Beat and Raise May Not Be Enough For Cadence and Terex

Beat and Raise, Beat and Raise. Under most circumstances, this is exactly what you want to hear about your stocks during earnings season. Today after market close, two of my stocks [Cadence Design Systems (CDNS) and Terex Corporation (TEX)] announced they beat earnings estimates and they raised future earnings guidance. Generally speaking, this leads to increased stock prices, but in the case of CDNS and TEX, I'm not so sure.

What has me concerned about TEX is that the out-performance didn't come from top line revenue growth. My preference is to see strong top line growth on reasonably constant operating margins. Analysts polled by Thompson Research expected TEX revenue of $2.41 billion, but actual revenue was only $2.34 billion.

CDNS also beat 2nd quarter earnings estimates, and raised future earnings guidance. However, they only beat by a penny, and after hours trading is showing mixed signals on the stock price.

Both TEX and CDNS beat earnings (a good thing) and raised guidance (another good thing), but there are never any guarantees when it comes to stock prices. Regardless, I'm quite anxious to see how their prices will react when the market opens tomorrow.