Dollar General (NYSE: DG) is at the top of the dollar store market. First quarter earnings, although disappointing in comparison to analyst expectations, compared favorably to its main competitors. While Dollar General has successfully navigated the retail marketplace in the past year, two new variables loom large in this retailer's future.

Most notably, CEO Rick Dreiling announced his impending retirement only one week ago, which kicked off a search for a new chief executive . Meanwhile, billionaire Carl Icahn is pushing for a sale of Dollar General's main competitor Family Dollar  . The replacement of Dreiling and the possible sale of Family Dollar both have interesting implications for Dollar General's future viability.

Dollar General and Family Dollar: two different stories
Two weeks ago, Dollar General's stock recorded a yearly high of $65.07, which could be a signal of increased optimism in the company after a successful first quarter. Specifically, store traffic positively increased and same-store sales improved 1.5% during the first quarter of 2014. Furthermore, quarterly diluted EPS grew about 7% in the first quarter of 2014, compared to the same quarter last year.

Dollar General's encouraging improvement describes a company on the upswing, which is further illustrated by the fact that its net sales rose almost 55% in the past 5 years. In contrast, its main competitor has not fared as well.

Family Dollar recently saw same-store sales drop 3.8% and diluted EPS dropped about 30% compared to the same quarter a year ago. In April, the company announced it would close 317 stores this year due to underwhelming earnings . Conversely, Dollar General opened 214 stores during the first quarter of 2014, and recent success spurred the company to look to open 700 more stores by the end of the year .

The success of Dollar General and underperformance of Family Dollar has led some analysts to believe a merger between the two could occur in the near future.

Dollar General as the buyer
Some analysts see distinct advantages in a possible purchase of Family Dollar by Dollar General. For one, a merger of the two largest dollar stores could create a dominant convenience-based retailer, according to investment firm Credit Suisse .

Furthermore, a merger could push Dollar General into its next business phase as internal opportunities continue to diminish. For example, Dollar General's expansion necessitates more real estate, and a purchase of Family Dollar's 7,600 stores would help fulfill that need.

But while these advantages appear to be beneficial, looking closer at what Dollar General would receive from a merger raises some red flags.

What Dollar General is actually getting in return
A combination of Dollar General and Family Dollar would indeed create a dominant convenience-based retailer, in comparison to the only other remaining dollar store, Dollar Tree. However, Dollar General sees Wal-Mart

Consumers see dollar stores as "fill-in stores," which fall between supermarkets and large retailers like Wal-Mart . A merger with Family Dollar would do little to change this perception about Dollar General, unless the merger initiated a company-wide overhaul.

Additionally, real estate and inventory are two factors that would lead Dollar General to dismiss an opportunity to buy Family Dollar. Family Dollar and Dollar General stores usually appear in close vicinity to one another . If Dollar General was to utilize the real estate gained from a purchase of Family Dollar, then some store closures would be necessary. These closings would complicate the company's pre-existing plan of expansion.

Family Dollar's steady over-ordering of inventory is perhaps an even bigger issue pushing Dollar General away from a purchase Excess inventory could drag down profitability, especially with Dollar General's own decreasing margins .

Dollar General's shareholders should be wary of an attempted purchase of Family Dollar.

The silver lining in Dreiling's retirement
Of course Dollar General shareholders are concerned about losing Dreiling, as he has led the company to successful new heights. Fortunately for shareholders, Rick Dreiling's retirement announcement could nix a potential purchase of Family Dollar.

A period of transition is a dangerous time to make a landmark change such as a merger. A purchase of Family Dollar within the next year could severely complicate the process of initiating a new CEO. According to analysts from Sterne Agee, a purchase of Family Dollar is much less probable after Dreiling's retirement announcement .

Final Thoughts
Dollar General is succeeding in the current retail market. A merger with Family Dollar seems like a risky move as excess real estate and inventory could drag down Dollar General's profitability. As a result, shareholders could be dissatisfied as they see a once successful company lose its luster.

