Earning’s stories

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International Widget First Quarter Earning
International Widget is the second largest widget maker in the world. It located in Hong Kong, China. It is listed on the Hong Kong Stock Exchange market.
International Widget Ltd saw its earnings in the first quarter increase. Net profit increased by 1.4% to reach HK$354.3 million, from HK$340.4 million last year. The company revenues also increased from HK$2.79 billion to HK$2.87 billion in the first quarter of the year. Also, the company experienced a rise in operating cost rose from HK$2.15 billion to about HK$1.98 billion, which accounts for 75% of the revenue earned annually.
The rise in International Widget Ltd earning can be largely attributed to a good environment for business. The economy in the first quarter is experiencing a boom and consumers are consuming more goods and services. The other factor is that International Widget Ltd has embraced new technology in widget making. This has secured an increase in both revenue and net profit, as new technologies bring efficiency in production.
Universal Widget Inc. is the main competitor to international Widget Makers Ltd. The universal widget has had a tough first quarter. Its shares price fell by 1.9% closing trading day at HK$1.20. The company enjoyed one-time profit by HK$50 million by selling a chain of a liquor store. Revenue earned from the unique selling off assets gives a company revenue figures that does not necessarily indicate their general performance within a given duration of time.

International Widget Maker Ltd cost of operations is 75% of the revenue the companies earn, while Universal Widget Inc. cost of operation is 65% of their revenue. Universal Widget is more efficient in their production process than their counterparts, as they can make a widget at a lower cost.
Universal Widget will be focusing on making their company more profitable, while International Widget makers will be more focused on reducing their cost of operations. When the cost of operation cost a company 75% of their revenue, it a serious issue to investors.
Prices of shares in the stock market are sensitive to earnings announcements. Shares of international widget maker are likely to rise in price due to its rising profit. On the other hand, Universal Widget Inc. share prices are expected to fall due to falling in its revenue. Its only increase in revenue came from the sale of the one-time asset.
To ensure profitability, the two companies need to lower their cost of operations. This is costing them significant share in revenue they earn. Also, they should incorporate new technologies that are cheaper to produce widgets and come up with ways of reducing operating cost.