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 should continue rising. Here is a closer look.
Semiconductor play
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 Technologies Ltd (NASDAQ:AVGO) said its revenue dropped 2.6% to $562 million while profit declined 15.7% to $113 million. These are not great numbers, but given the competitive nature of the global semiconductor market, Avago Technologies Ltd (NASDAQ:AVGO) seems to have done a good job in protecting its turf.
Foxconn Technology Group, which is Apple Inc. (NASDAQ:AAPL)’s manufacturing partner for the iPhone, is one of the biggest customers of Avago Technologies Ltd (NASDAQ:AVGO), accounting for 21% of its revenue 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 raised their price targets on the stock to $44 and $45, respectively. This compares to the current market price of $38.
Going auto
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% decline in revenue to $359.6 million for the latest quarter, while posting a loss of $2.1 million compared with a profit of $15.6 million in the same period last year. Revenue was 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 the market’s 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 around $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.
Retail play
While moderate revenue drops are still 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. Revenue grew 2.5% 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 million–$135 million.
This revision had the market going positive on the stock, which jumped nearly 13% after results. Since the stock was range bound for the last four months, it may be a positive breakout. This moderately geared company’s current valuation puts 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.
Foolish bottom line
Overall, these earnings results were 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 stocks such as Express may be a better bet.
The article Strong Results Could Boost These 3 Stocks originally appeared on Fool.com and is written by Jacob Wolinsky.
Jacob Wolinsky has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Jacob is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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