Here's our fourth-quarter earnings report card for 31 stocks in the portfolio

Published Tue, Mar 19 20246:00 AM EDTUpdated Wed, Apr 10 20244:24 PM EDT

The fourth quarter was pretty darn good for our stocks. Results were mostly better than expected, and many corporate leaders forecasted more of the same. For good reason: Businesses are starting to spend again, supply chain conditions continue to improve and the consumer remains resilient. Roughly 73% of companies in the S & P 500 reported positive earnings surprises, while 64% reported better-than-expected sales results, according to FactSet, which said this quarter had the lowest number of S & P 500 companies citing 'recession' on earnings calls for a quarter since the fourth quarter of 2021. In addition, the term "soft landing" had more mentions on calls this season than we've heard going back at least three years. This all aligns well with recent macroeconomic reports. And while it does mean we're in a higher rate environment for longer, it's better to be in a higher rate environment with a strong economy than a lower rate one in which rates have been cut because the economy isn't growing. We always say that there is more to be gained from listening to the conference calls than there is from just about any other source of company information given the real-time nature of management's commentary. If the above data points are any indication, the U.S. economy continues to chug along and that's music to a bull's ears. Top-line strength in the fourth quarter was provided by the healthcare (86% of companies beating sales estimates), communication services (73%), and technology (72%) sectors. Bottom-line beats were largely driven by technology (89% of companies), consumer staples (83%), and industrials (81%) As always, we're wrapping up the season with a review of results for all Club holdings. These quarterly report cards are not the end-all, be-all for analysis. But we believe stock prices ultimately follow the underlying business fundamentals of companies and having an idea of which companies did well and which didn't can help when thinking about which stocks to pick at first in a pullback or let go of in a broad-based rally. Similar to prior quarters, we grouped company results into one of four categories. The companies in each category are listed in alphabetical order. Please note, that Abbott Laboratories is not listed below as we did not own the name before the company's earnings release. We liked what we heard — enough to initiate a position. The Great The Good The Not So Bad The Ugly The Great Amazon made the shift from mostly investing in future growth to harvesting profits on past investments — and it showed in the results . Moreover, while sales guidance for the current quarter was a bit short at the midpoint, management's forecast for operating income exceeded expectations. Eaton delivered great results, cementing our thesis that the industrial stock is one of the big winners from massive mega-trends — electrification, the energy transition to digitalization infrastructure spending, and re-industrialization. The outlook for 2024 looks strong, too. Sales and earnings for Eli Lilly beat expectations, as did both gross and operating margins, driven by sales of the obesity and weight loss drugs Mounjaro and Zepbound. In addition, management's full-year sales guidance was better than expected while the earnings forecast was in line with Wall Street estimates. It was a great showing from Ford , with beats on earnings and full-year EBIT (earnings before interest and taxes) guidance. Capital discipline, leverage to hybrids, profitability of commercial vehicle unit Pro, and the potential turnaround in quality control are all reasons to stick with the carmaker. GE Healthcare closed out 2023 with a beat and raise — a shocker to many on Wall Street who had lowered expectations, worrying over China and the company's ability to hit its post-spin financial targets. That sent shares up 13% to their highest level since June 2023. Meta Platforms had one of the best earnings reports of the entire season, as sales, earnings, and cash flow trounced expectations. And in a sign of extreme confidence in the path ahead, the social media giant initiated a dividend of 50 cents per share. The results were even more impressive after Alphabet reported a miss on ad sales earlier in the week. Operating income at Microsoft was a bit short for its PC unit, but that was more than offset by the strength seen in its cloud business (Azure) and pretty much everywhere else. Investors continue to focus on the the company's intelligent cloud unit, which with productivity and business processes, surpassed Street estimates. Nvidia continued its year-long hot streak, rolling into the earnings release with sky-high investor expectations and leaping right over them. The chipmaker once again proved that despite the rapid rise in its stock price, when the driver of the action is earnings growth and not multiple expansion, the move is sustainable. Wynn Resorts is clicking : Macao is back on track with a better profit margin profile than ever before, Las Vegas is firing on all cylinders, and Boston Harbor remains resilient. It also appears the strength in the fourth quarter has carried over into the current (first) quarter in all three locations. However, the stock continues to struggle to receive credit for the recovery due to lingering concerns about China's economy. The Good Apple beat on sales and earnings, and we were pleased to see the installed base of active devices hit another all-time high in all geographies and product categories, now standing at more than 2.2 billion. However, a miss in services sales and lower-than-expected guidance kept it from being a great quarter. Positive results at Bausch Health don't matter all that much while we wait for a ruling on the company's ongoing legal dispute over Xifaxan, a key drug that represents 81% of sales at BHC's Salix Pharmaceuticals unit. The only knock on Broadcom' s strong quarter was management not raising full-year guidance to the strong quarterly results. On the post-earnings call with investors, management explained that the lack of an upward revision was because the stronger-than-expected demand for AI solutions was offset by increased weakness in the legacy business. We're in this for