Some strong earnings defy weak economy

Read here:

In some ways it seems fitting – even telling – that the hottest stock in the Dow Jones Industrial Average over the past year comes down with a cold during January earnings season. It would be hard to say that McDonald’s (MCD) did anything wrong given the $27.2 billion record high revenues raked in last year, as well as record net income of $5.5 billion.

And despite beating bottom line estimates by 3-cents and matching sales, McDonald’s shares are shedding more than 2% on the news.

It should be pointed out that the fast-food giant’s decline is from a record high that was attained, as Macke says in the attached clip, through “perennial out-performance that warms my cockles of heart.”

From my standpoint, it is for that very same reason that this super-sized $100 billion business looks increasingly ripe to disappoint. It may be years away, or as soon as next quarter, but the burger baron is on a roll and its trajectory over the past year looks unsustainably steep, making its premium P/E ratio of 19 times 2012 estimates more difficult to justify because the fry oil is heating up.

Verizon (VZ) also reported record revenue growth today that matched expectations, but its muddled path to an ex-items bottom line miss by a penny is cause for concern in some circles.

“Ex-items are not all created equally, and VZ’s ex-items make sense,” Macke says.

What he is referring to is a net loss that came as the result of pension obligations, a legacy problem from the dark days that masks the sizzle of smartphones – which Verizon sold a lot of, and spent a lot doing so. Officially, 56% of 7.7 million smartphones it sold were iPhones (which means 44% weren’t), which drove 13% and 19% growth in its wireless and data businesses.

The other silver lining in this Macke-branded “consumer/utility/IT play” is every dip drives its dividend higher, which at last check was yielding 5.3%, which happens to be about 2.5-times the take on a 10-year Treasury.

And finally, we tear apart Johnson & Johnson (JNJ), the global healthcare conglomerate who’s defensive appeal outweighs its 4% sales growth. J&J comfortably beat on the bottom line with EPS of $1.13 versus $1.09 estimates. While its aforementioned low-single-digit revenue growth met analysts targets, a 10% jump in foreign sales was able to mask a 3.4% slide on the domestic side.

J&J is also one of the few to give full year guidance today. They guided cautiously on 2012, looking for $5.00 – $5.15 per share versus consensus at $5.21.

While Verizon and AT&T pay larger dividends, the fact that J&J is one of only four U.S. companies t0 carry a AAA-rating makes its 3.5% yield even more appealing. As does the fact that if and when they increase it again in April, it will mark the 50th consecutive year they have raised their dividend.