Earnings Week – Xmas came early

Mr. Market delivered xmas early this year

A couple of weeks ago I published an earnings week preview to get my readers prepared on the results of:

  • Apple
  • Starbucks
  • Under Armour
  • Buffalo Wild Wings

I want to shift my focus on what happened with those 4 stocks after earnings and what is important:

  1. Stay the course… Nothing alarming was reported to support the decision to jump ship on those stocks
  2. The underlying business is still strong, and for the most part… Mr. Market agreed
  3. Never forget how we should invest

First up… Apple:

What a roller-coaster Apple earnings were… reading the news headlines made my head hurt. One guy says one thing and the next says another. At the end of the day when I broke it all down, the business was still strong.

If you want the details, glance through Apple’s Q3 results here. Here are some Q3 2015 highlights:

  • Revenue $49.6 billion, Net Profit $10.7 billion ($1.85 diluted EPS)… Q3 2015
  • Revenue $37.4 billion, Net Profit $7.7 billion ($1.28 diluted EPS)… Q3 2014 (for comparison purposes)
  • Gross Margin 39.7% vs. 39.4% same Q last year
  • International sales were 64% of revenue
  • “Successful launch” and “great start” for the Apple Watch, but no firm details

Q4 2015 guidance:

  • Revenue $49 – $51 billion
  • Gross Margin 38.5 – 39.5%

As you can see, Apple hovered between $131 to $133 prior to earnings. Once markets closed and they released their results, after hours the stock was down -10%. The chart tells the rest. I don’t know about you, but neither the stock action or the earnings results are enough to scare me away.

Apple Q3 2015

Next up… Starbucks:

You can read Starbucks’ Q3 2015 results here. Some highlights:

  • Record revenue $4.9 billion, + 18% vs. same Q last year
  • Record GAAP $0.41 EPS, + 21% vs same Q last year
  • Global comp store sales + 7% on + 4% increase in traffic
  • 431 net new stores opened, total store count 22,519
  • Comparable store customer transactions increased + 18 million in the US and + 23 million globally
  • FY 2015 outlook increased

FY 2015 targets:

  • Net new stores remain at 1,650
  • Revenue growth + 16 – 18%
  • Global comp same store sales growth mid-single digits
  • GAAP $1.77 – $1.78 EPS (and $0.38 – $0.39 EPS for Q4 2015)

As you can tell, Starbucks shot up on Jul 24th (reported earnings Jul 23rd after market close). It retraced the move in the following days, but still up from where it was before it reported earnings. This has been one steady and stable stock.

Again, let the noise wash out and stay the course.

Starbucks Q3 2015

Next in line… Under Armour:

Under Armour reported Q2 2015 results on Jul 23rd before the markets opened. You can read what you need to know about the Q2 2015 announcement here, but the highlights say it all:

  • Revenue $784 million vs. $610 million in Q2 2014 (+ 29% vs same Q last year)
  • Net income $15 million vs. $18 million in Q2 2014 (- 17% vs same Q last year)
  • EPS $0.07 vs. $0.08 in Q2 2014
  • Apparel revenues + 23% to $515 million
  • Footwear revenues + 40% to $154 million (growth from Stephen Curry product line)
  • Accessories revenues + 39% to $83 million

FY 2015 targets raised:

  • Revenue $3.82 billion (+ 25% vs. FY 2014)… prev estimate $3.78 billion
  • Operating Income $405 – $408 million (+ 14% – 15%)… prev estimate $400 – $408 million

You invest in a strong business which is the best decision you can make. Everything else just happens, more importantly, the only thing that matters is the business needs to make things happen. What the market does is out of our control.

Under Armour Q2 2015

Last but not least… Buffalo Wild Wings:

Buffalo Wild Wings reported Q2 2015 results on Jul 28 after markets closed. You can read the full details here, but some quick highlights:

  • Revenue increased + 16.5% to $426.4 million
  • Company-owned restaurant sales + 17% to $401.9 million
  • Same-store sales + 4.2% (company-owned) and + 2.5% (franchises)
  • Net earnings – 9.3% to $21.5 million (EPS – 9.9% to $1.12)

The overall theme was solid sales performance offset by a challenging cost environment due to increased food and labor costs. Cost of wings were as much as + 26% vs. same Q last year and the company is paying out a premium for guest experience captains.

2015 Outlook:

  • Net earnings growth revised to + 13% vs. FY 2014 (due to transition costs of purchase agreement to acquire 41 franchise locations expected to close in Aug 2015)

I bet the people on the sidelines are not too happy right now. The slippage between the bid/ask on the call option I bought was quite high, but in hindsight well worth the cost. I could have never been able to predict the market would react this way but I’ve got no complaints… I invested in a business that was heavily sold off at the right time.

BWLD Q2 2015

Never forget how we invest

And maybe most important… if you made it this far, you might be the type of investor that should subscribe to my blog.

It’s not difficult to realize that a disciplined investing strategy pays off. My next post will highlight the performance of my portfolio at the end of July 2015, but throughout earnings on those 4 stocks my investment portfolio is approximately + 20% YTD. In order to accomplish this, you need to use options and you shouldn’t be scared about it either. Read some of my posts about investing with options on my blog to understand how it works.

Every decision I make also takes into account an implied objective of never losing money.

We never know what the market will do, but we must always remain disciplined, make calculated decisions and know exactly why we are doing what we do.