While concerns regarding an abrupt halt to quantitative easing are running high, corporate results continue to paint an upbeat picture of reality. The Home Depot, Inc. (NYSE:HD), STMicroelectronics N.V. (ADR) (NYSE:STM) and Rally Software Development Corp (NYSE:RALY) are some companies whose business prospects have started to look much better. Here is a closer look:
The Home Depot, Inc. (NYSE:HD) shattered analysts’ expectations, posting a higher-than-expected 18.5% growth in profits, which reached $1.2 billion, in the first quarter. Revenue growth was solid at 7.4% as more people turned to the home improvement retailer following continued recovery in the US housing market. The company not only saw margin improvements during the quarter, but also upped its full year sales guidance to project 2.8 percent sales growth.
However, the biggest positive was the bottom-line enhancement which is projected at 17% growth on a per-share basis. In addition to growth in profits, this will be made possible by share repurchases amounting to $4.4 billion over the remaining months of the year. The stock has advanced in a linear fashion over the last 12 months, and there are good reasons this trajectory will likely remain the same over the next several quarters. Following the quarterly results announcement, brokerages have increased their price targets on the stock to beyond $85.
A phoenix rises from the ashes
Semiconductor manufacturer STMicroelectronics N.V. (ADR) (NYSE:STM) took a severe beating during 2011 after it became clear that Nokia – its biggest customer – had missed the smartphone rally and was faced with deep financial issues. STMicroelectronics N.V. (ADR) (NYSE:STM) itself saw a sharp reduction in revenues in 2011 and 2012 which has resulted in the company swinging to losses now. For the full year 2012, it booked a loss of $1.16 billion on sales of $8.5 billion.
However, the situation seems to have stabilized, with visible traction in order books. STMicroelectronics N.V. (ADR) (NYSE:STM) shares surged after chief executive Carlo Bozotti said the company expects order growth of 5%-10% for the current year. This builds on the 5% growth seen in the latest quarter. Full-year revenue is expected to be around $9 billion, not a great jump from last year’s $8.5 billion, but the resulting effect on margins could send the shares higher. At current prices, the stock trades at a forward price-earnings ratio of 13.2, while its price-sales ratio of 1.01 indicates that it has more room for growth.