02 September 2009

Summary of 2nd Quarter 2009 Gauge Scores

We have nearly finished examining the second-quarter 2009 financial results for the 19 companies we're currently tracking.  We posted as many as four articles per company in the following sequence:
  • Look Ahead - before earnings release
  • Income Statement Analysis - soon after release
  • Financial Gauge Analysis - 1 to 2 weeks after release
  • Financial Gauge Update - 1 to 2 weeks after 10-Q/10-K

There are some exceptions to the pattern.  We don't post Look Aheads for a few companies, and Financial Gauge updates are not needed if the 10-Q/10-K is filed within a few days of the earnings release.

The following table summarizes the gauges and the changes to the scores from the previous quarter.  Apple (NASDAQ: AAPL) and Procter & Gamble (NYSE: PG) were new additions in the second quarter to the list of companies under analysis.  Bankrupt Nortel Networks (OTC:NRTLQ) was dropped.

Overall Gauge (100 = max) Strongest Gauge and score (25=max)
Weakest Gauge and score (25=max) Gauge Rising the Most Gauge Falling the Most
AAPL48 (-12)CM (13)G (10)P (+0.1)V (-7)
ADP 59 (0) V (19) G (6) V (+2) G (-8.5)
BP 31 (-20) CM (10) G (3) None V (-9)
BR 52 (+22) CM (19) G (6) V (+10) None
CSCO 37 (-16) P (12) G (1) None V (-8)
COP 27 (-17) CM (10) G (0) None G (-9)
EIX 28 (-6)V (10)G (1)CM (+3)V (-6)
HD 28 (+1)P (8)G (3)G (+3)CM (-1)
INTC 27 (-3) CM (13) G (0) CM (+3) V (-4.5)
KG 18 (-10)CM (7)G (0)CM (0.1)V (-5)
MSFT 61 (-8) CM (21) G (1) CM (+5) V (-6)
NOK 28 (-17) P (10) G (1) None V (-9)
NVDA20 (-1)CM (7)G (0)P (+2)V (-2)
PEP 44 (-4) V (14) G (1) P (+.1) V (-2)
PG44 (-8)V (20)G (1)NoneG (-4)
TDW 59 (-8) V (21) G (6) P (+2) G (-5)
WMT 29 (-7)V (10)G (1)V (+1)G (-10)
WPI 39 (-4)CM (12)V (8)CM (1.5)V (-2)
CM= Cash Management
G = Growth
P = Profitability
V = Value

Before we make a few observations about this table, two cautions (in addition to our normal caveats) need to be emphasized.  This group of companies is not a representative sample of the market, nor any segment of the market.  Also, the Value (and, therefore, Overall) gauge scores were based on share prices on 30 June (or 31 July for a few companies).

The first thing that jumps out is that the Growth gauge was the weakest for nearly every company.  Most firms weren't able to increase Revenue, Operating and Net Income, and Cash Flow from Operations.  Many of the Growth scores were close to zero.  Apple was the only company to achieve double-digit points for Growth.

It's also interesting that Cash Management was the strongest gauge for many companies.  Many companies took steps to raise cash, refinance debt, reduce inventories, or become more efficient in some other way.

Microsoft (NASDAQ: MSFT) achieved the highest Overall Gauge score in the second quarter, and its score was down 9 points.

Broadridge Financial (NYSE: BR) was the only company to merit a significant increase in its Overall Gauge score.  This spinoff of Automatic Data Processing (NASDAQ: ADP) does not have a long record as an independent entity, which add volatility to its scores.  Nevertheless, the increase was impressive.

We see a mixed Value story when looking at the other companies on the list.  When share prices fell broadly in late 2008 and early 2009, Value gauge scores began to rise.  However, increasing prices through the second quarter reversed this trend, significantly so in a few cases.

Full disclosure: Long many of the companies mentioned above at the time of writing; short none.  No positions in AAPL, PG, and WPI.

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