Monday morning was quiet on the earnings front, but there were still several big-name companies to report quarterly results. In this piece, I am looking at those stocks, determining if any are good post-earning buys, and asking if any should be added to my Motley Fool CAPS.
The publishing giant Gannett Co., Inc. (NYSE:GCI) traded lower by more than 3% on Monday after missing second quarter (Q2) earnings expectations. The quarter itself was a slight miss as revenue declined 0.3% year-over-year to $1.3 billion.
However, the company’s broadcasting and digital segments were very strong, with $210 million and $186 million in revenue respectively. The problem is that advertising revenue declined 5.3% year-over-year, and is the company’s largest segment with $532 million in revenue.
Gannett Co., Inc. (NYSE:GCI) is not an expensive stock, at 1.1 times sales, and does pay a dividend of 3%. Moreover, the company announced a new $300 million share repurchase plan. Therefore, I don’t think Gannett is a “buy” on this earnings report alone, but if you’re a long term dividend investor then I don’t think you can go wrong with Gannett.
Is it sustainable?
PetMed Express Inc (NASDAQ:PETS) exploded higher with gains over 12% after posting an EPS of $0.24 ($0.02 beat) and revenue of $74.2 million ($4.65 million beat). The company’s quarter was phenomenal, as net sales, Earnings Per Share (EPS), and new order sales rose 7.6%, 22%, and 9.6%, respectively, year-over-year. The big boost in EPS relative to sales growth reflects margin improvements and a $4 rise on the average order size to $77.
Petmed Express Inc (NASDAQ:PETS) is also known as 1800-PetMeds, or an online pet pharmacy. Consumers can go online and order their pet’s medication for prices that are often lower than what’s paid at a local vet. Moreover, vets also use PetMeds, and it has rapidly become the primary go-to pharmacy for animals. Therefore, the business is a bit non-cyclical by nature.
Like I said, Petmed Express Inc (NASDAQ:PETS)’s quarter was phenomenal, but my biggest concern is whether it is sustainable. The company has a history of being fundamentally erratic. At 19 times earnings and a price/sales ratio of 1.32 the company isn’t expensive, but after revenue declines of 8% in the previous quarter, I can’t be too bullish about this solid quarter. Therefore, I still want to see one more good quarter before I am ready to buy this stock.
Too big to grow
McDonald’s Corporation (NYSE:MCD) is a massive restaurant chain. In fact, McDonald’s is so large that it’s hard for the company to find growth. As a result, the stock is trading lower by 3% on Monday, after slightly missing EPS expectations and meeting revenue expectations.
The company’s revenue grew 2% in the quarter, which was decent, but words such as “our results for the remainder of the year are expected to remain challenged” spooked many investors, and complemented a very conservative full-year outlook.
McDonald’s trades at 18 times earnings and 3.60 times sales. Hence, it is not cheap. With a dividend of 3%, it may be OK for long-term dividend investors, but there is nothing within the quarterly report that presents an underlying value for retail investors.
Seeking a long-term growth source
Halliburton Company (NYSE:HAL) is ticking lower by 1% on Monday after the company beat earnings expectations. The company’s beat wasn’t large, but its growth in the Middle East and Africa of 12% was particularly encouraging. The company said that it expects revenue growth in the mid-teens and improving margins in the Eastern hemisphere over the next two quarters.