By www.CentralBankNews.info Indonesia’s central bank held its policy rates steady, saying it expects past rate increases and macroprudential measures to help bring down the current account deficit “to a more healthy level” while inflation is expected to return to the target.
Bank Indonesia (BI), which has raised its benchmark BI rate four times this year by a total of 150 basis points to limit the fall in the rupiah currency, held the BI rate steady at 7.25 percent, the lending rate at 7.25 percent and the deposit rate at 5.50 percent. All three rates were raised by 25 basis points in September.
The central bank expects the global economy to continue to slow and is characterized by a high degree of uncertainty, putting pressure on the country’s exports. In the third quarter, Indonesia’s economy is expected to expand by 5.6 percent, down from 5.8 percent in the second and 6.03 percent in the first quarter.
For the full year, Indonesia’s Gross Domestic Product is still forecast to expand by 5.5-5.9 percent.
Next year, the economy is expected to improve, growing between 5.8 and 6.2 percent. Last month Bank Indonesia cut its growth forecasts for this year and next.
Indonesia’s inflation rate picked up sharply in recent months following the government’s increase of subsidized fuel prices by an average of 33 percent in June and the central bank said it still expects average inflation this year to hit 9.0-9.8 percent before easing toward the bank’s range of 4.5 percent, plus/minus one percentage point in 2014.
In September Indonesia’s headline inflation rate eased to 8.4 percent from 8.79 percent in August, in line with the central bank’s expectation that inflation will slowly return to normal from September.
The depreciation of Indonesia’s rupiah has also increased inflationary pressures but the currency has recently started to stabilize after slowly falling in mid-May with the fall accelerating from mid-July.
The central bank said the depreciation was mainly due to sentiment surrounding the expected tapering of asset purchases by the U.S. Federal Reserve against the background of a relatively high current account deficit.
In the third quarter the rupiah weakened by an average of 8.18 percent to the U.S. dollar from the second quarter. The rupiah was quoted at 11.163 to the dollar today, up from 11,580 at the end of September but down 16 percent from the start of the year.
“Bank Indonesia views the exchange rate at the moment as describing the condition of Indonesia’s economic fundamentals,” the central bank said.
Indonesia’s current account, which grew to $9.850 billion in the second quarter from $5.270 billion in the first quarter, is expected to narrow in the third quarter due to lower imports from weaker domestic demand and the impact of the weaker rupiah, the central bank said.
The Federal Reserve’s delayed tapering of asset purchases last month, a greater surplus in the capital account, a re-entry of foreign investors and reduced selling of domestic stocks helped boost foreign reserves to $95.7 billion at the end of September from $93.0 billion end-August, the equivalent of 5.2 months of imports.
www.CentralBankNews.info
Crude Oil Prices Trades Flat; US Shutdown In Focus
Crude oil prices were seen trading flat during the late Asian trading hours on Tuesday, while investors continue to focus on the US government shutdown.
The West Texas Intermediate crude dropped 0.09%, trading at $102.94 a barrel at the time of writing, while the European benchmark Brent crude lost 0.22% to $109.44 a barrel.
Crude Oil Prices – US Government Shutdown
Lawmakers in the US, still haven’t budged on the budget of the world’s largest economy, which has lead to the US second week of its government shutdown, which began on October 1.
Over 800,000 federal employees have been left without pay and idle, with several federal institutions and government services closed.
The ongoing US government shutdown has affected the country’s economy and delaying the expected macroeconomic data releases, including Friday’s payrolls report.
Concerns have been raised on whether the Congress will fail to raise the country’s debt-limit before October 17.
Workers from the oil producers in the Gulf of Mexico, which includes Chevron, Marathon Oil, BHP Billiton, Petrobras and Andarco, resumed at the offshore platforms after tropical storm Karen dissipated.
The Gulf of Mexico accounts for almost 1.3 million barrels a day, almost a fifth of total US oil output.
Almost 62% of the overall production in the region, representing 866,000 barrels per day, was shut down when storm Karen occurred, the US Bureau of Safety and Environmental Enforcement reported on Sunday.
Production at the Kashagan oilfield resumed on Sunday after a gas pipeline from D island of the field to the onshore plant was repaired after a gas leak was detected on September 25, the Oil and Gas Ministry confirmed in a statement.
