Earnings Rundown: Are Stocks Gaining Traction?

Corporate earnings are beginning to resonate and stoke the market higher; albeit results continue to be seriously overshadowed by the credit crunch/sub-prime mortgage opera, but at least companies posting good results are seeing good things from good execution. Businesses are grinding ahead; even as many have braced for a slower economy others are preparing for the eventual rebound (read boom). There are company-specific issues that seem to be gaining traction.

Doom and gloom surprisingly did not come to the retail sector in January. Following rather disappointing chain store sales data last week, the market was expecting dire readings on U.S. retail sales today out of the Census Bureau. However, they failed to materialize as retail sales increased 0.3% excluding volatile automobiles versus the 0.2% consensus estimate. The result was better than the 0.4% decline last month. Stripping out automobile and gasoline service station sales, a calculation used for GDP, retail sales advanced a solid 0.2% in January compared to a decrease last month.

Here are a few companies that caught my attention as they reported.

Applied Materials (AMAT): This is a stock that I've written off because of so many unfulfilled potential and promises over the years have dashed hope and put numerous dents in wallets of investors. Tuesday night, the company beat the consensus estimates on the top and bottom lines. Although down from the year ago period revenues of $2.09 billion were ahead of the $2.00 billion anticipated, and earnings per share (ex. certain items) of $0.23 swamped the consensus of $0.19. The company's good fortunes didn't come from its "real" business but instead from flat panel demand and its burgeoning solar business. (See conference call transcript.)

I wasn't happy with comments from the company, although it was candid, because it more or less says the company's fortunes for the rest of the year is largely out of its hands.

Genetech (DNA): The company released great news on its Avastin breast cancer study which is in phase III trials. Apparently, the treatment does work, and this bodes well for the scheduled February 23 ruling from the FDA. Biotechnology stocks have gotten nibbles for a while because there isn't a lot of pressure to post earnings and there is no exposure to the credit crisis. (See conference call transcript.)

Buffalo Wild Wings (BWLD): Right off the top I admit this is no bellwether, yet by the same token it is the kind of stock that energizes the fast money crowd. Not too long ago this was a big time favorite of the momentum crowd until the stock was derailed. I guess it helps that the company has no exposure to the credit crisis, either. (See conference call transcript.)

Deere (DE): The company posted earnings results that came in ahead of Wall Street consensus estimates on the top and bottom lines. Revenues were up 18%, and earnings per share of $0.83 were well ahead of the expected $0.78 per share. The company even made money in financial services, which experienced an 88.2% year over year gain led by its credit portfolio and crop insurance. Guidance was solid, with management noting it would remain profitable in spite of weakening conditions in the United States. The stock is indicated to open lower. (See conference call transcript.)

Coke (KO): Continues to be the real thing. The company saw its net income climb 79% driven by strong sales in emerging markets (Africa 7%, Latin America 10%, and India 18%). Unit case volume climbed 5%, helping the company gain market share. The company beat the consensus estimate by $0.03 posting earnings of $0.58 per share. (See conference call transcript.)

We'll get a chance to see if this trend holds up as there were several strong earnings reports that could help provide leadership for the market today.

Written by Charles Payne, CEO and Principal Analyst of Wall Street Strategies (www.wstreet.com) providing information to over 30,000 subscribers, in more than 60 countries as well as several of the largest bank/brokerage firms.

Disclosure: none