Earnings seasons bring about lots of volatility. The Q2 results (during the nation's shut-down) can bring positive news, negative news, or mixed news, all affecting the share price within seconds. Beginning this morning, here are some companies you'll want to keep an eye on. First, let's review the basics of an Earnings Announcement.
Revenue: The total amount of sales (gross sales) for any given period for a company. Also referred to as the "top line" since this figure is found at the very top of an income statement.
EPS (Earnings Per Share): Earnings refers to the amount of profit left (net income) at the end of any given period. This is also referred to as the "bottom line" since this figure is found at the bottom of an income statement. This number is essentially the Revenue less all costs associated with running the business (taxes, interest on loans, Research & Development, payroll, depreciation, etc.). Take that number, then divide by the number of outstanding common shares of the company, and you have the Earnings Per Share.
Guidance: The projections on the above that share how a company believes it may perform in the near future given current company status and market trends. This is often referred to in disclaimers as "Forward-Looking Statements." Given the high level of uncertainty in the market-place this year, many companies have decided not to provide their Guidance this year.
Careful consideration is needed when making these projections. Over-promising and under-delivering at the subsequent quarter's report may result in a sell-off of the stock. What some companies have done is under-promise in hopes of over-delivering. But under-promise too much and the stock could sell-off today. Under-promise (slightly), and over-deliver at the next quarter's earnings report, and you may have an increase in holding and buying, and thus an increase in share price.
Expectations: A concensus of analysts' expectations on the next Earnings Report results. Often times, if the company reports an Earnings Beat, and a Revenue Beat, this means that the company's performance exceeded what analysts expected on both figures. Generally, the stock price will increase after an announcement like this.
If there is an Earnings Miss and / or a Revenue Miss, then the company did not perform as expected, or had more costs than expected; resulting in the Miss of expected earnings or revenue. Generally, the stock price will decrease after an announcement like this.
There is also an Earnings and Revenue Meet. This of course is if the company's performance literally met expectations.
However, we cannot forget Guidance can sometimes trump all of the aforementioned outcomes. Great Guidance can sometimes supersede any Misses and result with an overall positive market sentiment; thus raising the stock price. Poor Guidance can sometimes supersede any Meets or Beats with an overall negative market sentiment; thus resulting in a sell-off and decrease in stock price.
There's much more to a company's balance sheet, but this should get us started.
Advanced Micro Devices (AMD) - With their advancements in chip design, and since the release of their Ryzen 3000 Series CPU - 7nm chip just over a year ago, they've chipped away market share from long-time rival and king of the hill, Intel (INTC). Not only that. Just last Friday, Intel announced at their earnings call that their 7nm chip is delayed and wouldn't be ready until 2022 or 2023. As a result, rival AMD's share price spiked more than 10% on the news. Taiwan Semiconductor Manufacturing's (TSM - who manufactures for AMD) share price also spiked more than 10% immediately. By the way, it can be rewarding to also invest in a company whose business is directly or closely related to another company's performance. With Intel's current misfortune, the lockdown resulting in more PC sales, and the upcoming Sony PS5 and XBox Series X releases (both using AMD hardware), watch for AMD's performance and guidance to see a huge boost.
Pfizer (PFE) - Q2 earnings results will be announced during their conference call beginning today, July 28th, at 10:00am, EDT. This is one of my favorite long-term positions as they have a nice Dividend Yield of 4.04%, with a Payout Ratio that isn't the best, but still manageable. They also market many popular drugs that I've worked with in the Nursing world, including: Advil (Ibuprofen - NSAID used for fever and pain), Celebrex (NSAID for arthritis related pain and inflammation), Lipitor (Atorvastatin - a blockbuster drug used to lower LDL cholesterol), Zithromycin (a common first-line antibiotic), Zoloft (used as an anti-depressant), Flagyl (a popular antibiotic used often for UTI's, but also parasitic infections), and many other widely used drugs in its portfolio. They're also one of the front-runners in the race for a Covid-19 vaccine as they began their Phase 3 trial just yesterday, along with Moderna (MRNA). With all that it has going on, their Earnings Report is one to watch.
DexCom (DXCM) - I've been an admirer and investor ever since I've seen the DexCom G5 CGM - Glucose Monitoring System in action back in 2016 (the most current model is the G6). Although part-way through I sold around $80 pps thinking how much higher could this go? Hindsight says, I should have held. Currently, Abbott (ABT) is the only large competitor with their FreeStyle Libre CGM. Ultimately, each has their pro's and con's, but the only CGM device I've come across with patients in my Nursing career thus far has been the DexCom G5 and G6. Based on that alone, and patients and co-workers telling me how much they love the system, about its ease of use, and how it's been life-changing in managing their glucose levels and therefore their A1C, I believe this company has so much more room to grow. Not to mention the device allows their Primary Care Providers access to their daily glucose readings to consult on their diabetes management - even more important during a pandemic. For further details on this system and how it works, please click on the picture or link below.
Courtesy of DexCom, Inc.
Disclaimer: This post represents my own opinion and is not a substitute for professional investment advice. It does not represent a solicitation to buy or sell any security. Investors should conduct their own due diligence and consult their tax and financial advisors before making any investment.
Disclosure: I currently hold a position in: AMD, DXCM, PFE, TSM, with the intention of going Long, Long, Long, and Long, respectively. I do not hold a position in ABT or INTC.
I wrote this post myself, and it expresses my own opinions while sometimes quoting others. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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