We ranked the latest earnings reports from 30 portfolio stocks from great to ugly
It was a solid quarter for the companies in our stock portfolio, with the bulk of our names reporting what we felt were good-to-great earnings reports. Continued economic growth on the back of a resilient consumer and increasing business confidence ahead of what most expect to be a lower interest rate environment helped drive the results. Our companies’ performances were reflective of the S & P 500 firms in aggregate: 81% of technology companies beat sales estimates for the second quarter, followed by health care 79% and financials 61%, according to FactSet data. Health care at 87% and industrials at 82% were sector leaders in bottom-line beats. Methodology With the latest earnings season largely in the rearview, these second-quarter report cards are not the end-all, be-all for analysis. After all, we’ve only got about two weeks left in the third quarter. Nonetheless, we believe stock prices ultimately follow the underlying business fundamentals of companies. So, having an idea of which companies did well and which ones did not can help when thinking about which stocks to pick first in a pullback or let go of in a broad-based rally. With the latest earnings season largely in the rearview, these second-quarter report cards are not the end-all, be-all for analysis. After all, we’ve only got about two weeks left in the third quarter. Nonetheless, we believe stock prices ultimately follow the underlying business fundamentals of companies. So, having an idea of which companies did well and which ones did not can help when thinking about which stocks to pick first in a pullback or let go of in a broad-based rally. Similar to prior quarters, we grouped company results into one of four categories. The companies in each category are listed in alphabetical order. The Great The Good The Not So Bad The Ugly Home Depot is not listed below because we did not own the name before the company’s earnings release. With the Fed widely expected to cut interest rates at its upcoming September meeting, we opted to initiate a position in Home Depot to increase our exposure to quality companies that have been held down in this high interest rate environment but will see their industries improve as rates come down. Costco is also not included as the company has yet to report results. We will circle back and add Costco when the numbers are out toward the end of the month. Here is our ranking of earnings from 30 out of our 32 companies. The Great Apple : Despite all the worries about China, the consumer tech giant hit back with beats on the top and bottom lines. Equally important, total revenue guidance and management’s services growth forecast for the current quarter outpaced expectations. Advanced Micro Devices : In addition to exceeding expectations for both sales and earnings, management provided a positive outlook for the current quarter and sounded upbeat about AI chip demand. While MI300 chip supply continues to improve, CEO Lisa Su noted her expectation for supply to remain tight through 2025. On the PC front, she continues to think that new AI-enabled PC along with general refresh demand given how far removed we are from the last refresh cycle, during Covid, will result in strong demand for the company’s new “Zen 5” processors. Best Buy : Strong execution resulted in a top and bottom line beat versus expectations while the promise of wider adoption of AI devices and PCs as well as upcoming lower interest rates provided management the opportunity to raise full year guidance. Salesforce : The enterprise software giant beat sales and earnings expectations in the second quarter. The company may have maintained its full-year revenue outlook, but that was taken as good enough after last quarter’s debacle. Plus, an increase to its margin forecast showed Salesforce remains committed to profitable growth. DuPont : It was another beat-and-raise quarter , continuing a recovery partly driven by growing demand for AI chips — and rewarding our patience with the stock. DuPont has turned the corner, and now it is hitting full stride on its recovery. Danaher : The life sciences company delivered a strong quarter and reaffirmed its guidance — signaling the longtime Club stock is back on track. This quarter was exactly what we needed to see. In addition to strong performance at the companywide level — with profit margins and cash flow generation complementing the strength in sales and earnings — bioprocessing demand is improving as end-market inventory and funding continue to normalize. Dover : The company delivered better-than-expected second-quarter earnings and raised its full-year guidance — an all-around strong report that validates our decision to take a stake in the industrial name two months ago. Eaton : The momentum on display in Eaton’s quarterly results and in management’s outlook is showing no signs of slowing down. Segment profit margin and organic sales growth topped estimates. Management also raised its outlook for the year. In addition to industrial applications, both Eaton and Dover are beneficiaries of the AI-driven data center buildouts for the parts and systems they make. Eli Lilly : It was a home-run quarter fueled by sales of its blockbuster obesity and diabetes drugs, quieting any lingering investor concerns in the stock. Eli Lilly not only crushed estimates on all the most important items — profits and sales of diabetes treatment Mounjaro and weight loss drug Zepbound — but the company also hiked its full-year guidance for revenue, earnings and gross margin. Meta Platforms : Management delivered better than expected quarterly results, delivering revenue at the high end of guidance thanks to a roughly 22% increase in advertising dollars. While there are still concerns about the company’s aggressive AI spending, we believe these investments will pay off in the long run. Nvidia : The results , the guide and everything we heard on the call served only to increase our conviction that Nvidia really is the greatest semiconductor company in the world at the heart or the accelerated computing megatrend. Palo Alto