Although a CEO transition at a successful company isn't ideal, Dollar General shareholders should welcome Dreiling's retirement announcement for one reason: a merger with Family Dollar now seems like a longshot.

2014 hasn't been good for all restaurants. While the stock market makes new highs, many restaurants are struggling. The competition has eaten into their businesses, which has hurt their top and bottom lines. The three restaurant stocks that have been hurt the most this year are Potbelly , Panera Bread , and Krispy Kreme Doughnuts . Could these restaurants turn around and make a comeback in the second half of this year?

A very disappointing IPO
Potbelly came public last year, and it's been downhill ever since for the sandwich maker, with shares down over 53% year to date. After looking at the company's latest earnings report, it's easy to see why shares are down for the year.

Source: Potbelly

In the first quarter, Potbelly's same-store sales dropped 2.2%. This comes as the majority of its shops are in Illinois and were affected by severe winter weather. Total revenue increased just 7.5% from last year. Mr. Market likes to see double-digit growth in order to be placed in the same category as Chipotle Mexican Grill. Here, Potbelly just isn't measuring up. The worst part of the report in my opinion was that Potbelly earned just $200,000 in the quarter. It's hard to justify a high stock price when a company is only earning that much a quarter.

Source: Potbelly

Potbelly shareholders were hoping for improvement in the second quarter--unfortunately, that does not appear to be the case. Potbelly just pre-released its second quarter numbers, and they're awful. Same-store sales are likely to be lower by 1.6%. Net income will be a little better than the first quarter, but will still come in at only $2 million.

This has really shocked the market and caused shares to drop over 23% after the announcement was made. Making the situation worse is that the full year outlook is now quite bearish. When Potbelly released its first quarter earnings earlier this year, the company was expecting same-store sales to be positive and in the low-single digit range. However, now the company is expecting that same-store sales will be flat to negative single-digits. Potbelly expects to earn $0.18 to $0.21 per share for 2014.

The problem for current shareholders is that if Potbelly earns $0.18, which is at the low-end of expectations, shares are trading at 61 times earnings. This still makes shares expensive even at $11 per share. Right now, the only thing going for shareholders is that about 20% of the company's float is sold short. Any positive surprise going forward could get shorts covering and investors buying. But until then, investors are best off on the sidelines until we see some good news from the company. 

Not looking so creamy in the short term
Shares of Krispy Kreme Doughnuts took a tumble last month after the company issued disappointing earnings guidance for 2014. The result is that shares are now down about 19% for the year. The company cited a number of factors for the weakness. For one, the winter weather had an impact on coffee and doughnut sales. On top of that, Krispy Kreme is seeing higher costs associated with its new enterprise resource planning system and executive compensation.

Source: Krispy Kreme Doughnuts

Krispy Kreme is still forecasting double-digit earnings growth, but earnings growth will be slightly lower for the year due to the loss of business in the first quarter. That's the problem with coffee and doughnuts: once you lose that business for the day, customers won't make up for it the next day. They'll still only buy their usual cup of coffee and a doughnut.

Source: Krispy Kreme Doughnuts

Longer term, I like Krispy Kreme Doughnuts. The company just brought in Tony Thompson, the former president of Papa John's International to be its new CEO. He has more than 25 years of food and beverage experience, and he helped build Papa John's digital-ordering platform. With former CEO James Morgan in the chairman's chair, I think Krispy Kreme has a great management team in place.

Retooling the business model
Panera Bread is working on improving its business model with Panera 2.0. Long customer waits during rush hours have led customers to go elsewhere. The result has been weakness in Panera's top and bottom lines. In the first quarter, same-store sales at company-owned locations increased only 0.1%, while net income was 12% lower than last year. Panera's aggressive share-buyback program lessened the impact on earnings per share, which came in 5% lower than last year. Shares are down more than 16% year to date.

Source: Panera Bread

CEO Ron Shaich is looking to change that by offering more ordering options, dedicated wait areas for to-go orders, and table delivery service by Panera employees. The goal is to eliminate long lines. The problem is that the rollout of Panera 2.0 is going to take some time. Also, retooling the business model is going to require store improvements, which cost money. Panera is looking at earnings being only slightly better than last year.

