Many stocks are reporting their latest quarterly or annual earnings as we enter the second half of the first quarter of 2012. Many of the stocks in question are facing stiff headwinds going into fiscal year 2012, although this does not necessarily mean that they will have a tough year ahead. In fact, many of these companies are coming out of the red by reporting improved fundamentals. Below, I will look at six companies that are trying to take steps to gain market share in 2012.
Here is what I found:
Hewlett Packard (HPQ) is the world's largest vendor of computer hardware, maintaining the top spot in recent IDC surveys despite tremendous gains from competitors such as Dell and Acer. The stock, which is currently trading around $30, has faced a tough year in 2011, with the departure of Leo Apotheker and the controversial arrival of Meg Whitman, former leader of eBay, not to mention the nearly 40% decline in share price.
While Hewlett Packard has suffered at the hands of an arguably confused business strategy with seemingly no leadership in sight, it is encouraging to know that analysts are looking forward to the earnings announcement later this week. With margins under pressure, Hewlett Packard has struggled in the past with a lack of clear long term strategy, questionable investments such as WebOS, and a management team screaming for a true leader- I wouldn't go as far as saying that dividends will go up, but I'm hopeful Meg Whitman can turn things around.
Fifth Third Bancorp (FITB) is a Midwest U.S. banking major with a solid reputation built on the fact that it did not cut jobs as fast as some of its competitors, such as Comerica and KeyCorp, who cut nearly 10%, compared to just 4% for Fifth Third Bancorp (since 2007). Even more encouraging is the fact that recently, Fifth Third Bancorp began hiring for about 1,350 open positions across its operational area, which comprises 12 states in the U.S.
The stock, which currently trades around $13, is near the 52-week high with a price to earnings multiple of nearly 12 times. The dividend yield is a solid 2.3%, and the bank just missed fourth-quarter 2011 earnings by about 3 cents. The stock is a favorite among hedge funds with over 30 million shares purchased by institutions for the current quarter. Given the eye on acquisitions, dividends are not likely to rise this year in my opinion.
Corning (GLW) is one of the world's favorite technology companies by virtue of its glass products that are world renowned. The stock has lost over 30% of its value in the trailing twelve months, and currently trades at the bottom of its 52-week range at under $14, with a price earnings multiple of less than 8 times, where competitors such as 3M (MMM) are at 14 times. The company pays a dividend of 30 cents on the share, with a yield of 1.6% and a forward yield of 2.2%.
Year end 2011 sales were up almost 7% with earnings down nearly 50%, on account of restructuring charges (one time). Corning's bottom line is also suffering due to a decline in glass components used in LCD displays and other digital equipment. Considering that Corning has already raised the dividend payout from 5 cents per quarter, it is unlikely in the near term that we'll see another rise, at least until the dust settles.
Vale SA (VALE) is a Brazilian metals and mining major with a significant transportation system present, which implies that its revenues come from logistics as well, in addition to iron ore, a major product of the company. There is word on the street that Goldman Sachs and a few others are attempting to buy out the company's coal assets in Colombia, for advantages of strategic location.
Vale's stock is currently at the $25 levels, no doubt helped downward by the net profit decline of 21% as iron ore prices were on the decline. Considering, however, that the company has recently announced a 50% increase in the dividend payout on the 2011 minimum, analysts are arguing that the mining sector is set for a bounce-back, especially after China reported better than expected GDP figures. For most it appears to be a valuation play, considering it is trading at just about the five-year price to earnings low.
Huntington Bancshares (HBAN) is yet another Midwest banking company, having become famous recently for its collection of old checks written by famous people including Abraham Lincoln. Unlike Fifth Third Bancorp, Huntington is operational only in six states, although they are both based in Ohio. Huntington trades at $6 with a price earnings multiple of 10 times, and a dividend yield of 2.6% paying out 16 cents on each share.
Many analysts and institutional investors are now betting big on regional banks in the US, suggesting that an increase in loans, 16% for Huntington Banchshares, points to a larger positive trend for the US economy. Overall, despite an earnings "miss," if you will, for Huntington for fourth-quarter 2011, the results appear positive overall, showing deposit growth of 14% alongside a decline in non-performing assets of 7%.
Freeport-McMoRan Copper & Gold (FCX) is a copper and gold major with a reputation for producing the cheapest copper in the world. Freeport is a favorite in a sector of favorites, with a price to earnings multiple of 9 times, compared to peers such as Newmont Mining (NEM) at over 13 times. There have been mixed reactions to the concessions offered to the Grasberg miners constituting a significantly higher wage expense for the future.
The stock trades around $43 with a dividend of $1 per year, yielding 2.3%, compared to Newmont Mining's 2.4%, albeit with a higher payout of $1.40. With gold demand on the rise and copper prices following suit, the resolution of the Grasberg conflict should bring some relief to investors and management alike. For those looking for dividends, Freeport is an excellent bet, especially with the backdrop of the volatile global markets.
About the author:I'm mostly interested in income investing using dividends, preferred stocks and other debt instruments, and pair trading.
I fundamentally analyze every business from the top down.
In my personal life, I have a strong Jewish faith and enjoy playing Scrabble and entrepreneurship.