Here we are, three weeks into the new year, and surprisingly the majority of earnings reports have been considerably better than what Wall Street had predicted. With so many companies reporting during the several weeks each quarter that comprise earnings season, some very outstanding, and in some cases subpar, earnings reports can fall through the cracks.
For the past two weeks, I've taken a look at six companies that could be worth further research after either beating or missing their profit expectations. Today we're going to take a look at three more companies that reported earnings last week and may have slid under your radar, and that you should give a second look:
Xilinx (NAS: XLNX)
Citigroup (NYS: C)
Google (NAS: GOOG)
Source: Yahoo! Finance.
So much for that slowdown I've been talking about in the semiconductor sector, right? Xilinx absolutely crushed Wall Street's projections and managed to slightly top its own sales guidance for the third quarter. The programmable logic devices manufacturer even guided to sequential revenue growth of 2% to 6% in the fourth quarter, which appeared to get investors excited. As for me, I say, "Not so fast!"
Xilinx wasn't very cheap before it reported, and it's definitely not tickling my fancy here either. Consider that its $0.47 profit was down from $0.58 in the year-ago period and that it forecast its gross margin in the upcoming quarter to be in the 64% to 65% range, down from the 65.8% it just reported. Even if sales are rising, this figure shows us that expenses are rising equally as fast, if not faster, which is going to hurt Xilinx's bottom line. With most semiconductor stocks down in the doldrums, I'm not willing to pay a forward multiple of 19 on Xilinx, especially with year-over-year comparisons falling.
And here we were thinking that Bank of America would have the bad report from the banking sector, when it turned out to be Citigroup that dropped the golden nest egg.
Citigroup's 22% earnings miss was particularly disturbing because of the reason for the miss: rising operational expenses. In an environment in which banks are trimming the fat in order to raise capital and shore up their liquidity, Citigroup announced an 8% jump in expenses for fiscal 2011. Legal costs, an ongoing restructuring, and aggressive advertising campaigns are taking their toll on both Citi's bottom line and its shareholders. There were positives in its fourth quarter report, including a 14% jump in loan originations driven by growth in Latin America and Asia, but overall its results put a gray cloud over what has been a wonderful start to the new year for banks.
Newsflash: Google isn't Superman after all! The search engine giant missed the Street's estimates badly, citing a slowdown in European markets and a move from its consumers to more mobile platforms, where it receives smaller pay-per-click fees for advertising, as the reasons for the shortfall. Still, if you look past the headline numbers, it's pretty clear that Google is growing at a breakneck pace, and I think you'd be foolish (with a small f) to think this search behemoth is down for the count.
For the fourth quarter, Google's total ad clicks jumped 34%, and in December, it continued its trouncing of the search engine market by tacking on another 50 basis points to its 65.9% market share. In comparison, Yahoo! and Microsoft's (NAS: MSFT) Bing make up just 14.5% and 15.1% of the search market, respectively. Let's not also forget that Google's "miss" still represents a 25% sales increase over the year-ago period. Not too shabby, if you ask me! Don't count Google out just yet.
Sometimes an earnings beat or miss isn't as cut-and-dried as it appears on the surface. I've given my two cents on what's next for each of these companies; now it's your turn to sound off. Share your thoughts in the comments section below, and consider adding these stocks to your free and personalized watchlist to keep up on the latest news about each company.
At the time thisarticle was published Fool contributor Sean Williams owns shares of Bank of America but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Citigroup, Bank of America, Yahoo!, Microsoft, and Google. Motley Fool newsletter services have recommended buying shares of Yahoo!, Microsoft, and Google, as well as creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that you can bank on.
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