An onslaught of dire analyst predictions for the broader American economy has stoked an ongoing conversation surrounding the possibility of the double dip and the sort of impact that would have on the market. The past several weeks of earnings reports; however, have been stronger-than-expected, leading many investors to scratch their heads regarding the state of the economy.
Yesterday, a report that we have entered a darker era in consumer attitudes prompted the majority of retailers to pare morning gains, but more and more, there appears to be a disconnect between these reports and levels of earnings we’ve been seeing.
Same-store sales at both the high and low-end of the spectrum rose sharply in September, but many investors have been exiting the sector in spite of this, for fear analyst predictions are correct and earnings growth will peter out alongside slowing global growth. The latest series of announcements; however, may put an end to this overarching anxiety, as analysts asses the flurry of positive data and reconsider their weak third quarter predictions.
A somewhat more upbeat appraisal of the quarter seems to have replaced the murkier one that preceded it. Economists are now estimating that annual gross domestic product increased at an annual rate of 2.5 percent, not the 1.3 percent originally predicted according to a Reuters poll.
Some are citing fear over the potential impact of the U.S. credit downgrade and consumer confidence reports for the original mistake. The ability for the sales to buck these metrics bodes well for the cyclical consumer sector.
Below are two companies that look as though they could regain some of the market share lost amid more pessimistic predictions.
Coach (COH) Coach Inc. was among the companies to surpass analyst earnings expectations. The company announced on Tuesday that its fiscal first quarter profit added 14 percent as U.S. consumers purchased more handbags and men’s sales thrived overseas. The new analyst expectations for growth can be expected to help boost shares while the strong growth for the brand is projected to continue through the holiday season. Coach is expected strong sales this quarter as well as continued enthusiasm from shoppers in the Asian markets to help boost their sales.
LVMH Moet Hennessy Louis Vuitton SA (LVMUY): Shares of LVMH were ascending earlier in the year before analysts began to predict a weaker 3Q economy. The company’s earnings, posted Oct. 18, indicated sales growth for the third quarter that far surpassed projections. Strong revenue from signature brand Louis Vuitton helped boost sales by 17.6 percent from the equivalent period last year to 6.01 billion euros. Nine-month sales for the company added 15 percent to 16.3 billion euros according to the company’s statement. A stronger looking economy could help the stock reach its previous levels before the close of the year. Growth has been driven by higher demand in Asian nations as well as higher buying of luxury goods stateside, specifically of watches and jewelry. Purchases in this area were 76 percent higher than the year-ago period.
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