5 Reasons Not to Worry This Week
After a remarkable first quarter, the wheels are starting to come off two weeks into the sophomore quarter.
The market suffered its biggest weekly drop this past week, and that was after a soft performance the week before.
Many will argue that the market was due for a breather after posting double-digit percentage gains on the S&P 500 in back-to-back quarters, but most of the economic metrics coming out remain generally upbeat.
I recently went over some of the companies that are expected to post lower quarterly profits when they report this week.
Thankfully, they're the exceptions and not the rule. Let's go over some publicly traded companies that are expected to stand tall this week by posting year-over-year improvement on the bottom line.
Latest Quarter EPS (estimated)
Year-Ago Quarter EPS
|Intuitive Surgical (NAS: ISRG)||$3.14||$2.59||Add|
|Qualcomm (NAS: QCOM)||$0.96||$0.86||Add|
|VMware (NYS: VMW)||$0.60||$0.48||Add|
|Chipotle (NYS: CMG)||$1.92||$1.46||Add|
|McDonald's (NYS: MCD)||$1.23||$1.15||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Intuitive Surgical.
The company that has revolutionized some operating procedures with its da Vinci Surgical System has been growing at a time when many hospitals have been scaling back on other capital expenditures.
There are now 2,132 installed da Vinci systems, and 534 of those were put into service last year.
Intuitive Surgical's system was approved for general laparoscopic procedures 12 years ago, and the number of approved procedures has been gradually growing. Intuitive Surgical makes money on both the initial installations and the services and parts that increase with system usage, so it's not a surprise to see Intuitive Surgical's financials improving as more hospitals deploy the high-tech surgical arms that make more precise incisions than surgeons themselves.
Qualcomm has been the thinking investor's play on the smartphone craze, and it continues to pay off. Analysts see profitability growing nearly 12% on a per-share basis when Qualcomm reports on Wednesday.
VMware is the fast-growing leader in virtualization software. Wall Street's banking on a quarterly profit of $0.60 a share out of the company, but don't be surprised if VMware winds up earning more than that. Analysts have underestimated the tech darling's bottom-line results for 14 consecutive quarters.
Chipotle Mexican Grill is sexy and it knows it. The baron of burritos hit a fresh all-time high on Friday, and the quick-service champ's appeal is evident to anyone going past a crowded Chipotle eatery during peak lunch and dinner hours.
Unfortunately for Chipotle, the consumer-facing fave has actually come up short relative to Wall Street profit targets in two of the past three quarters. The valuation also isn't for the timid. Shares of Chipotle are fetching 50 times this year's projected net income and 40 times next year's forecast. The concept's unique success in its niche warrants a healthy premium, but there is also little room left for disappointment if it should come up short on Thursday for the third time in four quarters.
Finally, we have McDonald's. The world's largest restaurant operator has proven that it can grow during both lean economic times and pockets of prosperity. The growth usually isn't mind-blowing. Wall Street pros see net income climbing just 7% higher in its latest quarter, but it's obviously another step in the right direction.
Cross those fingers, but know the fundamentals
Investors in these five stocks have a right to be excited. They are all improving their financial situations. They are worthy of the gains that the market rally has bestowed upon them over the past year.
I wouldn't be uncomfortable owning any of these companies. They're doing the right thing, regardless of Mr. Market's mood swings.
The expectations may be high, but these five stocks wouldn't have it any other way.
At the time this article was published The Motley Fool owns shares of Chipotle Mexican Grill and Qualcomm.Motley Fool newsletter serviceshave recommended buying shares of Intuitive Surgical, Chipotle Mexican Grill, VMware, and McDonald's.Motley Fool newsletter serviceshave also recommended creating a bear put spread position in Chipotle Mexican Grill. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.