It was a tough first-quarter earnings announcement season for the stock market. The S&P 500’s earnings fell 13.6%, the lowest decline since 2009. Sales were also weak, up a measly 0.8%. And only 64% of the companies posted an earnings beat. For the second quarter, earnings are supposed to decline a stunning 43.3%, with revenue down 11.5%.
The reality is that few companies were able to avoid the wrath of the coronavirus pandemic, so it’s no surprise that earnings and sales growth would slow.
Case in point: the airline industry. As I discussed this past Tuesday, the airline industry really took it on the chin. Take American Airlines Group, Inc. (AAL), for example. On April 30, for its fiscal first quarter of 2020, the airline reported an earnings loss of $2.65, which was below analysts’ estimates for a loss of $2.33. So, AAL posted a 13.8% earnings miss. Revenue of $8.52 billion missed expectations by $496.45 million. And, looking forward, earnings are expected to take an even bigger hit, with earnings coming in at an even wider loss of $7.79 per share on revenue of $1.26 billion.
The stock plummeted 11.4% post-earnings and stayed under pressure through the month of May. While it did start bouncing back after announcing more flights in July, further weakness this week means it’s still about 53% off its 52-week high of $34.99.
And that’s just one example. Well-known companies like Hertz Global Holdings, Inc. (HTZ) and J.C. Penney Company, Inc. (JPC) have gone so far as to file for bankruptcy this year.
There is a silver lining, though. There were also companies that posted solid quarterly results, and my Buy Lists are chocked full of them. So, in today’s Market360 article, let’s take a look at three of my biggest Platinum Growth Club Model Portfolio winners.
Growth Investor: DexCom, Inc. (DXCM)
+214.3% Earnings Surprise
DexCom, Inc. has been innovating the continuous glucose monitoring (CGM) industry since 1999. With DNCM’s technology, a diabetic does not need to prick their finger to test their blood glucose levels. Instead, they insert a small sensor under the skin. They will then be notified via a display device when their glucose levels are either too low or high. It is simple, user-friendly and pain-free.
The company reported its first-quarter earnings on April 28, which revealed business momentum remained strong during the first quarter. Earnings of $0.44 crushed the estimated $0.14. So, DXCM posted a whopping 214.3% earnings surprise.
DexCom noted that it has seen more patients benefit from its virtual diabetes care and real-time monitoring throughout the coronavirus pandemic. And the company expects more patients will switch telemedicine in the wake of the coronavirus.
The stock has climbed 20% higher in the wake of its strong earnings results. All told, it’s up about 180% since I added it to my Growth Investor Buy List in November 2018.
And this is just one example. All told, my Growth Investor stocks are characterized by 16.7% average annual sales growth and 72.9% average annual earnings growth.
Accelerated Profits: JD.com, Inc. (JD)
+154.5% Earnings Surprise
JD.com is often referred to as “China’s Amazon.” But unlike Amazon, JD.com started as a physical storefront in 1998. However, during the SARS outbreak in 2003, the company saw an opportunity to expand its business by selling products online. By 2004, all operations were being conducted online and now JD.com is the largest e-commerce platform in China and the biggest retailer in the country.
On May 15, the company reported positive first-quarter earnings in the wake of a surge in online sales during the lockdown amidst the coronavirus pandemic. Earnings of $0.28 per share came in well above the consensus estimate for earnings of $0.11 per share. So, JD posted a huge 154.5% earnings surprise.
Looking forward, JD expects limited disruption to its operations in the second quarter. As a result, the company is looking for sales to grow between 20% and 30%.
The stock has climbed about 16% since reporting earnings. Since I added it to my Accelerated Profits Buy List in March, JD has risen about 50%.
For all of my Accelerated Profits stocks, I am pleased to say that they are characterized by 28.9% forecasted sales and 287% earnings growth, as well as a strong earnings surprise history of 58.6%.
Breakthrough Stocks: Repligen Corporation (RGEN)
+52.4% Earnings Surprise
Repligen Corporation has developed innovative technologies to further improve modern bioprocessing and provide the steps necessary to produce biologic drugs. The life sciences company started operations with the development of Protein A Ligand. Protein A is a purification component that is used in the production of breakthrough drugs for diseases such as rheumatoid arthritis, breast cancer and multiple sclerosis.
They continue to innovate the biomedical field with solutions in dialysis products, cell culture supplements and operating room disposables, just to name a few. For the first quarter, Repligen reported adjusted earnings of $0.32 per share, or 23% annual earnings growth. Analysts were looking for earnings of $0.21 per share, so Repligen posted a stunning 52.4% earnings surprise.
The company expects to achieve between a 14% to 18% annual revenue growth for fiscal year 2020. While RGEN did pull back amid the broader market selling, it remains up on my Breakthrough Stocks Buy List with about a 53% return since I recommended it in June 2019.
As for all my Breakthrough Stocks? Well, they are characterized by estimated second-quarter earnings growth of 544.3% and sales growth of 34.7%. You can see why I like to maintain a healthy weighting of these smaller “upstarts” in my Model Portfolio, too!
Above Average Earnings Results are No Accident
My point here is this: There will be winners and losers, which is why the best defense remains a strong offense. And by investing in the fundamentally superior stocks, as I do across all of my services, I am “locked and loaded” with the winners for the second-quarter earnings announcement season.
The stocks that I discussed today may have started out in Growth Investor, Accelerated Profits and Breakthrough Stocks, but I also hand-picked them for my exclusive Model Portfolio in Platinum Growth Club. The Model Portfolio features 45 stocks, the crème de la crème that, together, offer smart diversification in this tricky market.