Earnings beats help maintain Q4 guidance
It's a big day for earnings, with most companies reports maintaining fourth quarter guidance. The primary concern of fundamental investors—that large corporations would revise down Q4 guidance due to slower global growth—is not materializing.
Some are able to maintain full year guidance because of strong beats this quarter.
Take Ingersoll Rand, a multi-industry company with a strong beat over consensus. It reported earnings per share of $1.10 versus expectations of $1.04. The company makes heating and air conditioning, refrigeration through Thermo King, security systems and power tools. About 40 percent of revenues are outside the United States.
Thermo King bookings were up 20 percent due to strong orders in truck and trailer markets. Ingersoll Rand's guidance for the final quarter of the year is slightly below consensus, but because of the 6 cent beat in the current quarter, the company has maintained the midpoint of their full-year guidance at $3.22. Fiscal year guidance is $3.20 to $3.24.
Truck operator Ryder reported and raised the low end of its 2014 guidance range to $5.55 to $5.60 from $5.50 to $5.60. Demand and pricing trends have remained favorable. Lease sales have also been strong, a sign of improved demand for trucking services.
Roofing and fiber glass insulation company Owens Corning reported a strong beat. But it has not been able to raise prices, which has held down margins.
Stanley Black & Decker also reported a strong beat. The maker of power tools and locks for professionals and do-it-yourselfers narrowed its 2014 earnings-per-share guidance range to $5.52 to $5.58 from $5.50 to $5.60.
The one notable exception to fourth quarter guidance has been Lumber Liquidators.The hardwood flooring retailer missed by a large margin. Earnings were down 21 percent year over year, same-store sales were down 4.9 percent and guidance for Q4 was also below expectations.
What happened? Earnings and guidance suggests that demand for hardwood floors remains on the weak side.
Elsewhere:
1) On Tuesday, I noted how many stocks that had been killed during the decline from mid-September to the market bottom on Oct. 15 had rallied, and pointed out that many of them essentially regained all their losses.
This has been particularly noticeable in exploration and production stocks, as well as airlines.
For example, Chesapeake Energy dropped 28 percent from Sept. 18 to Oct. 15. Since then, it has risen 21 percent, according to Bespoke.
American Airlines dropped 17 percent from Sept. 18 to Oct. 15, and has risen 19 percent since then.
Royal Caribbean dropped 20 percent in that period. Since Oct. 15, it is up 16 percent.
In general, stocks that fell the most in that period were the ones that gained the most after the market bottomed on Oct. 15.
Read MoreStock market's biggest winners since the dip
2) Christmas is just 64 days away, and Hanukkah 55 days away. Retail sales grew a disappointing 3.1 percent last year, but there is reason to be more hopeful this year. Employment is considerably improved, the unemployment rate is down to 5.9 percent from 7.3 percent in October 2013. Still, the promotional environment is intense and the consumer is very price sensitive, according to RetailMetrics.