Stock markets closed the week marginally down from record highs as talk of lofty valuations and financial bubbles continued. With indices up 100% over the past five years the worry is that investors are becoming complacent about risks and that second quarter earnings seasons will fail to meet sky high expectations. However earnings season got off to a good start with several companies reporting strong results.
Alcoa reported surging profits on Tuesday that smashed consensus forecasts. Excluding the impact of special items, net income was $216 million, or $0.18 per share, more than double sequentially and nearly triple year-over-year and smashed consensus forecasts of $0.12 per share. The company reported strength in its value added aircraft and automotive business and reported productivity gains across all segments totalling $556 million. Additionally the company reported a bullish outlook. Based on rising truck orders and backlogs, Alcoa increased its 2014 estimated growth for the North America commercial transportation market to a range of 10 to 14 percent while the company continues to project 2014 global aerospace growth of 8 to 9 percent driven by robust demand for both large commercial aircraft and regional jets.
Wells Fargo met expectations with earnings and beat on revenue. It was the first big bank to report earnings with the others reporting next week. The bank reported earnings of $1.01 a share, up 4% on the previous year, with core lending up 7%, deposits up 9% and non performing assets down 14%. CEO John Stumpf also painted a positive picture reporting, "Our results also reflected strong credit quality driven by an improved economy, especially the housing market, and our continued risk discipline. We are committed to both maintaining strong capital levels and returning more capital to our shareholders."
In an interim update Chevron reported that it expected second quarter earnings to be higher than first quarter as a result of gains on asset sales and an absence of impairments in the prior quarter.
Finally, Fastenal Co. reported second-quarter earnings increasing almost 8% as revenue improved 12%. Fastenal, which sells nuts, screws, tools and other industrial and construction supplies, has faced slowing sales-growth momentum in recent quarters. However the company reported improvements in both sectors with manufacturing sales up 11.2% and construction up 7.5%. Fastenal said it still plans to open roughly 35 to 40 stores in total this year.
The author is a blogger for SurgingEarnings.Com
Risk Disclaimer: This article does not constitute a recommendation to buy or sell. Investing in stocks or other securities and derivatives is a high risk activity and not suitable for everyone. It is strongly recommended that individuals should consult with a SEC registered investment adviser prior to making any investment decisions.
Disclosure: The author holds no positions in any of the stocks mentioned nor has any intentions to initiate any in the next 72 hours.
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Nam Y. Huh/APA 2014 Mini Cooper Countryman on display at the Chicago Auto Show last February. DETROIT -- The four-door Mini Cooper Countryman was the only one of 12 cars to earn a top rating of "good" in new frontal crash tests. The Nissan Leaf, Nissan Juke, Fiat 500L and Mazda5 wagon all fared worst in the tests performed by the Insurance Institute for Highway Safety, an Arlington, Va.-based safety group that's funded by insurers. The Chevrolet Volt, Ford C-Max, Mitsubishi Lancer, Scion FR-S and Subaru BRZ all got the second-highest rating of "acceptable." The Hyundai Veloster and Scion xB were a notch below that, with "marginal" ratings. The small overlap front crash test, introduced in 2012, replicates what happens when 25 percent of a car's front end strikes a rigid object at 40 mph. It's a difficult test because a small area of the car's front end must absorb and manage the energy from a severe, high-speed crash. To earn a "good" rating, a car must keep the cabin around the occupants largely intact and protect them with a combination of seat belts and air bags, the institute said. When a car's cabin collapses, as it did in the crash tests of the Juke, Leaf, 500L and Mazda5, it can move the seats and air bags out of place, increasing the risk of injuries. The institute said 19 of the 32 small cars it has now tested have earned "good" or "acceptable" ratings on the small overlap test. The institute said the Mazda5 was among the worst performers it has tested. Its side air bags didn't deploy at all and its driver's side door unlatched, which shouldn't happen during a test. In a statement, Mazda pointed out that the Mazda5 has earned "good" ratings on other IIHS tests, including a front moderate overlap test and a roof strength test. It earned a "marginal" rating in a side-impact crash test performed by the institute. "We take these results seriously, and are studying the results of these IIHS tests as we consider the design of future vehicles," the company said. The Chevrolet Volt was the only car in the group to be labeled a "Top Safety Pick Plus," because it has an optional front crash prevention system. The C-Max Hybrid, Countryman, Mitsubishi Lancer, Scion FR-S and Subaru BRZ earned "Top Safety Pick" awards because they don't have front crash prevention systems. To be a top safety pick, vehicles must earn "good" or "acceptable" ratings for small overlap protection and "good" ratings on the institute's other four crash tests. MSRP: $26,495 Resale value retained after five years: 50.5 percent Even under Fiat (FIATY) ownership, some elements of Dodge's mouth-breathing, knuckle-dragging, He-Man-Woman-Haters-Club approach to auto sales managed to survive. The built-by-car-guys-for-car-guys Challenger and its rebooted muscle car aesthetic still lingers to lure meatheads who value racing stripes and rims over, oh, just about any other element of their vehicle. Ordinarily, that alone wouldn't make one of these vehicles worth a second look five years from now -- even among the most superficial gearheads. But Fiat helped the Challenger smarten up a little bit by coupling a 305-horsepower V6 engine or 375-horsepower 5.7-liter V8 Hemi with loads of interior space, real-time touchscreen navigation, traffic updates, Bluetooth connectivity, Sirius (SIRI) XM satellite radio, keyless entry/starter and a whole lot of Harman Kardon audio upgrades.