5 Large Companies and Their Future Direction

Includes: ALR, IAC, JNPR, MNK, TPX
by: Brian Nichols

A company's growth or its decline begins with earnings. A company can release the best of news every day of the week yet if its earnings do not produce the stock will not rise. It is a simple philosophy, earnings drive the market and tell us the future of a company. We can learn everything by listening or reading and understanding the earning reports. We can learn if the company's new product is selling as quickly as anticipated or how a company's new business structure is impacting costs. The market reacts and adjusts based on human perspective, which is not always correct.

The following stocks released earnings on July 27th and experienced heavy movement. Each company holds a market cap over $1 billion, which means the movement effects the overall market. These stocks will be following a path for the next three months until earnings are released again. Some will head higher while others will drop lower. It is a difficult reaction to predict yet I will try and determine the likely direction.

Tempur-Pedic (NYSE:TPX) saw gains in excess of 9% for the majority of the day after releasing a solid earnings report. The company announced net sales that increased by 30% and gross profit of 52.9 compared to 48.7 year over year. The company increased full year guidance above analyst expectations.

The company has seen gains over 100% during the last year. With a P/E of only 29 I see room for growth. The company has shown many signs of growth during the last year and has worked hard to expand their global sales. With a market cap under $5 billion I see the stock as relatively cheap considering sales are estimated around $1.4 billion. There seems to be room for growth and mattresses are a product that everyone must have. I would buy this stock at any price near $70 and look for continued growth.

InterActiveCorp (IACI) reached 52 week highs as the stock traded over 11% most of the day Wednesday. The company reported revenue of $485 million or an EPS of .44 compared to $394 million with an EPS of .12 year over year.

The company operates some of the Internet's most popular sites such as ask.com, match.com, and dictionary.com. The finances improved across the board and with Internet use at historical highs, there is reason to believe the stock will continue to climb. I believe this stock to be a buy as investors have seen strong returns and are anticipating more with a PE over 135. The Internet business is a good investment and IACI with room for growth makes sense as a stock with high potential.

Questcor (QCOR) reached all time highs as the company announced record earnings. The company posted net sales up 62% over the prior year of $46 million. Sale of the company's prescription gel Acthar recorded an unbelievable performance. Acthar is up 147% year over year with an increase of 48% since the first quarter of 2011.

It is impossible to know how long the company can sustain the growth of Acthar. With a 48% increase in only three months, I find it hard to believe they are going to slow down. I am buying the news and the growth of the company with a market cap of only $2 billion. The stock has seen unbelievable growth but so has the finances. Even with a 25% increase, the stock seems relatively cheap. I see this stock as a long term hold which could return large gains for many years to come.

Juniper Networks (NYSE:JNPR), with a market cap over $13 billion, saw shares decline over 20% for a portion of the day. The company announced second quarter net profit of $115.6 million down from $130.5 million the year prior. Juniper gave 3rd quarter guidance below estimates of $1.2 billion in revenue with an EPS of .30.

A 20% loss for a company the size of Juniper is extreme. Even after lowering the guidance the company still believes the estimates can be reached. I assume this fact based on the high end of guidance, which equals estimates. The company has reported the high end of their estimates four out of the last five quarters according to Reuters. If the company meets expectations, there is a good chance the stock will go up. I am not saying to buy this stock since the outlook appears weak, yet 20% is a large loss for a company this size. I expect modest gains today in the short term and would watch for improvements within the company. The price could turn out to be a good buying opportunity.

Alere (NYSE:ALR) finished the day with a loss of 13% after releasing full year guidance and quarterly results. The company announced EPS guidance of $2.50-$2.60 against expected EPS of $2.64. The second quarter reported loss of $9.4 million compared to $2.4 million year over year with revenue increasing 8.5%.

None of the numbers announced or expected sound good to me as an investor. I would not invest in this company at this point until profitability is stable. The company did see an increase in revenue over 8% but the loss was increased from $2.4 million to $9.4 million. The numbers do not add up and the issues within this company seem operational not economical.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.