China’s Growth Lowered
The World Bank lowered its growth outlook for China and the developing countries of East Asia, lowering China’s economy growth outlook to 7.5% this year and 7.7% in 2014. The previous forecast were set at 8.3% for this year and expected to grow at 8% for 2014.
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Asian Stocks In Green While Australia’s Benchmark Dragged Lower
Asian stocks were seen trading in green on Tuesday, while Australia’s main stock index was dragged down mainly due to the mining sector.
Asian Stocks – Japan
The Japanese benchmark Nikkei 225 advanced 0.30% higher, after trading the flat-line during the gloomy start to the session and hitting a fresh one-month low at 13,894.61, while the Topix index closed 0.22% higher at 1,150.13.
Japan’s Cabinet Office posted the Economy Watcher’s Sentiment for the country, which showed an increase of 52.8 in September compared to the previous reading of 51.2 in August, while analysts were expecting a rise of 52.2.
The Economy Watcher’s Outlook for the nation showed its first rise in five months, with a 54.2 rise in September versus 51.2 in August.
The giant electronic manufacturers Sharp dropped 2.1%, following the 8% drop in the previous session. While Japan Airlines eased 1.7%, following the company’s announcement to purchase 31 aircrafts from Airbus on Monday.
While Sony dropped 2.7% and car manufacturers Toyota Motor lost 0.3%.
Asian Stocks- China
China stocks moved higher from its lower open, assisted by HSBC China’s services Purchasing Managers’ Index (PMI) reaching 52.4.
Hong Kong’s Hang Seng index gained 0.94% to 23,190.00 at the time of writing, while the mainland Shanghai index rose 1.02% to 2,196.75.
The President of China Xi Jingping said that countries with major global currencies should follow dependable policies and also be careful with the changes of the monetary policy.
Australia
Australia benchmark S&P/ASX 200 index dropped 0.23% to 5,149.40, hitting a one-month low.
Newcrest Mining declined 2.26% and Evolution Mining edged 1.9% lowers.
While Korea’s Kospi index edged 0.42% higher at 2,002.76.
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The Three Most Dangerous Stocks in the Market
When it comes to discerning the future direction of share prices, I can’t emphasize enough the importance of earnings growth.
Or, as my favorite mantra goes, “Stock prices ultimately follow earnings.”
Yet, a subscriber recently wrote in to accuse me of being overwhelmingly lopsided in my application of this golden rule of investing…
“You always focus on companies consistently earning more and more profits, which are poised for stock price appreciation. But how about focusing on some dogs – companies with declining earnings and, in turn, stock prices that are bound to hit the skids?” – Joe B.
Okay, guilty as charged. So today I’m going to rectify the situation.
With earnings season upon us, I’m sharing three stock landmines that every investor should avoid.
As you’ll see, the odds point to each company dropping by double-digit margins in the blink of an eye. And the last thing we want is to be stuck holding any of them in our portfolios.
Heck, one could detonate as early as Thursday morning at 9:30 AM…
Take heed!
A Recipe for Disaster
To identify the market’s most dangerous stocks, I focus on four key criteria:
~ Extreme Volatility: What better place to start than companies with a penchant for dramatic price swings, right? Well, each quarter, Bespoke Investment Group compiles a list of the stocks in the S&P 1500 Index that react the most violently on their earnings report days. I’m talking about single-day price swings of over 10%.
~ Negative Price Trends: Because market trends tend to persist, the next element I hone in on is year-to-date performance. Specifically, the most volatile stocks that also happen to be down in price for the year. Why? Because if a stock is already under selling pressure, the trend is likely to persist. And there’s no better trigger for the next big leg down than a bad earnings report. Speaking of which…
~ A History of Bad Earnings Surprises: Since a bad quarterly report stands to trigger a selloff, I focus on companies with track records of reporting worse-than-expected earnings. The bigger the disappointments, on average, the bigger the stock declines we can expect.
~ Souring Sentiment: Last, but not least, I screen for companies where analysts have dramatically lowered their earnings forecasts over the last 90 days. This seems obvious, but keep in mind that analysts seldom get it right… so if they’re rapidly souring on a company’s earnings prospects, chances are, they’re too late to the game and too conservative. And the actual results stand to be even worse.
