Earnings Season Winners And Losers

Includes: AN, CMG, EBAY, GE, GOOG, IBM
by: Greg Group

So what have we learned from earnings season so far? There have been some big surprises and some major misses. Chipotle Mexican Grill (NYSE:CMG) lost $82 or 20% of its value following a missed earnings report this week. International Business Machines (NYSE:IBM) was a notable winner, rallying 3.8% and regaining its 200-day moving average as the stock was able to shake off a top line miss as earnings beat expectations. Here is a list of notable earning releases that affected the market outlook of these stocks.

EBay (NASDAQ:EBAY), once the online equivalent of a garage sale, is successfully transforming itself into a dominant force in mobile retailing, as seen by the successful turnaround of its Internet marketplace business and double-digit growth of PayPal, its online payments system. EBay reported Wednesday that it more than doubled net income in the second quarter to $692 million, or 53 cents a share, a 144 percent jump from the quarter a year earlier. The company said revenue climbed 23 percent, to $3.4 billion, slightly higher than the $3.36 billion Wall Street analysts expected.

Bottom line: The company's PayPal electronic-payments business saw a 26% jump in revenue. However, it was the 9% revenue surge contributed by the eBay.com marketplace unit that enabled the company to report revenue and profits that beat Wall Street estimates. EBAY is a buy here as it has stabilized revenue from the marketplace.

Google Inc.'s (NASDAQ:GOOG) second-quarter profit grew 11%, aided by continued growth in its core Internet search business, though advertiser payments per click kept falling. Paid clicks, a measure of how frequently consumers click on Google's advertisements, rose 42% from a year earlier and were up 1% from the first quarter. The average cost that advertisers paid Google per click fell 16% from a year earlier and rose 1% from the prior quarter. Google posted a second-quarter profit of $2.79 billion, or $8.42 a share, up from $2.51 billion, or $7.68 a share, a year earlier. Profit increased to $10.12 from $8.74 a share. Net revenue, not including Motorola Mobility, improved 21% to $8.36 billion.

Bottom line: Google boasts a dominant market share in search advertising and consumer clicks continue to grow. Google is creating a solution to increase mobile ads and has many projects in the works. Google has traded sideways for some time so now may be the time to add some shares.

Auto retailer AutoNation Inc. (NYSE:AN) reported second-quarter earnings this morning that crushed consensus estimates. Adjusted earnings per share came in at $0.66 versus a consensus estimate of $0.59. Revenue totaled $3.9 billion compared with an estimate of $3.77 billion. EPS on a GAAP basis totaled $0.64. Earlier this month, AutoNation reported that sales of domestic vehicles rose 25% year-over-year in June, while import sales rose 56%, and premium luxury sales rose 20%. For AutoNation's second fiscal quarter of 2012, domestic sales rose 31%, import sales rose 47%, and premium luxury sales rose 18% year-over-year.

Bottom line: AutoNation's board also authorized the repurchase of up to $250 million of its outstanding shares, raising the available level it can still buy back to about $368 million. During the second quarter, the company repurchased 3.7 million shares for an aggregate purchase price of $126.2 million. AutoNation has made a big move from $34 to $42 recently so wait for a pullback to buy.

General Electric Co.'s (NYSE:GE) second-quarter earnings fell 18% but edged Wall Street forecasts on an operating basis, buoyed by profit growth at its big energy infrastructure division and its GE Capital finance unit. Overall margins at the Fairfield, Conn., conglomerate's industrial units continued to slip, however, and orders for new infrastructure equipment and services were down slightly. On a positive note, GE said revenue from its industrial businesses, which include energy infrastructure and aviation, rose to $25.04 billion in the second quarter, an 8.8% jump. Profit from the businesses was up 6.8% to $3.74 billion, fueled by 13% profit growth at the energy division.

Bottom line: GE's earnings were not that impressive to me. Overall, GE has shown flat EPS growth while trading at a PE of 16. GE does have a nice dividend yield of 3.45% so if you own it keep it. Wait for a better price to add new shares.

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