Consumer goods giant Kimberly-Clark (NYSE:KMB) reported solid sales growth during its second quarter, though higher commodity costs continued to weigh on near-term profits. The outlook over the longer haul looks stronger, as growth in international markets should boost overall growth and help shareholders garner double-digit annual total returns on their investment.
By the end of 2011, the world’s population should reach 7 billion. Through 2050, it is estimated to grow by 150,000 people daily and reach 9 billion. As a result, there will be billions more mouths to feed. It will also be even more crucial than ever to lessen the world’s heavy reliance on fossil fuels. There will also be other needs to protect the environment and ensure the world can support the population.
LabCorp (NYSE:LH) bills itself as the largest independent clinical lab tester in the U.S. Hospitals dominate most of the market, but LabCorp and its archrival have succeeded by growing internally and pursuing a healthy acquisition program. These dynamics played out during LabCorp’s second quarter, and though its valuation is quite reasonable, cash flow growth remains an issue.
It has been a tense couple of years for firms operating in the cyclical industrial and aerospace industries. But the best-run firms have used the downturn to become more disciplined with their businesses, cutting costs and preparing for an eventual economic upturn. Honeywell (NYSE:HON) fits firmly into this camp, and its second quarter results and outlook gave investors confidence that the company remains on the right track.
Did you know that Internet traffic in 2010 exceeded all of the traffic on the Internet from its founding through every year up to 2009, according to tech firm giant Cisco (Nasdaq: CSCO)? This pace will most likely continue. So what’s the next big growth wave for the Internet? Well, you’ve probably heard buzz words such as “cloud computing” and “SAAS” (software as a service) gaining momentum. If you’re a smart investor, then you know the time to explore these investment areas is now.
Over the long haul, the stock market rewards profit and cash flow growth. Medical device firm St. Jude (NYSE:STJ) has taken care of business for more than a decade and rewarded shareholders with close to a 200% stock return. Its second quarter results represented more of the same, and future trends also look quite encouraging. (To help you invest in the medical industry, check out A Checklist For Successful Medical Technology Investment.)
Medical instrument and supply firm Baxter International (NYSE:BAX) reported second quarter profits ahead of analyst projections as its international sales continued to improve robustly. The stock’s earnings valuation is pretty reasonable given the firm’s growth outlook, but several peers currently trade at arguably more appealing levels. (To learn more check out Investing In Medical Equipment Companies.)
Tractor Supply Co. (Nasdaq:TSCO) caters to a rural consumer base made up primarily of farm and ranch customers. This focus has lended itself to a unique growth opportunity, which the company has fully exploited in recent years. Its second quarter results reflected its strong growth trajectory, as did increases in its full-year sales and profit outlook. Unfortunately, Tractor Supply’s prospects are no longer a secret, and this is making future returns for shareholders less of a certainty.
Bank of New York Mellon (NYSE:BK) reported second quarter earnings on Tuesday that came in ahead of analyst projections. The investment climate continues to be quite hostile for financial institutions, but BNY Mellon has a number of appealing investment characteristics that could lead to above-average shareholder returns going forward.
Posted: July 21, 2011 1:45PM by Ryan C. Fuhrmann , CFA
The technology industry has a reputation as one of the most fiercely competitive industries in existence. Change happens rapidly in tech, with new firms frequently leapfrogging older ones due to new technological developments, either by finding ways to improve upon existing products and services or by developing new ones. So why it is so difficult for firms to stay on top in technology?
Young companies with wide-open growth potential are my favorite type of investment. In a perfect world, these companies would be able to generate enough of their own profits to expand, be it in the form of new stores, factories or an increased sales force to reach new clients.
In recent years, toy firm Mattel (NYSE:MAT) has posted steady earnings growth for shareholders. Thanks to a successful toy licensing initiative with major film studios, sales growth has also perked up and investors are becoming more comfortable that Mattel can expand its toy operations consistently going forward.
Posted: Jul 19, 2011 11:09 AM by Ryan C. Fuhrmann , CFA
Banking giant JPMorgan Chase (NYSE:JPM) relies on the U.S. for nearly 80% of its revenue. As such, its results are driven by the domestic market, and its second quarter results and expectations for the remainder of 2011 suggest profits will finally exceed pre-financial crisis levels. With steady earnings growth going forward, investors could see stock gains in excess of 50% within the next few years.