Add it all up, and we have the perfect screener for companies destined to disappoint. So without further ado, here are the three most dangerous stocks heading into earnings season…
Our Top Three Earnings Season Stinkers
~ Stock Landmine #1: Crocs, Inc. (CROX): I can’t believe anyone still wears these ugly plastic shoes. But they must, as the company reported sales of more than $360 million last quarter.
Nevertheless, the future looks bleak for the stock.
First, in a strongly rising market, shares are down 5% this year.
Second, over the last 90 days, analysts slashed their earnings per share forecasts by a hefty 50% – from $0.39 to $0.18. And that sharp revision is no accident, either.
On September 10, management lowered its guidance, citing weaker-than-expected sales in the Americas. But even after lowering guidance, I’m convinced that the company is still going to come up short this quarter.
While analysts still expect the company to report earnings per share of $0.18, that’s the high end of the company’s guidance. So unless there was some end-of-summer rush for ugly footwear, there’s no chance the company puts up better-than-expected numbers. And consider that, in the last quarter, Crocs missed expectations by 25%.
Bottom line: With an average one-day price change of 12.02% on earnings days, look out below when Crocs reports results on October 24.
~ Stock Landmine #2: Gibraltar Industries, Inc. (ROCK): Bank of America (BAC) might be bullish on the industrials sector, but Gibraltar is the exception. The company has significant customer concentration without long-term contracts, weak pricing power and sizeable foreign currency risk.
Plus, with the stock already down 13% so far this year, analysts have chopped their earnings projections by 34% over the last 90 days.
The company is prone to missing expectations by a wide margin, too. Case in point: Two quarters ago, the company’s earnings per share tumbled almost 70% below consensus estimates.
To top it off, the stock averages a one-day price change of 10.3% on earnings report days.
Bottom line: An investment in ROCK is anything but rock solid. I wouldn’t leave any of my hard-earned capital on the line when the company reports results on October 31.
~ Stock Landmine #3: Ruby Tuesday, Inc. (RT): I confess, I may be a tad biased against this dining chain. I had a bad experience a decade ago, and could never muster the courage to eat there again.
However, aside from my hellish night of food poisoning, this isn’t a revenge mission. There are strong, fundamental reasons to expect a disappointment when the company reports its results after the bell on Wednesday.
The stock is already down 4% on the year, and investors are reacting to the company’s weak sales figures, which prompted analysts to cut their earnings per share forecasts over the last 90 days from a profit of $0.08 per share to a loss of $0.05. (Ouch!)
Now consider that the company has missed expectations by an average of 17.5% over the last four quarters. That means it’s likely to report bigger losses than analysts expect.
Bottom line: An average price swing of 10.8% on earnings report days makes this one stock we should promptly remove from our menu.
That’s it for today. Hope my pessimism satisfies you, Joe!
Ahead of the tape,
Louis Basenese
The post The Three Most Dangerous Stocks in the Market appeared first on Wall Street Daily.
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Original Article: The Three Most Dangerous Stocks in the Market
Two Old Restaurant Stocks Offer Investors Growth
By Profit Confidential
The last time we looked at Chipotle Mexican Grill, Inc. (CMG) in this column, the company was trading around $400.00 a share after blowing away Wall Street estimates in its second quarter.
The company’s numbers were excellent with 2013 second-quarter sales growth of 18% to $817 million, a 5.5% gain in comparable restaurant sales, and earnings-per-share growth of 10% to $2.82 a share.
In the second quarter, the company opened 44 new restaurants for a total of 1,502. Company management said that it expects comparable restaurant sales to be in the low to mid-single digits this year on between 165 and 180 net new locations.
Wall Street earnings estimates for Chipotle have mostly been going up for this fiscal year, but especially for 2014.
In its second quarter, expenses increased significantly, especially in the cost of food products. Company management cited higher costs for chicken and dairy products, and even for salsa due to a shortage of tomatillo in Mexico.
Labor costs as a percentage of revenues actually dropped compared to the second quarter of 2012, and so did occupancy costs.
Historically, Chipotle typically experiences lower average daily restaurant sales in the first and fourth quarters of the calendar year, due to the weather and holidays. In its upcoming financial report, the Street expects the company to generate approximately 22% in earnings growth and approximately 17% in quarterly sales growth.
Naturally, the stock is expensively priced because of this. Last year’s third quarter produced solid revenue growth of 18% to $700 million and diluted earnings per share grew 19.5% to $2.27 a share on comparable restaurant sales growth of 4.8%.