Networks : Quarterly results were strong, and all signs point to continued growth ahead. While product sales performance did come up a bit light, the weakness was more than offset by strength in the company’s subscription and support offerings. Companywide gross income and operating income were all ahead of expectations. Management also provided a better-than-expected sales, earnings, and recurring revenue outlook. Stanley Black & Decker : Delivered solid quarterly results — enhanced by strong cash flow performance, allowing management to raise its full-year guidance. Like Best Buy, Stanley is a stock that will benefit from lower borrowing costs. The Good Abbott Laboratories : Sales, earnings and organic growth all exceeded analyst estimates. Unfortunately, that was overshadowed by softer than expected guidance for the current quarter. That said, we think management’s upward revision to the full year forecast, for both organic revenue growth and earnings are where investors should focus. Broadcom : Sales and earnings outpaced expectations , driven by strong sales of its AI products and VMware software. But management’s guidance for the current quarter disappointed investors, keeping this from being an outright great quarter. Disney : Concerns about attendance at its theme parks overshadowed streaming profits and better-than-expected headline results . However, the quarter checked the boxes that matter most to us. Alphabet : Delivered largely better-than expected earnings results that showed the search and cloud giant is finally on better footing in the fast-growing AI space. Linde : It was another impressive quarter , as the industrial gas supplier continues to demonstrate its reliability and value in a diversified stock portfolio. Morgan Stanley : It was a pretty strong quarter overall. In addition to the revenue and earnings beats, Morgan Stanley put up better-than-expected results on nearly all key firmwide metrics. Unfortunately, results came up short in both the Wealth Management and Investment Management segments. Microsoft : In addition to fiscal Q4 sales and earnings outpacing expectations, gross, operating, and net profit margins were all better than expected at the companywide level. Operating profitability was stronger than expected in all three main operating segments. Cash flow generation was also much more than expected despite slightly higher-than-expected operating expenses and capital expenditures to support the company’s cloud and artificial intelligence offerings. The one major miss was at Azure, which is the one unit investors are hyper-focused on and prevents us from calling it a great quarter. Nextracker : A roughly $100 million revenue beat and healthy profits per share were not enough to satisfy investors as scrutiny of the solar company’s revenue backlog came more into focus during Nextracker’s conference call with analysts. It seems to be the overarching concern around the quarter. Starbucks : The quarter wasn’t a great one, but expectations were low after the previous quarter, a debacle that led to a 16% plunge the next day. The two most important things Starbucks needed to do this time were show signs of improvement in North America and maintain its outlook. It delivered on both with slightly better sales and small margin compression in its largest region, while the full-year outlook was reiterated. Constellation Brands : Reported an earnings beat driven by strength in its beer business. However, investors — including us — remain troubled by continued weakness in the wines and spirits business. TJX Companies : The company’s ever-increasing ability to attract deal-hungry shoppers was on display , with a 4% increase in quarterly comparable store sales entirely driven by more purchases rather than higher prices. TJX is pairing that flourishing customer appeal with its well-oiled corporate operations, enabling the company to deliver the financial results that investors have come to expect. The Not So Bad Amazon : Quarterly results were mixed as sales came up short. Nonetheless, Amazon Web Services delivered great results, hitting a $105 billion revenue run rate and with operating margins that continued to trend higher despite heavy investment to keep up with demand. On the other hand, there were misses across its e-commerce and associated businesses. We could live with that but what kept this from being a good quarter was that in addition to the mixed results, guidance for the current quarter came up short. Coterra Energy : Sales and earnings came up short , however, production volumes and more importantly cash generation both came in ahead of expectations. In addition to the strong production and strict capital expenditures discipline, management raised their production outlook and discretionary cash flow target for the remainder of the year. GE Healthcare : It was not the best showing from GEHC. China was a key source of weakness in the quarter, and the primary factor forcing management to downwardly revise its full-year organic growth outlook. Honeywell : Strong second-quarter results were overshadowed by a mixed update to management’s outlook for the remainder of the year. But we’re looking through the weakness on a belief that the industrial conglomerate is heading toward a healthy 2025. Wells Fargo : The bank reported a beat on earnings but delivered softer guidance due to the uncertain economy and interest-rate environment. The Ugly Procter & Gamble : It was a messy quarter , which could give fuel to investors worried that a deterioration in the consumer would make its guidance harder to achieve. Nevertheless, P & G still fills an important role in a diversified portfolio, and its business is on solid footing. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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It was a solid quarter for the companies in our stock portfolio, with the bulk of our names reporting what we felt were good-to-great earnings reports. Continued economic growth on the back of a resilient consumer and increasing business confidence ahead of what most expect to be a lower interest rate environment helped drive the results.
