1997 Earnings Reports from Companies We Own

and

EPS Growth in 1998 of Our Companies Should Handsomely Exceed That of the S&P 500

 

Over the long term, stock price performance correlates highly with growth in earnings from continuing operations. In that vein, how did earnings from operations progress in the companies we are interested in?

 

Company

1997 fiscal year

1996 fiscal year

1992 fiscal year

1987 fiscal year

Autodesk

1.50e

.95

.99

.45

Ballard

1.04

.90

.50

.04

Boeing

.63

1.42

2.29

.69

Coca Cola

1.67

1.40

.72

.30

Enron

1.98

1.82

1.05

.15

Gillette

2.55

2.22

1.16

.50

H&R Block

1.65e

1.13

1.68

.86

Ionics

1.73

1.65

.93

.25

Lilly

1.61

1.39

.72

.71

Mattel

1.65

1.44

.71

-.62

Medtronic

1.3e

1.12

.34

.16

Merck

3.83

3.20

2.12

.74

Monsanto

1.23

1.12

.56

.54

Nike

2.04e

2.69

.94

.19

Qualcomm

1.27

.30

0

na

Sequent

.92

.23

.55

.20

St. Jude Med.

.97

1.54

1.41

.27

Tupperware

1.77

2.79

1.77

1.04

UST

2.37

2.44

1.41

.56

Wrigley

2.36

2.10

1.27

.56

"e" means that the company’s fiscal year does not end on December 31, so an estimate of the next fiscal year end results is reported instead. Autodesk’s fiscal year ends on January 31, H&R Block’s on April 30, Medtronic’s and Nike’s on May 31.

 

Exceptional growth in 1997 earnings per share was reported by Autodesk, H&R Block, Qualcomm, and Sequent, and three of four of these companies’ stocks were exceptional performers in 1997.

  Big 1997 disappointments were reported by Boeing, Nike, St. Jude Medical, and Tupperware. This precipitated significant declines in these four stocks, and they are great buys right now if historical long-term growth is restored. Our expectation is that a significant acceleration of growth is imminent at St. Jude, to be followed at Boeing in the second half of 1998, and by Nike and Tupperware in 1999.

  Looking at next couple of years, Autodesk, Boeing, H&R Block, Qualcomm, Sequent, and St. Jude Medical are projected to have unusually strong earnings growth. Stock price performance compared to market averages over this period should reflect this. Coke, Gillette, Mattel, Merck, Wrigley and Ballard should continue their usual exceptionally consistent long-term earnings growth.

  In summary, I expect the stocks in our portfolios to significantly outperform the broad market averages in 1998, because the earnings growth rates of our companies will significantly outperform that of the average American company.

 

Steven L. Re¢ , CFA

February 13, 1998

The above is for information purposes only and is not to be construed as a recommendation to purchase or sell securities. The above information is from sources deemed reliable but is not guaranteed. It should not be assumed that investments in any of the above mentioned securities will be profitable, and past performance is not a guarantee of future results. Earnings projections often miss, and markets don’t always go up. The employees and families of Quality Growth Management, Inc. may own the above mentioned securities in their own accounts, and may trade them at any time without notice.