the AI and believe it can carry the legacy business until it has a chance to rebound in 2025. Despite missing earnings expectations, Coterra Energy delivered where it matters most: discretionary and free cash flow. The company demonstrated its flexibility and ability to allocate resources to whichever commodity — natural gas or crude — makes the most sense economically at that moment. Danaher shares soared to a new 52-week high as sales and operating income b e at expectations in every operating segment. However, guidance came up a bit short. Disney missed the Street's estimates for sales, but cost reductions across its many businesses boosted margins and helped earnings beat expectations. A strong profit forecast for the rest of fiscal 2024 and an upsized capital return program helps, too. Shares of Estee Lauder popped after the cosmetics company delivered better-than-expected results . Guidance was mixed, but investors latched onto CEO Fabrizio Freda's comment that "we are, encouragingly, at an inflection point." Linde 's expectations for the current quarter fell short of expectations, but investors shouldn't be alarmed: The industrial gas giant is a company that consistently outperforms its forecasts, delivering beats on the high end of their range for the past three years. Morgan Stanley delivered a top and bottom-line beat, but results under the hood were a bit more mixed. Shares sold off on the release due to concerns surrounding wealth management margins. It was still an overall good quarter because much of the weakness resulted from one-time charges related to a Federal Deposit Insurance Corporation (FDIC) special assessment charge on big banks in the fourth quarter, a severance expense, and a discrete tax benefit — factors not accounted for in the consensus estimates before the release. Though sales at Procter & Gamble fell short, a strong gross profit margin saved the day, leading to an operating income and earnings beat. Moreover, cash generation was well above expectations and management raised the low end of its full-year guidance range. Salesforce's quarter wasn't perfect but it beat estimates on most key metrics and the company announced its first-ever dividend. The balance of margin expansion with the potential for faster topline growth over the past year is why Salesforce is a company to own for the next few years, at least. Despite mixed results , Stanley Black & Decker did deliver on its cost and inventory initiatives — leading to beats in key areas, including adjusted gross income and margin, adjusted operating income, and free cash flow. For an investment based on a business turnaround, that's what we need to see. TJX Companies beat on nearly every earnings metric except guidance. We're not concerned because this is a conservative team. Over the last eight quarters, this management team met the high end of their estimates twice and exceeded them six times. Wells Fargo underdelivered on several key metrics for banks: efficiency ratio, non-interest expense, and return on tangible common equity (ROTCE). However, the misses were the result of one-time factors. As a result, we didn't hold that against the bank and argued it was no reason to sell. The Not So Bad Alphabet delivered beats on the top and bottom lines, driven by a strong performance from its cloud unit. Google Services, which produces the ad revenues that are the bread and butter of the business, missed estimates. Cash generation was also disappointing. We wanted more from Constellation Brands but the results were far from ugly. Solid sales performance and an upward revision to beer sales growth for the year spoke to sustained demand for the company's leading brands. Still, the wine and spirits portfolio remains problematic. Costco Wholesale reported mixed headline results , with a sales miss that may have been forgiven if not for the fact that the gross profit margin also came in a bit light. The quarter wasn't thesis-changing by any means and the powerful Costco business model is likely to excel in all seasons. You just can't miss on sales and margins when the stock is going into earnings at all-time highs. Subpar results at DuPont weren't much of a surprise given the company had already preannounced and indicated that 2024 would be weaker due to inventory de-stocking across a couple of business lines. We were pleased to see management announce a 6% dividend increase, along with the completion of an accelerated $2 billion share repurchase program and the announcement of a new $1 billion authorization. Honeywell 's earnings results weren't great, with sales missing across the board and segment profit results coming up mixed. However, cash flow was positive and earnings did outpace expectations. Our view: things are set to improve from here. Given the stock's reaction, one might wonder why we don't think the earnings results from Palo Alto Networks were flat-out ugly. For starters, the actual results were strong with sales, earnings, and cash flows all coming in ahead of expectations. Guidance was the issue as CEO Nikesh Arora said Palo Alto is making a lot of concessions right now to accelerate the adoption of the company's cybersecurity platforms. This is an acknowledgment that the demand landscape is changing and they've decided to take the medicine now rather than move slowly and drag things out. Starbucks didn't' deliver a great set of results but it was enough for a market that knew a shortfall was coming and an investor base that was more focused on the coffee chain's plan to address the temporary headwinds. Management did enough to convince investors that it has a great handle on its business. The Ugly The only good thing you can say about Foot Locker 's results is that they were so bad that it probably can't get much worse. Sales and adjusted earnings may have come in better than expected, but between a dismal forward outlook and management announcing a two-year delay to the company's long-term operating margin goal, it was an ugly report. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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Microsoft CEO Satya Nadella speaks at the company's Ignite Spotlight event in Seoul on Nov. 15, 2022. Nadella gave a keynote speech at an event hosted by the company's Korean unit.

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