Source: Panera Bread

Panera is another stock with a high short interest. About 9% of its float has been sold short. Shares could see a pop if the company beats expectations. Panera is forecasting same-store sales to increase 2% to 3.5% this year. This means the company is expecting strong sales in the back half of this year. Panera also expects to open about 115 to 125 new locations this year.

Foolish final thoughts
It's a tough call trying to be a bottom picker. Usually I like to see a catalyst, or good news, before saying that the low is in. Fools should watch the next earnings report closely and see if there is improvement for Potbelly, Krispy Kreme, or Panera before jumping in. If one of these companies delivers better results, shares could jump and that could be a sign that the bearish sentiment is over. Until these companies report earnings, it's best to stay on the sidelines.

Major new video game launches could soon feature built-in content that's exclusive to GameStop . A company spokesman confirmed this week that the retailer is looking to partner with game publishers early on in their development process to secure a mix of physical and digital content that's only for GameStop's customers.

In the video below, Fool contributor Demitrios Kalogeropoulos argues that the move makes great business sense for both GameStop and video game developers. Despite the fact that publishers such as Activision Blizzard and Electronic Arts make more profit by selling directly to consumers via digital delivery, GameStop remains their single biggest partner for retail sales -- by far. Last quarter, for example, the company was responsible for a whopping 49% of all software sales on the next-gen game consoles.

Another reason that publishers love GameStop, Demitrios notes, is its high software attach rate. The retailer sold roughly five games with each new console last quarter, or 70% more than its competitors. Retail success like that is a big reason why a deep partnership between GameStop and publishers makes sense, and should last for years to come.

Watch the video below for Demitrios' full take.

Watches will be one key to Michael Kors' growth in the men's segment. Image source: Michael Kors.

As if gobbling up market share in Coach's core women's business wasn't enough, Michael Kors just made it clearer than ever that the men's segment is firmly in its crosshairs.

On Wednesday, Michael Kors announced the appointment of Mark Brashear to the newly created role of President of Men's. Previously, Brashear served for five years as CEO and chairman of Hugo Boss' Americas division.

What's more, Michael Kors CEO John Idol reminded investors the company is set to launch a new men's fragrance, introduce a new collection of men's watches, and open its first flagship store featuring a full men's offering in SoHo in the coming months.

We knew this day would come
But this shouldn't come as a big surprise: Just over a month ago, Idol revealed that that particular store will be their largest to date at 21,000 square feet, with the lowest of its three levels to be fully dedicated to their men's full offering. At the time, Idol also teased, "We will be announcing shortly that there will be freestanding men's stores that we are going to be opening globally," while elaborating their belief that there is a "great sportswear opportunity" to drive growth over the long term.

For now, though, Michael Kors is targeting men's to be a $1 billion business -- a lofty aspiration considering it expects total revenue this fiscal year to be between $4.0 billion and $4.1 billion. By comparison, Coach is currently targeting fiscal 2014 men's sales of "just" $700 million, or good for roughly 20% growth over the same period last year.

Coach already has a significant presence in Men's. Image source: Coach.

But therein lies the rub: Coach's men's business has long remained one of its bright spots, and in each of the past several quarters has helped offset declining comps in Coach's core North American market. In its most recent quarter, for example, while Coach's sales of men's bags and accessories continued their double-digit climb, North American revenue fell 18% to $648 million on a harrowing 21% plunge in comparable-store sales.

As Michael Kors moves in, then, it seems logical to assume Coach will suffer even more.

Can't we all just get along?
But it also doesn't have to be a losing game for the iconic 73-year-old brand. After all, Coach's North American weakness is at least partially self-inflicted, as it seemed to let its women's line lapse into stylish obsolescence. And weary investors have not only taken solace as Coach's products continue to sell well overseas, but are also eagerly awaiting the September arrival of the inaugural collection from Coach's new creative director, Stuart Vevers.

