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Early Movers for Tuesday Feb. 12, 2013

February 12, 2013 | About:
U.S. equity markets are looking to rebound after Monday’s decline. With a P/E of 17 and a Shiller P/E of 23, I still believe we are overvalued and the market might be headed for a correction. But one never knows as markets can stay overvalued for long periods.

After a quiet Monday, earnings season will once again pick up for the rest of the week.

Dow Jones component Coca-Cola (KO) reported fourth quarter EPS of $0.45 per share or one cent above analyst estimates. Revenue missed but the beverage giant was content with the results considering the economic uncertainty in several markets around the world. Overall unit case volume increased 3% versus analyst expectations of 3.9%. Unit case volume helps analysts get a clearer picture of revenue growth (or decline) as it excludes price and currency fluctuations. Case volume growth are right in line with CEO Muhtar Kent expectations as he stated in a CNBC interview:

"There is no case volume issue," he said in an interview with CNBC right after the company's earnings numbers were released. "Our long-term targets we have established are 3 to 4 percent case volume. We grew 3 percent for the quarter and 4 percent for the full year."

For the most part, Gurus have been net buyers of the beverage giant. Recent, buyers include Donald Yacktman, John Burbank, Ken Fisher, Ray Dalio and Joel Greenblatt. Yacktman has been the busiest at these price levels as he has been purchasing shares of Coca-Cola across the various Yacktman Funds. At current levels, Coca-Cola has a forward rate of return of 15%. If you are not familiar with the concept of forward rate of return, it’s a concept that Yacktman and his team use to analyze stocks. The concept behind the forward rate of return is simple and straightforward, it can be seen as the return that investors buying the stock today can expect from in the future. In Coca-Cola’s case, investors can expect a return of 15%.

Shares of specialty retailer Michael Kors (KORS) are up significantly after the company reported a profit of $0.64 per share versus analyst estimates of $0.41 per share. The company appears to be firing on all cylinders since it went public and has become a Wall Street darling. Let’s see how long that will last considering the tough competition in retail. Revenues increased 70% as same store sales surged and the company continues to open new stores.

Gurus have been net sellers of Michael Kors (KORS) as the stock makes new highs and trades at a lofty 68 times earnings. Gurus reducing or selling out completely include John Griffin, Ron Baron, PRIMECAP Management and George Soros. Lone Pine Capital’s Steve Mandel is the sole Guru purchasing shares of KORS with the specialty retailer making up 2.9% of Lone Pine’s current portfolio.

The other company reporting earnings is building products company Masco (MAS) which reported fourth quarter EPS of $0.04 per share versus analyst expectations of $0.01. But what really caught my attention is that the company reaffirmed and expects strong growth in new home construction this year. Maybe the U.S. economy isn’t as fragile and weak as many economists have predicted?

Gurus who have recently purchased shares of Masco (MAS) include Richard Pzena and David Tepper. Tepper’s position is more significant as it represents 2% of the Appaloosa portfolio.

Rating: 4.0/5 (2 votes)


Earningsyield premium member - 1 year ago
By the way, I hold no positions in none of the stocks mentioned above

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