While the stock is pricey with a trailing price-to-earnings ratio of around 45, the company is providing genuine economic growth for investors. (See “New Restaurant Stocks Plentiful, but This Old Name Delivers.”)
The stock is trading right at its 52-week high and is close to its record price high set in April 2012.
Restaurant companies regularly experience operational issues that aren’t often related to general consumer spending. Changing consumer tastes and price wars can wreak havoc on operating margins. However, the equity market has proven that restaurant stocks are good wealth creators, and investors should always consider the sector as part of a diversified portfolio.
Right now, there’s value among a few struggling chains. Darden Restaurants, Inc. (DRI) is not a Wall Street favorite right now, but the stock is reasonably priced, and the company’s dividend yield is nearly five percent.
All it takes is one strong turnaround quarter for Darden and investors will pile in. It happened to Chipotle in the third quarter last year. However, it will probably take longer for Darden, but the position definitely offers value.
In this stock market, I favor existing winners.
Chipotle reports its third-quarter earnings on October 17.
Article by profitconfidential.com
Update: Apple’s Attempt to Enter Emerging Markets a Blunder?
By Profit Confidential
When the next-generation Apple Inc. (NASDAQ/AAPL) “iPhone 5S” and “iPhone 5C” were launched in mid-September, the company reported record sales over its first weekend of selling.
But there was a problem: the majority of the sales were for the iPhone 5S, while sales of the iPhone 5C lagged. The problem was the cost of the plastic-cased 5C; at around $100.00 with a two-year contract, the “cheaper” version simply cost too much, especially for the emerging markets like China, where Apple had high hopes for the iPhone 5C.
Obviously, the initial demand for the iPhone 5C over the first few weeks appears to be disappointing. Best Buy Co., Inc. (NYSE/BBY) announced it was cutting the price of the 5C to $50.00 on a two-year contract between October 3 and October 7.
But while the discount was only for four days, you kind of wonder if there will be a more permanent price cut ordered by Apple should sales lag.
The iPhone 5S is selling very well, but for Apple to really break out of its shell, the company will need to cut the cost of the iPhone 5C in order to get a foothold in the emerging markets.
Without a major price cut, it will not be easy for Apple to break into a mobile market that focuses on attractively priced smartphones—a market that includes established rivals, such as Nokia Corporation (NYSE/NOK), whose mobile assets are to be acquired by Microsoft Corporation (NASDAQ/MSFT), Samsung Electronics Company Ltd., LG Corporation, and major upstarts, such as Huawei Technologies Co. Ltd. and ZTE Corporation, based out of China.
For Apple, the massive mobile market in China is what the company desperately aims to grow. The company’s current market share in China is insignificant and lags behind both the domestic and foreign makers.
So far, an official distribution deal with China Mobile Limited (NYSE/CHL), the largest cell phone operator in China with 500 million-plus users, has yet to materialize and this is worrisome. Apple needs China, especially a deal with China Mobile.
Until Apple can make some ground in China and other massive cell phone sectors in the emerging markets, such as India, Asia, and Latin America, the company will only be regarded as tops domestically. With the U.S. mobile market being only a small fraction of the global market, Apple will need international success.
In my view, I would be hesitant to buy Apple now unless there are developments in China. One contrarian play in the smartphone market to consider might be Microsoft, if its deal to buy the mobile assets of Nokia is approved. (Read “Why I Like Microsoft’s Proposed Acquisition of Nokia’s Cell Phone Business.”)
Article by profitconfidential.com
Beware of the Bear Dressed Up as a Bull
By Profit Confidential
Income is the largest factor when it comes to determining changes in the consumer spending. Unfortunately, personal income is declining in the U.S. economy—not a good indicator; no matter how anyone tries to spin it.
In the first eight months of 2012, the average change in real personal disposable income (income adjusted for price change) in the U.S. economy was 0.11%. In the first eight months of this year, real personal disposable income has actually contracted by 0.4%. (Source: Federal Reserve Bank of St. Louis web site, last accessed October 4, 2013.)
As real disposable income pulls back, we are seeing the effects of slow consumer spending starting to emerge.