At the same time, however, Coach is also undergoing a costly long-term transformation, which includes closing dozens of underperforming locations, implementing organizational efficiencies, updating its global store fleet, and realigning inventory levels. Time will tell whether Coach's plan works, but as it emerges from the other side of that transformation, it should be better poised to compete with the younger, fast-growing brands like Michael Kors that are currently causing it so much pain.

Source: Deere.com.

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some industrial companies to your portfolio but don't have the time or expertise to hand-pick a few, the iShares Dow Jones U.S. Industrial ETF could save you a lot of trouble. Instead of trying to figure out which stocks will perform best, you can use this exchange-traded fund to invest in lots of industrial companies simultaneously.

Why this ETF, and why industrials?
The industrials sector is poised to benefit as the world's economies get back on track. As more infrastructure work and construction is undertaken, and retailers keep selling more, many industrial stocks will see their fortunes improve. The U.S. economy is in the midst of turning around already, with unemployment falling. There's more room for improvement, though, in the opinion of Fed chief Janet Yellen, among others.

ETFs often sport lower expense ratios than their mutual fund cousins. This ETF is no exception, with an annual fee of 0.46%. It has outperformed the world market over the past three, five, and 10 years -- and it also offers a modest dividend yield near 1.3%.

A closer look at some components
On your own you might not have selected Deere & Company or Cummins as industrial companies for your portfolio, but this ETF recently counted them among its 200-plus holdings.

Deere & Company
Deere began way back in 1837 as a blacksmith shop, and today it's an industrial giant, offering agriculture, turf, construction, and forestry equipment worldwide, as well as financial services. It enjoys a market share of about 50% in the U.S. and Canada, but that might end up hurting it, as the Department of Agriculture and others are forecasting weak demand for agricultural equipment over the next year and possibly beyond. Part of the problem is a 45% drop in expected government payments to farmers.

That's the bad news. The good news is that our recovering economy (here and globally) should drive new construction, requiring new equipment. And Deere has been busy upping its investments in research and development, which leads to more efficient equipment that in turn spurs sales.

The company is clearly facing some challenges -- its top and bottom lines have shrunk recently -- but its long-term prospects seem solid. The world's population is growing, and more food will need to be harvested to feed it. Deere offers a 2.6% dividend yield and recently hiked its payout by a hefty 18%. Its P/E ratio is below 10, and it's kicking out increasing free cash flow while also reducing its share count significantly.

Cummins
Engine maker Cummins can top that 18% dividend hike, though, with its recent 25% hike -- though its current yield, at 1.6%, is still below Deere's. It has also been buying back shares, which has helped bolster its EPS, which has slipped a bit in the past few years. On top of a recent $1 billion repurchase plan, the company just approved another $1 billion.

Cummins is poised to benefit from the growth in vehicles powered by the natural-gas engines it builds -- growth that should be spurred some by Environmental Protection Agency regulations calling for more fuel-efficient vehicles as well as related regulations in Europe and Asia. (Revenue from China grew 21% year over year in the company's first quarter.) Cummins has partnered with Westport Innovations to produce cleaner-running long-haul trucks. It's not without competition, though, as companies such as Paccar are also building cleaner-running vehicles.

With a forward P/E of 14, Cummins seems appealingly priced. It has taken on a lot of debt recently, though, so investors should keep an eye on its ability to pay that down. If the 1.6% dividend isn't too tempting, remember that it's being increased aggressively and that Cummins' payout ratio is still below 30%, suggesting plenty of room for growth. And 25% dividend increases are not instituted by managements worried about future performance.

The big picture
It makes sense to consider adding some industrial companies to your portfolio. You can do so easily via an ETF. Alternatively, you might simply investigate its holdings and then cherry-pick from among them after doing some research on your own.

The rise and fall of Molycorp , and other rare earth mineral stocks, has been a caution tale for investors speculating on high-potential and high-risk stocks. When China reduced exports of rare earth minerals, buyers of the materials couldn't reduce demand, and prices went through the roof. 

But when Molycorp and Lynas Corp in Australia began production, prices quickly fell. Their expansion plans continued as prices fell, and soon the market was flooded with rare earth minerals. Prices dropped, leading to massive losses. 

