The markets are currently in the midst of turbulent conditions. While the debt compromise averted the risk of a technical U.S. default, it was a prolonged and uncomfortable reminder about this country's rising indebtedness. The U.S. headline risk only adds to the risks associated with the incredible efforts in Europe to aid troubled countries like Greece and avoid a larger scale meltdown of the economic union. As a matter of fact, the macroeconomic trends have, for the most part, diminished the normal attention on stock earnings.
Still, investors would be wise to pay close attention the seven stocks listed in this article. Each one reports earnings on Thursday and because of each company's situation, they could make headlines.
A123 Systems (AONE)
The Massachusetts based company designs and manufactures rechargeable lithium-ion batteries. They also have a joint venture with SAIC Motors to develop hybrid electric vehicle battery systems for distribution in China. The company drew a lot of investor attention because General Electric's Capital Corp is one of the company's largest shareholders. We even once listed them among "5 Stocks That Could Double in Price," but they yet to live up to their promise and the macro environment is not helping.
The company trades at a an all-time low of $4.45. The company has shown promise, but shareholders have lost their patience. The stock began trading in 2009, pricing at $13.50 and peaking above $25 per share in 2009. But the company's stock price has been in a steady free fall. Considering the weak stock performance, it is not surprising that the investor sentiment is extremely bearish. Short interest is very close to record levels above 20 million shares. This level is double the short interest at the beginning of this year. What's even more shocking is that the short interest now represents 12.83 days to cover based on average daily trading volume.
The company now has a market capitalization of $560 million. They reported losses in the last 12 months and they are expected to lose money in 2012 as well, but the company has price/sales of 6.70 and price/book of 1.46. Between 2009 and 2010, revenues grew from $91.05 million to $97.31 million. While they reported a loss in the quarter ending March 31, 2011, shareholders may have found solace in the fact that revenues rose around 33% from the year ago period and operating margin improved dramatically because of reduced costs of revenue. The company still has access to capital markets as evidenced by their $253.9 million capital raise in April 2011, but considering the market conditions, risk appetite going forward is hard to predict. The company needs to show progress as they continue to push into the transportation and electric grid markets. The company is poised for a major bounce, but investors need a reason for real optimism.
Alpha Natural Resources (ANR)
The coal mining giant trades with a trailing P/E of 37.32, but earnings are expected to grow dramatically in the coming year and forward P/E is estimated at 6.67. Despite volatility in the coal markets, revenues have rapidly increased between 2008 and 2010 from $1.69 billion to $3.9 billion. In 2009, they acquired Foundation Coal and early in 2011 they acquired Massey Energy. The company now has $5.18 billion in total assets and 14,000 employees.
In the quarter ending March 31, 2011 ANR grew their revenues from $922 million to $1.13 billion on the back of strong coal and freight revenues. In the upcoming earnings release, investors should pay close attention to the continued demand. While most of the company's coal is sold to domestic customers, they still have sizeable exposure to export markets, with 34% of sales in the most recent quarter coming from international sales. In addition, investors should pay close attention to the company's ability to control costs which rose sharply last quarter and monetize synergies from the recent merger.
The satellite television provider is a stock to watch because management will likely shed some early insights into the positive effects of the end to the NFL lockout. Considering that they paid $4 billion in 2009 for an extension of their NFL Sunday Ticket rights until 2014, this is a major asset for the company. Not only does it drive revenues, it is an important distinguishing characteristic that separates it from Dish Networks (DISH) as well as other service providers.
In the quarter ending March 31, 2011, the company grew revenues from $5.61 billion to $6.32 billion year over year. This growth strong growth considering that between 2009 to 2010, revenues grew from $21.56 billion to $24.10 billion. The stock trades at a trailing P/E of 18.00, a forward P/E of 11.62 and a PEG ratio of 0.70.
LinkedIn Corporation (LNKD)
The professional internet networking company is among the hottest stocks in the market. There is no doubt that the company has become an important part of the internet and the career development industry, but bears are quick to point out that the company's valuations are excessive and we tend to agree but growth may actually accelerate from current levels. The company trades with a $9.62 billion market capitalization on $292.32 million of revenues during the last twelve months. This puts price/sales at 33.64 and forward P/E at 308.36.
While investors may be content looking at growth in registered users, unique visitors and page views, we think shareholders should also pay close attention to the company's revenues especially in their hiring solutions segment. This segment earns revenues by selling services and access to enterprise and professional entities. It has been the company's largest driver of revenue growth and the secular potential and margins from this operation are amazing. It is no surprise that smart money investors like Tiger Global and Steadfast Capital have accumulated sizeable positions.
Investors should be mindful of the company's earnings this week. The stock price is priced for perfection and while it could be significantly re-priced based on any earnings letdown, they still appear to be in a growth period. More importantly though, the company has the potential to affect the broad market because high growth internet IPOs are some of the last areas of the stock market where risk taking is active. As such, any letdown by LinkedIn could send ripple effects that undermine the rest of the U.S. equity markets.
The internet travel company should continue to post stellar earnings results on the back of their outsized exposure to international travel markets. Expedia Inc (EXPE) reported strong earnings earlier this week. Their revenues grew 22.8% in the last quarter from a year ago period. EXPE's international sales represented 42.7% of the aggregate sales, but they grew 45% year over year. PCLN should show even more dramatic earnings growth this quarter because in 2010, 69% of their sales were from international sources. Hedge funds likes Lone Pine Capital and Tiger Global have noticed the company's international exposure and have taken sizeable stakes.
Of course, much of the company's growth opportunities are already priced into the stock. The company trades at a trailing P/E of 45.74, a forward P/E of 20.16 and a PEG ratio of 1.09.