Quarterly results are often the trigger points for breakouts on the higher or lower side for stocks and as such offer a great opportunity to investors to monitor their portfolio’s viability. Avago Technologies Ltd (NASDAQ:AVGO), Modine Manufacturing Co. (NYSE:MOD) and Express, Inc. (NYSE:EXPR) recently announced their latest quarterly results and by the looks of it, stocks of these companies will likely be rallying. Here is a closer look:
Avago Technologies Stock
Avago Technologies Ltd (NASDAQ:AVGO) is a manufacturer of semiconductor products for wireless communications, wired infrastructure, industrial and automotive electronics industries. The stock popped after reporting better than expected quarterly results. Avago said its revenues skidded 2.6 percent to $562 million while profits declined 15.7 percent to $113 million. These are not great numbers but given the competitive nature of the global semiconductor market, Avago seems to have done a good job in protecting its turf.
Foxconn Technology Group, which is Apple’s manufacturing partner for the iPhone, is one of the biggest customers of Avago Technologies Ltd (NASDAQ:AVGO), accounting for 21 percent of its revenues for the latest full year. The company primarily operates an outsourced manufacturing business model that utilizes third party foundry and module assembly capabilities but also operates its own fabrication facilities in Fort Collins, Colorado and Singapore to protect its intellectual property. Following the results, RBC and Deutsche Bank AG (NYSE:DB) (ETR:DBK) raised their price targets on the stock to $44 and $45 respectively. This compares to current market price of $38.
Wisconsin based Modine Manufacturing Co. (NYSE:MOD) is a manufacturer of parts for the global automotive industry with a special focus on heating and cooling technology and solutions. The company reported a 7.5 percent decline in revenues to $359.6 million for the latest quarter while swinging to a loss of $2.1 million compared with a profit of $15.6 million in the same period last year. Revenues were affected by declining commercial vehicle sales but its bottom line included a one time $2 million charge for a tax valuation allowance in Asia.
Nevertheless, the results were ahead of market expectations indicated by the surge in stock following the results. Analysts at Robert Baird have increased their price target to $12 for the stock which currently trades at $10. At a forward price earnings ratio of 16.7, the stock is not in the expensive zone although further gains may be limited. The company remains hopeful of posting better results going forward due to strong new program wins which are likely to offset the effect of weakness in the North American commercial vehicle market and sluggish growth in European market.
While moderate revenue drops are still seen satisfactory in capital intensive businesses, specialty apparel and accessory retailer Express, Inc. (NYSE:EXPR) posted a jump in its top line for the latest quarter. Revenues grew 2.5 percent to $508.5 million although margins came under pressure. However, the company made an upward revision in its full year guidance in anticipation of a strong second quarter. The company expects net profit of $139.3 million for the full year, up from an earlier projection of $127 – $135 million.
This revision had the market going positive on the stock which jumped nearly 13 percent on Thursday after results announcement. Since the stock was range bound for the last 4 months, it may be a breakout on the upside. This moderately geared company’s current valuation put a multiple of 13.2 on its trailing 12 months’ earnings but this reduces to 12.3 for the next 12 months’ earnings indicating room for further growth.
Overall, these earnings results are seen as positive by the market although there remains a clear risk of the market witnessing a correction from here. In this light, sticking to consumption driven stock such as Express, Inc. (NYSE:EXPR) may be a better bet.