Total light vehicle sales by the automakers in the U.S. economy declined 4.2% in September compared to the same period a year ago. Passenger car sales declined 5.6% in the month. Automakers like General Motors Company (NYSE/GM) saw their total car sales fall 17.1% in September from the same period in 2012. (Source: Autodata, October 1, 2013.)
Another indicator of slowing consumer spending, crude oil inventories are increasing. For the week ended September 27, the Energy Information Administration reported that there was a build-up of 363.7 million barrels of crude oil in the U.S. economy. The agency reiterated these inventory levels are “toward the upper range for this time of the year.” (Source: Energy Information Administration, October 2, 2013.) When there’s less consumer spending, or companies are producing less, then fewer barrels of crude oil are used.
And worst of all, 19 companies in the consumer discretionary sector of the S&P 500 have issued negative guidance about their corporate earnings for the third quarter. (Source: FactSet, September 30, 2013.) This is roughly 23% of all the companies in the sector. (Source: S&P Dow Jones Indices, September 30, 2013.) The consumer discretionary sector is very dependent on consumer spending. Companies in this sector see the trends in consumer spending long before anyone, because they are very close to the customers. If they are warning about future profitability, something isn’t right when it comes to consumer spending.
Mainstream outlets are too focused on the debt ceiling debate and the U.S. government shutdown. Few are talking about consumer spending, which can actually change the fate of the U.S. economy going forward. We are fixated on quantitative easing, which helps out the big banks and Wall Street, but not the average American Joe. And optimism among stock advisors is growing again. The reality of what’s going on in the economy, dear reader, is very different from the picture the stock market paints. Beware of the bear dressed up as a bull.
What He Said:
“The Real Threat to the Economy: U.S. retail sales are falling, the producer price index is crashing, house prices, car prices are all falling—and no one is talking about deflation but me. Fed governors are still talking about inflation—they’ve got it wrong. There’s no need for me to get into the dangers of deflation as I’ve written about them (many times) before. Let’s just put it this way: Deflation is about the worst economic state a country will experience. The risks to the U.S. economy in 2007 are greater than I’ve seen in years.” Michael Lombardi in Profit Confidential, November 15, 2006. Michael was one of the first to warn of deflation. By late 2008, world economies were embedded in their worst state of deflation since the Great Depression.
Article by profitconfidential.com
To See How It All Turns Out, Here’s What Happened in Japan
By Profit Confidential
If you want to see how this all turns out in the end, I’m talking about the Federal Reserve’s program of printing over $1.0 trillion a year in new paper money (something that’s never happened in history), we need not look any further than the Japanese economy.
Why? Because the Japanese economy collapsed about 15 years before our credit crisis collapse of 2008. What we are doing now (artificially low interest rates, deep government debt, and money printing), the Japanese did years ago.
But unfortunately, when I compare the “Japanese experiment” to what our government and central bank are doing now, I don’t like what I see. In fact, I question the long-term benefits and effectiveness of quantitative easing.
Did quantitative easing help the Japanese economy? Turns out the answer is, NO. Since 1990, when troubles in the Japanese economy began, until 2011, the average annual growth rate (as measured by GDP) of the third biggest nation in the global economy has been less than 1.1%. (Source: Federal Reserve Bank of St. Louis web site, last accessed October 4, 2013.) In 2012, the Japanese economy didn’t perform so well and fell back into recession.
This year, the Japanese economy grew one percent in the first quarter and then declined to 0.9% in the second. (Source: Trading Economics web site, last accessed October 4, 2013.) Albeit a generalization, if quantitative easing and low interest rates were working, the Japanese economy would not be suffering like it is.
Which investments made money for the investors in the Japanese economy during its post-boom era? To say the very least, just don’t count on the stock market.
While the American stock market has moved slightly above its 2007 boom-time peaks, the main stock market in the Japanese economy has done horribly. The main index in the country, the Nikkei, is well below its record high, as the chart below illustrates.
Chart courtesy of www.StockCharts.com
Since its peak in 1990, the Nikkei is still down about 60%.
Last month, we heard the U.S. Federal Reserve won’t be slowing down on its quantitative easing. The Federal Reserve said it will start to slow quantitative easing when the unemployment rate in the U.S. economy reaches 6.5% and the inflation expectation increases above two percent—two events that can be more than one year away, if not more.
