Now that earnings season is nearly over it's time to take a closer look at some of the reports. Several big name corporations have been able to make substantial gains in the face of increasing headwinds. The estimated GDP growth, both domestic and worldwide, are lower for 2012 than 2011. So far, new data is actually worse than previously feared. The IMF has issued a string of downward revisions to its own estimates, further sapping hope of a strengthening recovery. The European recession, which is still unfolding, is now expected to impact US and global growth more directly. The release of US 2011 GDP last week did very little to support the market. Slower-than-expected growth in 2011 is now making me wonder if 2012 could be worse than feared? I don't think so. A close inspection of the US market will show increasing amounts of cash in the form of bank deposits, expectations for continued growth and improving balance sheets. Here is a closer look at a few of the high profile earnings surprises this year.
Thermo-Fisher (TMO), a leading provider of solutions to the scientific community, announced record earnings per share last quarter. Earnings for the quarter rose 23% to $1.18, and 20% to $4.16 for the full year. These gains were made on a 15% increase of revenue, a good sign. The company increased revenue, profits and margins. The net operating margin for the quarter grew by a full 100 basis points to 18.9%. Thermo-Fisher released some significant new products in 2011, which positively impacted earnings. The companies innovation drove sales in its three main business categories, mass-spectrometers, specialty diagnostics and laboratory equipment. Acquisitions during the year also helped to increase revenue and profits. Discounting the additions of major acquisitions Dionex and Phadia, the companies earnings grew by 6% in the fourth quarter.
Thermo-Fisher has been able to produce strong results on core business. It has also been able to positively impact earnings and profitability through some major acquisitions. Thermo-Fisher should be able to withstand global economic pressure. The companies guidance is strong, estimating a 16% growth in earning per share for 2012. Thermo-Fisher is currently trading around $55 and breaking above resistance with strength.
Hershey (HSY) has the cash flowing like warm chocolate. The candy maker reported increased earnings, revenues, raised the dividend and updated 2012 guidance. The fourth quarter net sales rose by 5.7%, just shy of the full year increase of 7.2%. The rise in sales is reflected by a 6% rise in 2011 earnings per share. The company is expecting to increase earning next year as well by 9-11%. The gains were offset by a slight decline in margins. The reduction in profitability is directly related to the known expense related to the Project Next Century program initiated in the previous year. The project is a modernization and restructuring program initiated after a supply chain assessment. The plan is aimed at improving distribution and improving cost structure across product lines.
Earnings growth and reduced costs will help Hershey realize its goals in 2012. The production of candies and confections grew in the US by around 2.8% in 2011, keeping pace with US GDP and outperforming the general market. This trend is expected to continue in 2012.
Exxon-Mobil (XOM) made headlines again. This company increases revenue and profits every quarter. The oil giant is so diversified in the field it is nearly impervious to the price fluctuations of individual products. The company just released estimated earnings for the fourth quarter 2011. According to the report, earnings per share rose 6% in the quarter and 35% for the year. This is an increase in the range of $11 billion. The company was able to increase earnings on lower production of oil-equivalents and non-equivalents. Higher realization of crude oil and natural gas, refining margins and growing world demand helped to boost shareholder earnings. Estimates of global demand are mixed, the IEA say its is lessening and OPEC sees it on the rise. Regardless, I expect to see Exxon-Mobil continue to increase revenue and profits next quarter and next year. The stock currently trades around $84 and yields about 2.25%. It looks like the stock is setting up for a small pullback, but it will just be a buying opportunity. Exxon is a proven earner with a captive market.
United Parcel Service (UPS) is delivering more than just packages. The company reported record full year earnings per share and a double-digit improvement in the fourth quarter. The gains were led by performance in the US domestic sector, linked to increased online holiday purchasing. Total revenue increased for the quarter by 17% to just over $2 billion. The bottom line was negatively impacted by one-time charges associated with a switch to mark-to-market methodology in its pension accounting. A 3% increase in traffic and improvements to margins are other highlights of the impressive report.
UPS is vulnerable to the global economic conditions, but should remain strong in 2012. International revenue accounted for over 20% of total revenue in the fourth quarter alone. The company is expecting an increase of earnings per share of nearly 15% for 2012. CFO Kurt Kuehn explains that "balanced world-wide presence, broad portfolio of business and the best people in the world" make the gains possible in the "volatile global operating environment".
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
