Which Conglomerate Stocks Have the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 5 conglomerate stocks rank via earnings trends:

General Electric Co. (NYSE:GE): Current Price $22.04

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 181,580 154,440 149,590 147,300 147,360
Diluted EPS ($) 1.72 1.01 1.06 1.23 1.29

Sales at GE have fallen every year until 2011 and are flat in 2012. But the company is still working on improving profitability – its earnings have improved every year through the last four years. Interesting…

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 37,980 35,180 36,500 36,350 39,330
Diluted EPS ($) 0.35 0.29 0.29 0.33 0.38

We find the same trend of a rising EPS during both the last two quarters. A stock to keep on our watch list…

Caterpillar Inc. (NYSE:CAT): Current Price $97.62

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 44,960 51,320 32,400 42,590 60,140
Diluted EPS ($) 5.37 5.66 1.43 4.15 7.40

Caterpillar hit a trough in 2009 but has since gotten its act together. Both sales and profits have grown at a nice clip…

Let’s take a look at the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 15,720 17,240 15,980 17,370 16,440
Diluted EPS ($) 1.71 2.33 2.37 2.54 2.54

Unfortunately the quarterly story is quite something else. Revenue is fluctuating and declined in September 2012. Besides, EPS has remained flat over the last two quarters…

Siemens AG (NYSE:SI): Current Price $110.97

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 116,300 103,850 103,120 102,630 101,720
Diluted EPS ($) 9.61 3.56 6.03 9.72 6.55

Plunging sales every year, though a creditable profit performance until 2011. But in 2012 profits took a hit too…

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 28,820 23,280 25,480 23,710 28,200
Diluted EPS ($) 1.90 2.12 1.47 1.13 1.79

Some erratic quarters here, but September 2012 has turned out better because both revenue and EPS grew. We’ll keep looking…

United Technologies Corp. (NYSE:UTX): Current Price $86.95

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 55,720 59,120 52,420 54,330 58,190
Diluted EPS ($) 4.27 4.90 4.12 4.74 5.49

United Technologies has reported better revenue and profits during the last two years and looks promising.

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 14,240 16,810 12,420 13,810 15,040
Diluted EPS ($) 1.47 1.46 0.36 1.47 1.56

On the quarterly front, we find that things have taken off after the March 2012 quarter, and both revenue and EPS have risen nicely since then. This could be our candidate…

Honeywell International Inc. (NYSE:HON): Current Price $67.81

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 34,590 36,560 29,950 32,350 36,530
Diluted EPS ($) 3.16 1.08 2.05 2.59 2.61

Honeywell too has improved its show after 2009, reporting an improved top line and EPS in both 2010 and 2011.

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 9,298 9,473 9,307 9,435 9,342
Diluted EPS ($) 1.10 -0.39 1.04 1.14 1.20

Sales have remained rather flat, but profits have improved each of the last three quarters.

Conclusion

Overall, the conglomerates have performed very well, but our company of choice under theĀ “E-Squared” investment analysis is Honeywell International. It’s the only one that has grown earnings for the last three quarters, and also improved its annual performance during the last two years.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!