Several forgotten companies have rallied in the last week as investors continue to pore over quarterly results.
Covergirl maker Coty (COTY) is up more than 50 percent in the last week after earnings and revenue beat estimates. That suggested the heavily shorted company, loaded with debt from major acquisitions, is finally starting to get its business in order.
Mattel (MAT) also stunned to the upside after a revamp of its iconic Barbie doll juiced unit volume. Profit and sales beat. Its 38 percent gain in the last week ranks behind only COTY among members of the S&P 500.
There are more. Shoe retailer Sketchers USA (USA) gapped higher after earnings beat. Motorola Solutions (MSI) - yes, the maker of police radios - beat on the top and bottom lines. Believe it or not, MSI broke out to a new all-time high on the news.
Coty (COTY) chart with 50-day moving average and daily changes.
Prominent names in the Dow Jones Industrial Average had mixed results. Cisco Systems (CSCO) shot to its highest level since late 2000 after beating estimates across the board and guiding above consensus. Analysts cited good pricing, adding that upgrades to its Catalyst 9000 (Cat9k) switch will help results moving forward.
Speaking of help, Coca-Cola (KO) needs plenty of it. Earnings feebly met forecasts despite strong sales. Margins, the lifeblood of most consumer-product stocks, got squeezed by higher costs - especially for transportation services. KO’s having its worst drop in over a decade.
Activision Blizzard (ATVI) had a flurry of news. It was initially weak on concerns about slowing demand for its video games and competition from Fortnite. A Bloomberg article on job cuts hammered it even lower, but then the stock rebounded after its quarterly results failed to worsen the pessimism. Rival Electronic Arts (EA) also had a wild ride on reports that its Apex Legends game was winning back users from Fortnite. This group has had a lot of interesting price action in recent weeks.
Most other technology stocks also fell on their results. High-flying software maker Twilio (TWLO), for instance, dropped on tepid guidance. Other cloud players like NetApp (NTAP) and Qualys (QLYS) also stumbled.
Weak names in other industries included watch-maker Fossil (FOSL), tire-maker Goodyear Tire & Rubber (GT) and brewer Molson Coors (TAP). FOSL is down more than 11 percent in the last week as a continued slowdown in its core business caused earnings and revenue to miss. Weak Asian demand hurt GT and TAP struggled with a sharp drop in volumes and accounting problems.
Satellite-television provider Dish Network (DISH) also skidded lower after its subscriber count fell more than expected.
There were some other positive stories. Hotelier Hilton Worldwide (HLT) surprised analysts on the top and bottom lines, thanks to higher room rates. Here’s an idea: compare HLT’s higher room rates with this week’s inflation numbers showing gains for services. Then throw in KO’s rising transport costs. Is a trend emerging? Keep reading Market Insights for more.
Two other housing-related names are also worth a mention. Flooring provider Mohawk Industries (MHK) surged from a 5-1/2 year low after beating estimates. Unlike KO, its cost structure seemed to benefit from a sharp drop in lumber prices. Louisiana-Pacific (LPX) also rallied after making progress on a complicated turnaround plan.
European drug maker AstraZeneca (AZN) had its biggest gain in over a year after after new cancer treatments and traction in China pushed sales past estimates.
In conclusion, the last week brought a lot of strong earnings, although most were lesser-known companies. The big question facing investors now is whether the bulls are scraping the sides of the barrel or whether new leadership stories are emerging.
This article was written by David Russell, TradeStation Securities, Inc., part of the Monex Group Inc, published on 14/02/2019.
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