Economic news and key earnings this week
Investors were keeping an eye on retail reports as shoppers headed to the stores on Black Friday. Initial reports suggest that queues were down on last year but that may be due to more stores opening on Thanksgiving and robust on line sales. Frantic sales were reported at Macy’s with Michael Kors and Coach being targeted by bargain hunters (see Macy’s Company Snapshot at end of article).
In other news, the Commerce Department released building permit data for October, saying the month’s seasonally adjusted annual rate rose 6.2 percent from the September total and 13.9 percent over the October 2012 total. Single-family home permits were 9-percent better than October 2012′s total. Permits on apartments were 24-percent better. Stocks of homebuilders benefitted with Pulte (+2.96%), Toll Brothers (+1.10%) and Lennar (+3.50%) all ending up on the week.
Hewlett-Packard turned around a $6.9 billion loss in fourth quarter 2012 to report a $1.4 billion profit in 2013 as strong sales from the enterprise division offset declining PC sales. Revenue for the fourth quarter was down 3% from a year ago but represented the smallest decline the company has posted in the past nine quarters. Meg Whitman, HP president and chief executive officer is now two years into a five year turnaround plan that is already showing some success. Cloud server and 3d printers also offer exciting opportunities for HP and Mrs Whitman made clear in the analyst conference call that HP intend to be a player in this market given their existing multibillion-dollar printing business. For fiscal 2014, HP reiterated guidance for non-GAAP diluted net EPS to be in the range of $3.55 to $3.75 and GAAP diluted net EPS to be in the range of $2.85 to $3.05. The stock closed on Friday at $27.35.
Tiffany & Co
Luxury jeweller Tiffany & Co. on Tuesday reported a 50 percent increase in profit for the third quarter, driven by strong demand for the company's high-end jewellery in Asia and America as well as margin expansion. Michael Kowalski, chairman and chief executive officer said, "Operating earnings rose faster than sales, reflecting favorable product cost trends and ongoing well-controlled expenses. We're experiencing excellent customer response to our expanded fashion jewelry designs, highlighted by the ATLAS collection, as well as continued growth in our fine and statement jewelry, with particular strength in our yellow diamond collection." Worldwide net sales increased 7% to $911 million in the third quarter as he Americas region increased 4% to $417 million and the Asia-Pacific region saw total sales increased 27% to $238 million.
Looking ahead, management raised earnings guidance for fiscal 2013 to $3.65-$3.75 per diluted share, compared with $3.50-$3.60 in its previous outlook and $3.25 per diluted share in 2012.
Dycom Industries Inc, a leading service provider for engineering, construction and telecommunications industries in the US and Canada, reported first-quarter fiscal 2014 results on Monday with GAAP net income of $18.7 million or 54 cents per share up from $11.9 million or 35 cents per share. The year on year increase was primarily driven by a significant top-line growth as Dycom's total revenue surged 58.6% year over year to $512.7 million. The company's organic contract revenues grew 10% after excluding revenues worth $157.1 million from its acquisitions in 2013.
Macy’s Company Snapshot
Macy's was hit hard by the great recession but returned to profitability in 2010 and has managed to report consistently healthy results since then despite challenging economic conditions and weak discretionary consumer spending.
The company embarked on an ambitious turnaround strategy named My Macy’s to identify what is working locally and share with other stores. It has also developed its multi channel distribution through stores, website and mobile devices so that customers can browse online, then come to Macy’s to lay on the mattress or try on the shoes before buying them in the store.
The turnaround has been a success and earnings have grown from $330 million in 2010 to $1.3 billion in 2013. Same store sales are improving. This is a great result in a period of declining consumer spend and bodes well as the economy continues to recover. Recent research on disposable income by IBISWorld Inc forecasts compound annual growth of 2.5% between 2013 and 2018 which should have a leveraged positive impact on spending on luxury goods.
With Bloomingdales performing well and The Finish Line Inc partnership showing positive results Macy’s earnings may have further to go. The stock closed on Friday at $53.26 representing a historic PE of 14.94.
The author is a blogger for SurgingEarnings.Com
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Disclosure: The author holds no positions in the above mentioned stocks