5. The State of Energy (Travis Hoium)
This earnings season, I’ll be watching the major trends in oil & gas and solar.
First, I want to see what the sentiment looks like for suppliers in oil & gas. Rig counts have dropped rapidly over the past year in natural gas; meanwhile, oil has only managed to stay flat despite a rapid rise in production. Low natural gas prices haven’t helped and drillers are becoming more efficient, so fewer rigs are needed.
Specifically, I’ll be looking at suppliers like Heckmann Corporation (NYSE:HEK) and CARBO Ceramics Inc. (NYSE:CRR), who supply water and environmental and ceramic proppants, respectively. They were both hammered last quarter because of weak demand and I’m interested to see if demand is picking up at all in 2013.
On the renewable energy side, I’m interested to see how quickly solar grows both domestically and overseas and who is taking advantage. Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP), once the largest manufacturer in the world, is effectively bankrupt and similar Chinese suppliers have been losing money hand over fist. Will that change or is Chinese solar going to slowly fade away?
In the U.S., does First Solar, Inc. (NASDAQ:FSLR) continue to be profitable and can SunPower Corporation (NASDAQ:SPWR) continue to improve margins and grow its residential business? This quarter will be an important data point on the path to determine who the big winners in the emerging solar market will be. I’m very excited about solar but there are still many risks and investors are by no means out of the woods.
6. Where Does Detroit Stand? (John Rosevear)
For both Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) , first-quarter earnings are likely to be a mixed bag. On the one hand, both have seen significant upticks in pickup truck sales in the U.S. in recent months. That suggests that North American earnings will be strong and overall results will be solidly profitable: Pickup sales are a major driver of profits for both automakers.
But both face challenges overseas, particularly in Europe, where auto sales are hovering near a two-decade low. Both Ford and GM have launched extensive restructuring efforts in Europe, in hopes of returning to breakeven by mid-decade. However, the near-term outlook is grim.
For both automakers’ European operations, first-quarter losses in the $500 million range would not surprise. For GM, that European loss will likely be offset by steady gains from Asian operations, particularly in China where the General remains the market leader. Ford, though, is investing heavily to expand in Asia, and its operations in the region have run at about breakeven in recent quarters.
All that said, I expect both to post solidly profitable overall results driven mostly by strength in North America. Ford’s U.S. margins have been very strong in recent quarters, as strong sales of well-priced products have kept its factories humming.
GM is still overhauling its U.S. offerings and per-vehicle profits have been somewhat thinner than Ford’s. That’s likely to improve as more of the General’s new products hit dealers in coming months, but first-quarter results may remain somewhat thin in comparison to Ford’s. Still, a solid first-quarter profit is likely for both.
The article 6 Must-Watch Trends This Earnings Season originally appeared on Fool.com.
Anand Chokkavelu, CFA organized this article and owns shares of Bank of America, Apple, JPMorgan Chase & Co., Wells Fargo, and General Motors. He also has warrants in JPMorgan and Wells Fargo. The Motley Fool recommends Amazon.com, Apple, eBay, Ford, General Motors, Google, and Wells Fargo. The Motley Fool owns shares of Amazon.com, Apple, Bank of America, eBay, Ford, Google, Heckmann, JPMorgan Chase & Co., and Wells Fargo and has the following options: Long Jan 2014 $4 Calls on Heckmann and Short Jan 2014 $3 Puts on Heckmann.
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