Now, Molycorp's operations are burning through cash at a rate of nearly $50 million per quarter, and the company may not last another year without further financing. Specialist Travis Hoium covers how Molycorp got here, and what investors can learn from its rise and fall.

Stocks headed into the weekend on a peaceful note today, ending in mostly positive territory. A struggling Portuguese bank, believe it or not, spooked investors yesterday, as a flight to safer investments knocked a good 70 points off the Dow Jones Industrial Average . With little breaking economic news to go on, and all eyes to a flurry of quarterly reports next week, the Dow added 28 points, or 0.2%, to end at 16,943 today.

Home Depot was the hardest-hit stock in the blue chip index yesterday. Today's modest 0.3% gain shows that investors forgave some of yesterday's losses -- losses that were hardly rational to begin with. Yesterday, Wall Street nearly had a conniption when flooring retailer Lumber Liquidators sharply cut its second-quarter earnings outlook. The lousy quarter at the $1.5 billion Lumber Liquidators in turn erased more than $1.5 billion from Home Depot's market value alone, as shareholders worried the flooring retailer's struggles were indicative of the home-improvement industry, as a whole.

Tile Shop Holdings was also a victim of yesterday's collective home-improvement industry freakout. Shares continued falling today, shedding an additional 6.9% on Friday. While Lumber Liquidators' poor performance is more relevant and worrisome for Tile Shop Holdings -- which is also a small-cap flooring retailer -- the sell-off in this stock also seems a little on the harsh side. Motley Fool real-money manager Jim Royal noted yesterday that he was excited to snap up shares at discount prices on the decline.

Can John Cena's popularity bring more eyeballs to the WWE Network? Image Source: WWE.

Shares of World Wrestling Entertainment are steeply discounted from where they began the year, off nearly 30% from their New Year's levels. All of those losses and then some, however, were accrued on a single day in May, when the stock took a 43% smackdown. World Wrestling Entertainment shareholders were livid about the broadcasting deal struck with Comcast's NBCUniversal, which will be worth around $200 million annually -- a few hundred million less than what investors expected. But the company isn't completely down-and-out: Shares advanced 2.3% Friday, and the catalyst most WWE believers are hoping for is the company's live-streaming subscription service, which needs 1.4 million users to break even. The WWE Network aims to have 1 million subscribers by the end of the year.

A $600 million bet on premium theater seats might just pay off for holders of AMC Entertainment  stock, Fool contributor Tim Beyers says in the following video.

In a recent interview with The Wall Street Journal, AMC chief Gerry Lopez likened his new company to his old one -- Starbucks -- since selling a premium theater seat isn't so different from selling a $4 latte. Or at least that's what he wants investors to believe.

During the next five years, AMC will spend some $600 million to retrofit about 1,800 of its 5,000 screens. In some cases, renovations will remove two-thirds of capacity in order to make room for comfier seats. According to the Journal, AMC plans to wait at least a year before raising ticket prices on renovated theaters.

Can the strategy work? Apparently, but you wouldn't know it from the box office totals. Year-to-date domestic grosses are down about 5% from last year, Box Office Mojo reports. Even so, the Journal says Cinemark and Regal Entertainment Group are also in the process of renovating on the belief that doing so will lead to higher profits. Lopez, for his part, told the Journal that box office revenue was up 60% in 37 theaters that had been fully renovated in the first quarter.

That's a good sign. But for current or prospective AMC Entertainment stock investors, it's the long-term record that matters. Check back in on AMC's overall and per-theater grosses in September, after the summer movie season has run its course.

General Electric  is currently the ninth-largest company in the world based on its market capitalization. Yes, it's a massive organization, but GE's management team thinks about size in a much different way today than it did 20 years ago.

When Jack Welch was at the helm, GE needed to be No. 1 or 2 in a given market, or it packed up its bags and abandoned the venture altogether. Today, GE appears to prioritize products and customers over positioning. For shareholders, that's a positive sign of a company on a mission versus one grasping for growth.

