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April 11th, 2012 at 9:35 am
From Doug Kass:
Has the 2012 Earnings Bar Been Set Too Low?
Apr 11, 2012 | 8:43 AM EDT
Stock quotes in this article:
SHW, AA, BA, AAPL
"The Sherwin-Williams Company is updating its sales and earnings expectations for the first quarter ended March 31, 2012, previously given on January 26, 2012. Based on stronger-than-anticipated preliminary sales and earnings results, diluted net income per common share for the first quarter is expected to be in the range of $0.92 to $0.95 per share compared to the January guidance of $0.56 to $0.74 per share. The company reported diluted net income per common share of $0.63 per share in the first quarter 2011."
— Sherwin-Williams (SHW) release (April 9, 2012)
Normally, I don't think that Alcoa's (AA) earnings are meaningful to the markets. But consider Jim "El Capitan" Cramer's reflection upon Alcoa CEO Klaus's upbeat earnings commentary below:
1. Aerospace is going to exceed growth plans with eight years of plane orders from Boeing (BA) and Airbus on the horizon. That's 8,400 aircraft on backlog with the likes of the A320 and B737 being all aluminum. We are now talking about a 13% to 14% increase in that aluminum business, which includes the dominant fastener biz (screws). Plus the business jet business, hurt so badly by President Obama's critical, some would say reckless, comments, seems to be coming back.
2. Autos and 7% growth goes to 12% in North America, which offsets the European decline of 8.3% and is augmented by China's single-digit growth. With oil prices so high, Klaus says, "light-weighting is the name of the game."
3. Trucks are up 65% even as there is some recent slowing and a reduction in backlog. Worth watching but definitely robust, even in China. European down single digit again.
4. Beverage cans up 2-3% slightly better than the industry itself.
5. Industrial turbines up 1-2% but getting much stronger of light.
6. Consumer electronics remains strong, which is, wink wink, Apple (AAPL). That's part of what Klaus calls the "aluminizing" of a whole sector in part because of green desires — remember 75% of all aluminum is still in use because of recycling.
— Jim Cramer, "Alcoa Against the World" (April 10, 2012)
As Jimmy so eloquently points out above and as Sherwin Williams' commentary on Monday showed when the company substantially raised its first-quarter profit forecast, the 2012 profits outlook may be better than is expected by the consensus.
Yesterday, I suggested that investors' expectations have been dramatically reduced, creating a low bar for the markets.
And so might the case that the profits bar for the first half of 2012 might have been set too low.
Position: None