Why Are These Five Stocks In Spotlight Today?

Although earnings season is in full swing, the broader markets are strangely quiet. The VIX is below 14, and the S&P futures are flat. Among the stocks trending this morning are Caterpillar Inc. (NYSE:CAT), Carnival Corp (NYSE:CCL), Honeywell International Inc. (NYSE:HON), AutoNation, Inc. (NYSE:AN), and SunTrust Banks, Inc. (NYSE:STI). Let’s take a closer look at why each stock is in the spotlight and see how the smart money thinks of each of them.

While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. 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).

Caterpillar Misses on the Bottom Line

Caterpillar Inc. (NYSE:CAT) reported a mixed first quarter, with earnings of $0.67 per share on revenue of $9.46 billion, versus estimates of $0.68 in EPS and revenue of $9.39 billion. Due to lower commodity prices, the company’s EPS dropped to $0.67 from $2.07 in the first quarter of 2015. Guidance is light, with management expecting 2016 sales of $40-$42 billion versus the previous guidance of $40-$44 billion and 2016 profit of $3.70 per share versus the previous $4 per share. The primary reason for the lower EPS is higher restructuring costs. Caterpillar Inc. (NYSE:CAT) CEO Doug Oberhelman said:

While first-quarter results were about as we expected, sales and profit were well below the first quarter of 2015. Sales declined across the company with substantial reductions in construction, oil and gas, mining and rail. While many of the industries we serve are challenged, we remain focused on what we can control: the quality of our products, our market position, safety in our facilities and continued restructuring and cost reduction. In fact, our period costs and variable manufacturing costs in the quarter were nearly $500 million lower than the first quarter of 2015

Joel Greenblatt’s Gotham Asset Management was among 31 funds that we track that owned shares of the company at the end of December.

Carnival to Begin Miami-Cuba Trips in More Than Half a Century

Carnival Corp (NYSE:CCL) is buzzing today after the company issued a press release confirming that its Fathom brand will sail every other week from Miami to Cuba beginning on May 1. The maiden voyage will be the first such trip in more than half a century due to previous U.S. and Cuban tensions. As a bonus, Cuba has also allowed Cuban-born passengers to visit the country. The number of smart money investors from our database with holdings in Carnival Corp (NYSE:CCL) dropped by five to 48 at the end of December.

On the next page, we examine Honeywell International, AutoNation, and SunTrust Banks.

Honeywell Turns in a Good Quarter

Industrial giant Honeywell International Inc. (NYSE:HON) reported a good first quarter with EPS of $1.53 on sales of $9.52 billion, versus estimates of $1.50 and $9.37 billion, respectively. Sales rose 3.4% year-over-year, led by the company’s Automation and Control Solutions division, which registered a revenue jump of 13%. The company’s operating margin also rose 20 basis points to 17.6% excluding the impact of M&A. Management raised 2016 EPS guidance to between $6.55 and $6.70 and revenue guidance to the range of $40.3 billion to $40.9 billion from the previous EPS and revenue forecasts of $6.45-$6.70 and $39.9-$40.9 billion, respectively. A total of 49 top funds that we track owned $2.05 billion worth of Honeywell International Inc. (NYSE:HON)’s shares at the end of the fourth quarter. Shares of the company are down 1.30% in morning trading.

AutoNation Lower on Disappointing First Quarter Results

AutoNation, Inc. (NYSE:AN) reported first-quarter earnings of $0.90 on sales of $5.12 billion, missing both top- and bottom-line estimates. Same store sales inched 2% lower, while the company’s gross margin rate declined 10 basis points to 16.1%. Its operating margin rate dropped 20 basis points year-over-year to 4.1%. CEO Mike Jackson said:

“As we stated last quarter, the market is in a plateau environment. Industry retail sales for the quarter were flat despite year over year manufacturer incentive increases of 14%, new vehicle sales lease penetration over 30%, and high retail inventories. We still believe the industry will be above 17 million units for the year.”

Larry Robbins’ Glenview Capital was among the top shareholders of AutoNation, Inc. (NYSE:AN) as of the most recent 13F reporting period. Shares of AutoNation are down 1.14% in morning trading.

SunTrust Up on Earnings Beat 

SunTrust Banks, Inc. (NYSE:STI) shares have inched up by 3.5% after the bank reported an EPS of $0.84 on sales of $2.09 billion, exceeding EPS and revenue estimates by $0.09 per share and $60 million, respectively. The company’s tangible book value per share rose 5% year-over-year to $32.90 and the company bought back $175 million of warrants and stock in the quarter. Average deposits rose 6% year-over-year. CEO William Rogers said:

“This revenue performance, combined with continued expense discipline, resulted in a good start to the year with 8% earnings growth. We remain highly focused on improving the financial well-being of our clients and communities and delivering increased value to our shareholders.”

A total of 36 funds from our database owned $608.58 million worth of SunTrust Banks, Inc. (NYSE:STI)’s shares, which accounted for 2.80% of the float on December 31, versus 45 funds and $524.03 million, respectively, a quarter earlier.

Disclosure: none