading more than $25 a share lower than its 52-week high.