Besides an occasional corporate event or announcement, few occurrences move stock prices as much and as often as earnings reports. The last couple of days went a long ways to underscore that. As stocks you own have been effected by their recent reports, I want to pass on some thoughts on the financial developments of a few noteworthy announcements and the near term plan for managing these positions.
Wednesday’s long list of earnings announcements included some of the largest companies in the casual dining sector. Chipotle Mexican Grill and Buffalo Wild Wings are two that made the financial headlines with their quarterly reports. One of the world’s highest profile tech companies and the largest of the S&P 500 index, Apple Inc., also grabbed investors attention with its report. These three stocks all declined in reaction to disappointing quarterly financial reports. Yesterday’s earnings news was highlighted by positive announcements by Amazon.com, Linkedin and Facebook.
With $4.5 billion in sales during 2015, Chipotle is the dominant player in the $9 billion-plus domestic fast-casual Mexican category. This week, though, the company announced 1st quarter sales that were 23% below the same period last year. This news has left the market questioning the company’s total 2016 revenue growth and earnings prospects, and when, if ever, it will return to growth rates of the past.
Buffalo Wild Wings owns and franchises a total of 1,175 restaurants with plans to open another 95 this year. While the company is growing, its recent financial report shows it is growing at a slowing rate. The company reported annual earnings and revenues up 14% and 15%, respectively, but below expectations and lower than last quarter’s earnings growth of 23% and 20% gain in sales.
Apple Inc. surprised investors with its first decline in year-over-year sales since 2003. Revenues, however, were $50.6 billion. The companies earnings and margins also declined this quarter compared to last year. The cash-rich company announced an increase of $35 billion in its stock buyback program and a 10% increase in its dividend to shareholders.
These stocks, and others, seeing price swings due to recent earnings may also have experienced a change in their key fundamentals and technical outlook. That has happened to these three and, as a result, the process of prudent portfolio management calls for action. You can count on it being done – for these holdings and others. I always evaluate each position individually for the best investment strategy, It all begins with a forward view and decision to buy, hold or sell with the goal of adding the most value to your portfolio. Current market volatility has made stock options an attractive strategy and in some cases the best strategy. For other holdings a full or partial sale is determined as the best action…even if to re-position into a stronger company in the same industry group.
Please call anytime you have questions.
Thanks again for your continued trust and confidence.
John Gardner
