Bellweather stocks

Analysts and economists alike have a number of stocks that they consider bell-weather signs of the economy - economic indicators of the current climate if you will. Earnings/sales figures and movements in the stock price can viewed as forecasts of where the general economy is going. Well, we've had a few of these bell-weather stocks report their recent fiscal quarter results in the past week, so lets take a look...

(1) KROGER

Kroger represents what many believe to be the best-performing US grocery operator. As we all know, people need to buy groceries, whether here, at Wal-mart or elsewhere. Kroger's results? (1) Their profit came in below expectations (due to having to cut costs to compete with Wal-mart); and (2) they lowered their full-year forecast slightly from last quarter's report due to lower than originally expected revenue/sales.

(2) BEST BUY

Best Buy is seen as a good indicator of consumer discretionary spending. The results? (1) Sales at US stores pulled down overall sales and cause sales to come in below expectations; (2) the company raised its 2009 guidance (basically sales expectations for next quarter) believe that Christmas shopping and buyers who delayed purchases during the most recent quarter will ultimately come back and spend their money; and (3) the company saw good traffic in their stores but cited a lower average transaction amount as the reason for the dip in US store sales.

(3) ORACLE

Oracle is the world's #1 seller of database software and a strong indicator of whether businesses are upgrading their technology in view of future performance or whether companies are really keeping purse strings tight. The results: (1) the company matched profit expectations for the quarter; and (2) however, the company did so by cutting costs. the company saw sales come in below expectations as businesses have not been buying new software but instead paying Oracle for customer support to fix problems with existing software.

(4) FED EX

Fed Ex is a major bell-weather, as people believe that when this company performs well it means that businesses are shipping and the business world is in motion. The results? (1) despite a 53% drop in profit from one year ago, the company met its recent quarter profit expectations; (2) the company "warned" on expectations for the rest of the year and stated that "conditions remain challenging"; and (3) the company plans to increase shipping costs by nearly 6% next year.

So all in all - companies are showing an ability to meet expectations largely based on cost-cutting and profitability. Revenue growth is coming in below expectations. Cost cutting = short term good news. Revenue growth = essential for long-term good news. The million dollar question: Can these companies (who have so far survived poor sales by cutting costs) turn the corner and find actual (and consistent) revenue growth or will the short term positive earnings results from cost-cutting peter out and leave us with a stagnant, non-growing economy in 2010?