Three Stocks to Buy on Recent Earnings
In this article, I will discuss three companies that have recently reported quarterly results and which I think remain good long-term investment options. The companies are Rite Aid , ConAgra Foods , and General Mills .
Splendid run likely to continue for Rite Aid
Rite Aid has put up a solid performance in recent quarters, which has resulted in year-to-date stock price appreciation of 250%. Last month, Rite Aid announced healthy results for the second quarter of fiscal 2014, continuing its momentum of strong results.
It reported quarterly revenues of $6.29 billion, representing an increase of 1% year-on-year. The increase in quarterly revenues was led by an increase of 1% in comparable same store sales. Rite Aid reported earnings per share of $0.03, beating earnings per share consensus estimates by 175%. Earnings per share for the second quarter was increased by more than 150% year-on-year.
The company has long been exposed to intense competition from CVS Caremark and Walgreen. Rite Aid has been making the right moves to counter the competition and remains on track to deliver a solid financial performance in the upcoming years.
In addition, Rite Aid has been working to control its costs and remodel its existing stores. Cost control steps taken by the company are likely to lower its SG&A expenditures by making operations and the supply chain more efficient. SG&A expenditures as a percentage of revenues dropped by 50 basis points to 25.5% in the second quarter, as compared to 26% in the second quarter of fiscal 2013.
Rite Aid is currently trading at attractive valuations as compared to its competitors. Currently, Rite Aid is trading at an EV/EBITDA of 7.5 times as compared to an EV/EBITDA of 12 times and 8 times for Walgreen and CVS Caremark, respectively.
Lastly, analysts have estimated an attractive five-year growth rate of 8% per year looking forward. Due to the solid financial performance, attractive valuations, and an attractive growth rate estimate for the future, it is definitely worth a look for Foolish investors.
Attractive growth opportunity
Over the years, General Mills has yielded solid financial performance built upon with solid product portfolio.
Last month, the company announced decent financial results for the first quarter of the 2014 fiscal year. General Mills registered total revenues of $4.372 billion and earnings per share of $0.70. Total revenues for the quarter grew by 7.9% year-over-year. The company is on track to deliver a strong financial performance going forward and analysts estimate an impressive growth rate of 7.8% per year for the next five years.
General Mills has been taking steps to expand its international market presence and pacing up its product innovation to keep up with changing tastes and consumer preferences. Revenues for the company's international segment increased by more than 20% in the recent quarter. This was mainly due to acquisitions and product innovation initiatives that the company has taken to grow its international presence to tap in to available growth opportunities.
The company expects double-digit growth in its international business in upcoming years. As it continues to expand its presence in international markets and offer new products to sustain its solid product portfolio and market share, I think that these measures will translate into robust earnings growth. Therefore, given its domestic dominance and international growth prospects General Mills should definitely be considered by Foolish investors.
Attractive valuations = buying opportunity
In its recent quarter, ConAgra Foods struggled to post healthy financial results. This was mainly due to a weak consumer spending environment in the United States. However, as the consumer spending environment is expected to improve next year, ConAgra should have no problem bouncing back and the company's financial performance should be positively affected.
The company recently announced its financial results for the first quarter of fiscal 2014. The company reported total quarterly sales of $4.2 billion and earnings per share of $0.37. Adjusted quarterly revenues dropped by almost 1.5% year-over-year and earnings per share for the quarter decreased by 15% year-over-year.
To combat this, ConAgra is increasing its promotional and advertisement activities to increase its sales. In the most recent quarter, advertising spending increased by nearly 15%, consistent with its efforts to increase sales. In the upcoming quarters, the company plans to further increase its advertisement and promotional activities to increase sales volume and market share further.
Perhaps more importantly, the company's stock is currently trading at an attractive valuation as compared to its competitors. The following table shows ConAgra has attractive valuations in comparison to Kraft Foods and Kellogg:
Source: Yahoo Finance.
Foolish Final Take
All three of the previously discussed companies are worth a look to long term investors. Rite Aid continues to deliver healthy financial performance and is just beginning a turnaround. General Mills is dominant domestically and is making inroads internationally. Lastly, ConAgra Foods stock is trading at an attractive valuation and its initiatives to increase its sales via promotional and advertising activities are likely to help going forward.
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The article Three Stocks to Buy on Recent Earnings originally appeared on Fool.com.Syed Shah has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.
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