Earnings growth for U.S. corporations is running at its lowest pace in four years, while revenue growth is almost non-existent. The mirage called the stock market in the U.S. economy is running on newly printed money; the rally will only go so long as the easy money continues to flow.
Income is the largest factor when it comes to determining changes in the consumer spending. Unfortunately, personal income is declining in the U.S. economy—not a good indicator; no matter how anyone tries to spin it.
In the first eight months of 2012, the average change in real personal disposable income (income adjusted for price change) in the U.S. economy was 0.11%. In the first eight months of this year, real personal disposable income has actually contracted by 0.4%. (Source: Federal Reserve Bank of St. Louis web site, last accessed October 4, 2013.)
As real disposable income pulls back, we are seeing the effects of slow consumer spending starting to emerge.
Total light vehicle sales by the automakers in the U.S. economy declined 4.2% in September compared to the same period a year ago. Passenger car sales declined 5.6% in the month. Automakers like General Motors Company (NYSE/GM) saw their total car sales fall 17.1% in September from the same period in 2012. (Source: Autodata, October 1, 2013.)
Another indicator of slowing consumer spending, crude oil inventories are increasing. For the week ended September 27, the Energy Information Administration reported that there was a build-up of 363.7 million barrels of crude oil in the U.S. economy. The agency reiterated these inventory levels are “toward the upper range for this time of the year.” (Source: Energy Information Administration, October 2, 2013.) When there’s less consumer spending, or companies are producing less, then fewer barrels of crude oil are used.
And worst of all, 19 companies in the consumer discretionary sector of the S&P 500 have issued negative guidance about their corporate earnings for the third quarter. (Source: FactSet, September 30, 2013.) This is roughly 23% of all the companies in the sector. (Source: S&P Dow Jones Indices, September 30, 2013.) The consumer discretionary sector is very dependent on consumer spending. Companies in this sector see the trends in consumer spending long before anyone, because they are very close to the customers. If they are warning about future profitability, something isn’t right when it comes to consumer spending.
Mainstream outlets are too focused on the debt ceiling debate and the U.S. government shutdown. Few are talking about consumer spending, which can actually change the fate of the U.S. economy going forward. We are fixated on quantitative easing, which helps out the big banks and Wall Street, but not the average American Joe. And optimism among stock advisors is growing again. The reality of what’s going on in the economy, dear reader, is very different from the picture the stock market paints. Beware of the bear dressed up as a bull.
What He Said:
“The Real Threat to the Economy: U.S. retail sales are falling, the producer price index is crashing, house prices, car prices are all falling—and no one is talking about deflation but me. Fed governors are still talking about inflation—they’ve got it wrong. There’s no need for me to get into the dangers of deflation as I’ve written about them (many times) before. Let’s just put it this way: Deflation is about the worst economic state a country will experience. The risks to the U.S. economy in 2007 are greater than I’ve seen in years.” Michael Lombardi in Profit Confidential, November 15, 2006. Michael was one of the first to warn of deflation. By late 2008, world economies were embedded in their worst state of deflation since the Great Depression.
Article by profitconfidential.com
Wall Street Lowered Expectations for This Stock, But It Got NASA’s Attention
By Profit Confidential
In any market, innovation spawns opportunity. While equity market conditions matter for companies that are raising capital, new industries are perpetually being born with the invention and adoption of new technology.
One industry that’s in its early stages and well worth your attention over the coming quarters is three-dimensional (3D) printing. This industry is very much on the cusp of migrating to the consumer’s level. It’s a very interesting investment theme for risk-capital investors.
One company we looked at previously is The ExOne Company (XONE). This company was one of the most successful initial public offerings (IPOs) this year, but the stock retrenched significantly after an earnings miss. However, ExOne’s failure to meet expectations does not mean that this innovative company won’t become a burgeoning enterprise.
ExOne is based in North Huntington, P.A., and it manufactures 3D printing machines that help industrial customers in the aerospace, energy, automobile, and heavy machinery sectors create prototype parts for their respective businesses. ExOne builds its printing machines in the U.S. and Germany, and a full expansion is underway.
In its most recent quarter, the second quarter of 2013 (ended June 30), ExOne generated $9.2 million in total revenues. Approximately 63% of these sales were for 3D printing machines and micromachinery, with 37% of sales coming from other related products and materials. This compares to total sales of $4.7 million in the second quarter of 2012.
