Strong Earnings Are Driving These Stocks Higher This Morning

It’s Thursday and another slate of companies have released their latest quarterly earnings reports, some of which have beaten consensus, while others have missed the mark. In this article, we will take a closer look at the latest financial results reported by five particular companies, Southwest Airlines Co (NYSE:LUV), General Motors Company (NYSE:GM), Under Armour Inc (NYSE:UA), D.R. Horton, Inc. (NYSE:DHI), and PulteGroup, Inc. (NYSE:PHM), all of which turned in positive quarters. We will also analyze relevant hedge fund sentiment towards these stocks.

This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).

Southwest Rallies in Pre-Market on Beat

Southwest Airlines Co (NYSE:LUV) handily beat estimates for the first quarter, reporting EPS of $0.88 on revenue of $4.83 billion, versus estimates of $0.84 and $4.81 billion respectively. Free cash flow was a record $1.2 billion, powered by low fuel prices and a relatively new jet fleet. The airline also returned $596 million back to shareholders through dividends and share repurchases. CEO Gary C. Kelly gave a little more detail on the results:

“As expected, operating revenues grew in line with our available seat mile growth of 9.2 percent, which is a very strong performance, especially considering the increase in stage length. The sustained strength of Customer demand for our one-of-a-kind service produced a record first quarter load factor of 80.5 percent. Solid bookings and revenue trends have continued, thus far, in April, and we currently expect modest operating unit revenue growth in second quarter 2016, year-over-year.”

Although higher crude prices could lower the un-hedged part of Southwest Airlines Co (NYSE:LUV)’s fuel expenses, 52 top funds that we track owned 9.3% of the company’s float at the end of December.

General Motors Surges on Solid Quarter

General Motors Company (NYSE:GM) is 3.4% higher in pre-market trading after the vehicle manufacturer turned in an excellent quarter. For the first quarter, General Motors beat earnings estimates by $0.25 per share with EPS of $1.26, while it beat revenue expectations by $1.89 billion with sales of $37.3 billion. Profits were more than double those achieved during the first quarter of 2015 and sales rose by 4.5% year-over-year, which is impressive given the strong dollar and weak global macro-economic picture. GM’s EBIT-adjusted margin also moved up by 130 basis points to 7.1%. Warren Buffett‘s Berkshire Hathaway owned 50 million shares of General Motors Company (NYSE:GM) at the end of December.

On the next page, we examine how Under Armour Inc, DR Horton Inc, and PulteGroup Inc. performed in the first quarter.

Under Armour Powers Up on Earnings

Under Armour Inc (NYSE:UA) shares have ramped up by 6.2% this morning after the sports brand delivered a top and bottom-line beat. Given that channel checks showed lower-than-expected demand, many analysts were not overly bullish going into earnings, but Under Armour Inc (NYSE:UA) proved the bears wrong. For the first quarter, Under Armour reported EPS of $0.04, more than double the expected earnings per share of $0.02. Revenue was $1.05 billion, up by 30.4% year-over-year, and $30 million higher than the consensus estimate. The company’s top and bottom-line beat was due to stronger-than-expected apparel demand, in addition to the launches of new basketball shoes and running shoes. The number of elite funds in our system with shares of Under Armour inched up by two to 25 during the fourth quarter.

D.R. Horton Exceeds Bottom-line Estimates 

The strong U.S economy has boosted D.R. Horton, Inc. (NYSE:DHI)‘s sales, as the company’s home sales jumped by 15.9% year-over-year to $2.69 billion for its second quarter of fiscal year 2016. Although that number was only in-line with estimates, D. R. Horton’s earnings soundly beat expectations by $0.05 per share, as it delivered EPS of $0.52. Pre-tax profit margin rose by 130 basis points to 10.9%, while the company’s sales order backlog rose by 14% to $4.1 billion. The company increased its full fiscal year 2016 guidance for consolidated pre-tax profit margin to 10.7%-to-11.2% and reaffirmed its fiscal year 2016 revenue guidance of $12 billion-to-$12.5 billion. Ken Heebner‘s Capital Growth Management owned 9.02 million shares of D.R. Horton, Inc. (NYSE:DHI) at the end of the fourth quarter. Shares are 2.58% higher in morning trading.

PulteGroup Beats on Both Lines 

Home builder PulteGroup, Inc. (NYSE:PHM) also turned in an excellent quarter, beating both the top and bottom-line expectations of analysts, as it earned $0.24 per share on revenue of $1.43 billion, exceeding earnings estimates by $0.04 per share and revenue estimates by $70 million. Sales jumped by 26.5% year-over-year. PulteGroup’s backlog ended the quarter at 8,755 homes, valued at $3.4 billion, up from 7,624 homes valued at $2.6 billion at the end of the second quarter of fiscal year 2015. The average price of a home in the backlog was $384,000, up by 14% year-over-year. Legg Mason Capital Management, now a part of Clearbridge, was one of the top elite shareholders of PulteGroup, Inc. (NYSE:PHM) that we track, as of December 31.

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