Earnings Reports Show Consumers Have Some Life

Bob Pisani is on assignment today, this post was written by CNBC producer Robert Hum.

Even though earnings have been solid this week, stocks have failed to get a big boost, as they have remained strongly tied to the dollar’s movements. The major indices have only fractionally gains/losses on the week (Dow up 0.6 percent, S&P up 0.3 percent, Nasdaq down 0.2 percent).

It’s Alive!

Some signs the consumer is alive and spending…albeit cautiously. A good sign for the economy: a number of firms saw higher consumer spending in the latest quarter. However, traders noted that some margins concerns from a couple of retailers illustrated the fact that, although the consumer is spending, it remains very price-sensitive in its shopping.

a) American Expressreported better-than-expected Q3 earnings ($0.90 vs. $0.87 consensus). Cardmember spending jumped 14 percent. Credit quality continued to improve as provisions for losses were slashed to $373 million from $1.2 billion in the year-ago quarter. Despite the higher earnings, expenses soared 28 percent primarily due to greater marketing costs and rewards programs costs, as well as higher salaries.

b) Chipotle Mexican Grillrises 3 percent after earnings beat estimates ($1.52 vs. $1.30 consensus) on strong sales and higher margins. Same-store sales for the fast food company soared an impressive 11 percent as a result of increased traffic.

The strength this year (comps likely up high single digits) will make next year’s comps tougher (firm expects growth in low single digits). Another good sign: the chain plans to continue its rapid expansion. 120-130 new restaurants will have opened in 2010 (through 9 months, 67 new locations have opened), while 135-145 openings are expected next year.

c) Penske Automotive Group beat estimates by a penny on higher new and used car sales (up 5.8 percent and up 14 percent, respectively). Same-store sales rose 3.8 percent, but margins narrowed as profits per used car transaction were down 18 percent..

d) Amazon.comfalls 1 percent even after its earnings beat the Street ($0.51 vs. $0.48 consensus). The online retailer also reported higher than expected sales (up 39 percent!) as sales of its new Kindle and other electronics/other general merchandise were very strong. Sales guidance for the current quarter looks solid too – up 26 percent to 40 percent vs. the Street’s estimate of 29 percent growth.

But despite the strong top line growth, shares fell as the e-tailer’s margin growth was below what the Street had been looking for.


1) The string of strong industrials reports this week continues today with two big reports

Honeywellbeats estimates ($0.64 vs. $0.62 consensus) as demand improved across most of its segments. Revenues at its transportation unit soared 19%, chemicals revenues jumped 16 percent and automation/controls sales rose 9 percent

The industrial firm raised full-year to $2.52, a bit below $2.53 consensus, and that also implies slightly disappoint Q4 guidance of $0.79 vs. $0.80 consensus. However, the company sees 2011 sales growing 5 percent or more, fairly inline with current Street expectations.

Ingersoll-Randearnings beat estimates($0.85 vs. $0.79 consensus) as sales rose a very respectable 8 percent, as orders rose 10 percent. Although continued weakness in commercial construction markets continued to hurt some of its operations (echoing earlier comments by Eaton and UTX, Ingersoll-Rand noted “sustained recoveries in the worldwide industrial and refrigerated transport markets, global parts and service activity and across most of the company's businesses in Asia.”

Earnings and revenue outlooks were raised for the year, to levels mostly inline with the Street’s estimates.

2) And regional banks are getting a small boost in early trade thanks to Keycorp’s good report today:

Keycorp beats estimates($0.19 vs. $0.03 consensus). Although total loans fell 17 percent , the regional bank saw its interest margin rise. Credit quality continued to improve as loan charge-offs and non-performing loans fell. Another good piece of news: loan loss provisions fell sharply from $733 million from the year-ago quarter to just $94 million in the latest quarter.

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