Supplement: April 26, 2016

I'd like to provide a summary of some key earnings announcements over the last several days:

Southwest Air (LUV) beat revenue (up 9% y/y) and earnings (up 33%) expectations for Q1. Fuel expenses fell during the quarter (average down to $1.78/gallon vs. $2 a year ago). Management did their best to talk-down future growth prospects. Fuel costs are expected to rise to $1.85-1.90 this year. Competitors are adding capacity “aggressively” (should be up 4-5% in Q2/3), and that will likely drive revenue-per-seat-mile down. But it’s also true that end demand remains strong. The stock was up 1.8% yesterday after the announcement.

Polaris (PII) reported a 5% year-over-year decline in revenue and a 45% decline in earnings. Sounds terrible, but it was all factored into the stock price and Wall Street forecasts. Actually, revenue was modestly better than expected. Management appears to have issued strong earnings guidance for the year, but gave a very wide range ($6.20/share to $6.80) "due to the persistent unpredictability around overall economic trends and more specifically powersports industry trends for the remainder of 2016." The stock immediately dropped 3% in the wake of the announcement, but clawed its way back through yesterday’s session; it’s up over 3% today.

BB&T Corp. (BBT) beat first quarter earnings estimates and revenue climbed 10% y/y. Traditional banking got a little better: first quarter net-interest-margin rose 8 basis points to 3.43%. Loans to energy companies are in focus. During the quarter, the bank charged-off $154mil in loans, about $30mil of which were energy-related. Non-performing loans (i.e. not current on payments) were up 27% q/q, driven entirely by energy loans. Losses look very manageable. The stock is up 1.7% this morning.  

Schlumberger (SLB) posted first quarter earnings that narrowly exceeded expectations. Revenue also came in slightly better that Wall Street forecasts. Of course, the company noted persistent pricing pressure throughout the industry and said conditions aren’t great. But everybody knows that. The company continues to cut headcount (down by 1/3 since the oil crisis began). The CEO didn’t pull any punches: “This environment is expected to continue deteriorating over the coming quarter given the magnitude and erratic nature of the disruptions in activity.” The stock gapped down at the open this morning but quickly recovered and is now trading flat.   

Starbucks (SBUX) reported first quarter results that matched analyst forecasts. That’s not generally a good thing when your stock trades at 30 times earnings. Overall same-store-sales rose 6% vs. 6.7% expected. Asia-Pacific same-store-sales increased 3% whereas analysts were looking for about 4.5%.  So the stock is down 5.5% this morning, and investors are debating whether this is a good buying opportunity.

Alphabet (GOOGL) missed Wall Street forecasts in the first quarter. Revenue rose 18% y/y and earnings grew 14% y/y. Mobile search and YouTube were very strong. Paid clicks rose 29% vs. 31% in the prior quarter, so a little deceleration there. Investors aren’t pleased with the fact that expenses rose on new hiring activity and investments in non-core areas of the business. The stock is down almost 6% this morning.

Visa (V) narrowly beat Wall Street earnings estimates but came in line with revenue forecasts. In terms of growth, revenue rose 6% y/y and earnings grew about 8%. The company noted weakness in emerging markets economies as well as in regions dependent on oil production. That said, total payments volume grew 12% y/y and transactions processed rose 9%. Management says annual net revenue will grow 7-8% in fiscal 2016 (ending September). They previously guided to double-digit growth. So the stock is down 3.9% this morning. 

Whirlpool (WHR) missed Wall Street forecasts and the stock is down 4% today. Sales fell 4.7% y/y. Excluding the effect of currency (i.e. stronger dollar) sales increased 1%. Earnings shot up 23% y/y but still came up short of expectations. Sales in some regions (Latin America, Europe) were weak. North America, however,  posted growth. Despite disappointing results, management did not reduce earnings guidance for the full year. 

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