Internet search and advertising giant Google (Nasdaq:GOOG) saw its share price jump forward after reporting impressive sales growth during its second quarter. Profits increased by a smaller margin, as Google is spending heavily to stay ahead of rivals. Its long-term ability to maintain dominance in online advertising and extend this to other venues is highly uncertain, but the stock is cheap if current growth trends persist over the next few years.
According to defense firm ManTech (Nasdaq:MANT), the U.S. defense budget of $708 billion for 2011 will be cut by more than 5% to $671 billion in 2012. Further needs to stem the budget deficit could mean more defense cuts going forward while less activity on overseas missions will also lower demand. As such, finding companies with growth potential is becoming more difficult. ManTech’s focus on cyber security and fighting terrorism could make it an appealing outlier in the shrinking defense market.
To paraphrase a frequently-cited Warren Buffett quote, it’s only when the tide goes out that you can see who has been swimming naked. To build on his analogy, the financial tide went out quickly during the credit crisis and left many banks without the proper swimming attire to make it back to shore with their reputations intact.
Banks with overly aggressive growth ambitions or poor loan underwriting standards didn’t even make it back to shore at the peak of the crisis. Specific firms such as Washington Mutual, Wachovia and National City Corp were left holding too many failed mortgage loans. As a result, they were bought out for a fraction of the value they had prior to the crisis.
International Speedway (Nasdaq:ISCA) owns a very appealing collection of 13 race facilities across the U.S. Most of its business stems from the highly popular NASCAR racing events, with professional football the only sport that is more popular in the U.S. The problem is, NASCAR’s popularity may have peaked, and the company is struggling to grow in this more challenging environment, though currently it does appear to be ringing more profits in the face of stagnant sales. (To learn more, check out Earnings Power Drives Stocks.)
Zep, Inc. (NYSE:ZEP) sells and distributes cleaning products and maintenance solutions to businesses in the United States, Canada and Europe. Its business lends itself to strong profits and cash flows, and though quite a bit of future growth is already priced into Zep’s stock, it has plenty of room to grow market share.
In most cases, a stock with a high dividend yield is of great appeal to income investors. However, a stock with an above-average dividend payout could also mean investors have knocked the share price down because they don’t see the payout as lasting for much longer. When this happens, the stated dividend yield rises, but it is only a mirage.
Confectionery retail store operator Rocky Mountain Chocolate Factory (NYSE:RMCF) opened the first quarter of its fiscal year with strong sales results. However, profits struggled as the company spent to try and boost future growth at its namesake stores and a new frozen yogurt concept. A weak lending market and rich earnings valuation are other near-term negatives, though there is still plenty of growth potential over the long haul.
Posted: July 11, 2011 12:57PM by Ryan C. Fuhrmann , CFA
Numerous studies have shown that dividends make up a big percentage of total stock returns. Estimates suggest that stocks returned about 9.4% annually between 1900 and 2010 and that dividends made up 4.4 percentage points of this return. In other words, without dividends, total stock returns were nearly cut in half. (Explore arguments for and against company dividend policy, and learn how companies determine how much to pay out. See How And Why Do Companies Pay Dividends?)
WD-40 (Nasdaq:WDFC) is a small capitalization consumer goods firm. Its smaller sales base and global focus are ideal conditions to post above-average growth trends, but this has not been the case in recent years. A number of larger rivals have managed to outgrow WD-40 and currently trade at lower earnings multiples, though WD-40 continues to hold growth potential.
Pacific Life Insurance Co., better known to investors as PIMCO, was co-founded by Bill Gross back in 1971 and has grown into one of the largest and most well-respected bond  managers in the world. As of the end of March, it managed nearly $1.3 trillion in assets. Gross is now a billionaire based on his ownership stake in PIMCO and remains at the helm of the bond giant.
Wisconsin-based National Presto Industries (NYSE:NPK) is a mini-conglomerate that operates three unrelated but successful operating units. Sales and profit generation have grown steadily over the past few years, and a special dividend awarded each year to shareholders may be of interest to income-minded investors. (To learn more about growth stocks, check out Steady Growth Stocks Win The Race.)