As the earnings season kicks in, it will be interesting to see if the market gains or loses momentum. By most estimates, the economy improved modestly, possibly at a 2% plus pace, but better than the 0.4% fourth-quarter advance. The following are just three of the earnings releases on tap for Wednesday, April 17, when nearly 70 companies plan to post results.
The defense contractor with operations in aerospace and industrial sectors is expected to achieve a bottom-line gain despite reduced spending by Uncle Sam. Analysts think earnings per share would be about $0.46 in the quarter, up from $0.41 in the prior year. However, it should be remembered that Textron has missed forecasts in each of the past two periods.
One key factor impacting the extent of bottom-line growth is if the business jet unit, Cessna, resumed an upward profit trend. Management is anticipating sluggishness in that business as it rolls out the new Citation Sovereign model. As for its Bell (helicopter) unit, Textron should experience growth behind demand for its commercial 429 unit, particularly from international customers.
Soft margins on military-related copters may offset the commercial strength somewhat. Still, given solid growth in its Systems (weapons) segment and a slight uptick in its Industrial (golf carts and turf maintenance) unit, overall manufacturing revenue ought to be solidly on the rise.
Finally, the liquidation of Finance receivables, an initiative that had been driving profit growth, is essentially complete, and it should be noted if the division's earnings continue to climb. With further improvements in Finance income, Textron's earnings may exceed expectations. Regardless, the shares are a decent holding for a long-term portfolio.
The offshore drilling contractor's earnings have been surging ahead, thanks to heightened activity in the Gulf of Mexico that allowed revenue from the United States to more than double during 2012. The U.S. is the Swiss company's largest geographical market, and drilling permitting activity there has returned substantially over the past 18 months or so.
Ranking second to the U.S. is Brazil, where Noble's relationship with Petrobras is supporting strong demand. Consequently, the outlook appears very favorable for 2013, as analysts look for almost 50% bottom line growth this year. Be aware that results can fluctuate greatly in this industry.
That said, Noble is showing improvements in two important metrics: rig utilization and dayrates (pricing). Further, such increases ought to send income, and thus the stock price, higher. The fact that Noble relies heavily on Shell poses some risk. But, management just upped the dividend to $0.25 a quarter. Noble remains one of the best stocks among the oilfield services companies, also in light of its sizable new build program targeted at long-term profit expansion.
Analysts are are estimating that this provider of electronics manufacturing services earned approximately $0.52 a share in the March quarter. The company lost its largest client, Juniper Networks, last November, pressuring its bottom line. The potential for a profit rebound rests in demand from the industries catered to by Plexus.
Specifically, the Networking/Communications sectors contribute more than one-third to revenue. Industrial/Commercial and Healthcare/Life Sciences each deliver about 25% of the top line.
With a rebound in demand, along with benefits from investments in new production programs (totaling about $956 million during the fiscal year ended September 2012) and cost containment, Plexus' earnings may well improve quarter to quarter. The shares are best viewed as a long-term holding for aggressive investors.
Investors should keep an eye on these three key earnings report next week, and check whether these stocks make for a good investment or not.
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