Earnings are solid–and the economy’s on track–even if the U.S. stock market doesn’t care right now
Earnings, schmearnings. The stock market simply doesn’t care.
After the close yesterday, May 18, Hewlett Packard (HPQ) reported earnings for its fiscal second quarter of 2010 of $1.09 a share. That was 4 cents a share better than Wall Street had projected. Revenue climbed 12.4% from the second quarter of fiscal 2009 to $30.8 billion. That too was above the Wall Street consensus (at $29.82 billion.) And the company raised its guidance for fiscal 2010 to $4.45 to $4.50 a share. That is slightly above the $4.45 Wall Street consensus and well above the $4.37 to $4.44 a share that the company had projected earlier.
Sell Deere (DE)
Sometimes the words are worse than the numbers. And that’s the case with Deere’s (DE) November 25 guidance for fiscal 2010, which began on November 1, 2009.
The company said fiscal 2010 earnings would come in at $2.12 a share on a 1% decline in sales. First quarter fiscal 2010 sales will be down about 10%, the company projects.
That’s no big deal and I’d be inclined to sit those numbers out and wait for the turn in Deere’s business that everyone expects in fiscal 2010.
Except for the words that the company used in describing fiscal 2010 sales. Those words lead me to sell Deere out of my 12-18 month Jubak’s Picks portfolio. I’m keeping the stock in my long-term Jubak Picks 50, however.
Are you contrarian enough to own farm stocks?
So when’s the farm rebound?
The U.S. Department of Agriculture can’t cut its forecasts of farm income fast enough.
Farm income will drop 38% in 2009 from 2008 levels, the USDA said on August 27. The forecast of $54 billion would mark a seven-year low in farm income and is down from a USDA forecast of $71 billion last February and down, down from the $87 billion projected at the end of 2008.
Falling prices for farm commodities are, of course, a big part of the problem. But farmers are also getting squeezed since prices for what they produce have fallen faster than the cost of things that they must buy.
Update Deere (DE)
Deere’s (DE) third quarter earnings report on August 19 confirmed what the company forecast in its second quarter report: forget about 2009.
In the quarter earnings per share fell by 25% to 99 cents from $1.32 in the third quarter of 2008. Revenue dropped 24% to $5.89 billion.
The drop in quarterly sales—the second consecutive year-to-year drop in quarterly numbers—came as the global recession continued to reduce demand for construction, forestry, and home lawn equipment.
The next quarter isn’t going to be any better either, the company said. Deere forecast that fourth–quarter sales will tumble 34% from the fourth quarter of 2008.