According to the company, it sold four of its largest 3D printing machines to customers in Japan, the U.S., Russia, and India.
Revenues for the first six months in 2013 were $17.2 million, compared to $7.4 million, for a gain of 132%.
While the company is spending on research and development, it’s spending more on selling, general, and administrative expenses. Like most newly listed stocks, ExOne incurred quite a bit of expenses in effecting its IPO.
The company said its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were a loss of $300,000 in the second quarter of 2013, up from a loss of $2.7 million in the comparable quarter.
Net loss attributable to the company was $1.12 million in the latest quarter, compared to $3.5 million. Many investors expected the company to be profitable in the second quarter. The resulting loss caused Wall Street analysts to lower their estimates for this year and next.
When ExOne’s share listed on the stock market, the position drifted initially; it then proceeded to advance almost 200% before experiencing a major retrenchment beginning in September. The company’s chart is featured below:
Chart courtesy of www.StockCharts.com
The big retrenchment was partially due to ExOne’s second loss, but also because of the further issuance of new shares by the company and selling insiders. It isn’t a surprise that the company hit up the equity market for more cash, especially considering how strong the stock performed.
IPOs can be very tough equity securities to trade because valuation is often trumped by expectation. But ExOne is a company with a determined growth path. The Street currently estimates sales to grow just under 70% this year and over 50% again in 2014. (See “Hot IPOs Emerging in This Lucrative Sector.”)
3D printing is a relatively new industry and should be on every speculative investor’s radar. NASA plans to launch a toaster-sized 3D printer into space next year so astronauts can make plastic tools and parts as needed. This is a technology that’s going to grow significantly this decade.
Article by profitconfidential.com
Revenues Down for This Aluminum Stock; Trouble for Global Economy Ahead?
By Profit Confidential
While the focus is on the government shutdown and debt ceiling, I’m getting ready for the start of another earnings season, to see if America delivers. Of course, the somewhat muted gross domestic product (GDP) growth has me fully expecting to see a drag in revenues across the broad.
Alcoa Inc. (NYSE/AA) starts the third-quarter earnings season when it reports after the markets close tomorrow. The company is a pretty decent indicator for the global economy, as aluminum is used in a broad assortment of industrial and consumer applications around the world.
The company is forecasted to earn $0.06 per diluted share on revenues of $5.71 billion, down 2.1% year-over-year, according to Thomson Financial. For this reporting year, Alcoa is expected to see revenues contract 2.8%, followed by 2.8% growth in 2014. This essentially means zero growth over two years. In my books, that’s not good; this clearly indicates a global economy that’s in trouble.
I don’t even think traders are expecting some miraculous jump in revenues or earnings in the third-quarter earnings season. Wall Street has already downgraded expectations for the earnings season.
Earnings growth for the third-quarter earnings season is estimated at 3.2%, according to a FactSet report dated September 27. (Source: “Earnings Insight,” FactSet Research Systems Inc. web site, September 27, 2013; last accessed October 4, 2013.) The number is well down from the estimate of 6.5% as of June 30.
The financial sector is expected to report the top growth, while the healthcare sector is projected to report the lowest level of growth in the third-quarter earnings season. Of course, should the U.S. government shutdown continue, this could change as we move forward.
But what is interesting is that of the 108 S&P 500 companies that have issued earnings-per-share (EPS) guidance for the third-quarter earnings season, a whopping 89 companies, or 82%, offered up negative guidance. This is much higher than the five-year average of 62%, so this is concerning, as it suggests a decline in the so-called economic “recovery.”
Meanwhile, the more important revenue growth rate is projected at 2.6% in the third quarter, down from three percent as of June 30. This number appears to be in line with the country’s GDP growth, but I expect it could worsen if the shutdown and debt ceiling talks falter.
Based on these estimates, I don’t think I would be diving in and buying in this stock market right now. You need to be careful and be selective in choosing your stocks; look for situations where the growth is above average. Companies delivering better growth than their peers will be rewarded. Otherwise, I really don’t expect much more for gains in the fourth quarter, based on the current climate.
As we move forward, I would look at opportunities in China, as we have seen numerous Chinese stocks record some stellar gains over the past few months. For more coverage on Chinese stocks, read “Your Portfolio Stop Growing? Here’s Why You Really Need to Think Chinese.”
Article by profitconfidential.com