GE's "Aha!" moment
In 2001, USA Today published a telling story about the evolution of Jack Welch's thinking as the head honcho at GE. It's worth a read on its own, but for those interested in cutting to the chase, here's the punch line: In their relentless pursuit to move the needle at a giant conglomerate like GE, managers were passing one profitable opportunity after another while chasing market share.

Despite its size, GE values a start-up mentality. Source: General Electric.

At the time, size trumped strategy, hands down. And the turbine market served as prime example of this counterproductive behavior.

In the early 1990s, GE decided to forgo the opportunity to provide after-market services for the huge turbines it sold. To managers, this was a ruthlessly competitive niche where GE would be a late entrant. Should they decide to enter, the resulting profits would be small at first, and it could take years to become a player with any serious clout.

This line of thinking was flawed, however, and leadership woke up to this fact by the late 1990s. Shortly thereafter, GE entered the services businesses, and, sure enough, it's turned into a veritable cash cow less than two decades later.

In my opinion, services are absolutely critical to GE's future profit margin growth. From 2011 to 2013, for example, since they represented roughly 28% of revenue but approximately 40% of earnings on average. Talk about a potentially costly oversight.

GE's 9HA gas turbine. Source: General Electric.

Leader of the pack no more?
As we fast-forward in time and look at GE today, investors can rest assured that GE's abandoned its size-matters-most mentality. In his letters to shareholders, CEO Jeff Immelt has lamented those years when bureaucracy hamstrung GE's ability to move quickly and focus on customers. In 2012, he described an ongoing transformation:

We had too many "checkers" and not enough "doers." Visiting with entrepreneurs has helped me focus on complexity, accountability and purpose. I have found two books -- The Lean Startup and The Startup Playbook -- to be particularly useful.

To be sure, GE is no "start-up" today. And one could even argue that its massive scale provides a key competitive advantage in the marketplace. But that's besides the point.

What's more evident is that GE is laser-focused on providing customers with the right products and services instead of fighting over another percentage point of market share. In fact, when it comes to cornering a particular industry, GE's hardly the heavyweight in the primary markets it serves:

Thinking beyond "big"
There was a time during Welch's heyday as CEO when GE's managers were told that they needed to be the biggest fish in every pond. Legend has it that this way of thinking even became part of company policy.

But that's no longer the case according the game plan laid-out in GE interviews and shareholder letters. The days of glorifying megacaps and market share are primarily in the past. And, as the renowned author Malcolm Gladwell points out in his book David and Goliath, that's an outdated way of thinking anyway.

In a recent sit-down interview with The Motley Fool, Gladwell asked a rhetorical question about human nature. With regard to everything from athletes to businesses, he wondered out loud, "Why do we worship size?"

It's a simple comment. And it's simply true in many aspects of life. But I would suspect that speed (and strategy) trump size at the modern-day General Electric.

On Friday, the stock market largely repeated its performance from the previous day, albeit without quite as much fanfare. Like yesterday, stocks initially posted losses, with concerns about earnings reports weighing on the mood of investors. Yet, by the end of the day, the markets had recovered their upward momentum, and most major stock market benchmarks finished up on the day. Shareholders in Amazon.com , Aruba Networks , and Westmoreland Coal had even more to celebrate, with solid gains in their share prices today.

Source: Amazon.com.

Amazon climbed almost 6% as the online-retail giant had mixed news. On the positive side, Amazon expanded its menu of cloud-computing services for its Amazon Web Services unit, reminding investors that the company is a major play on the cloud, as well as its namesake retail business. Amazon also got attention today for seeking permission from the Federal Aviation Administration to test-fly delivery drones, which it hopes to use to enable same-day delivery in key high-volume markets to further improve its customer service. Yet, Amazon also came under fire as the Federal Trade Commission said that the company had allowed children to make unauthorized charges from within apps while collecting from parents' accounts. The FTC will seek refunds of the charges, and also wants to stop Amazon from similar practices going forward.

Source: Aruba Networks.

Aruba Networks gained 7% after the Federal Communications Commission approved a $2 billion program to provide grants for schools to help pay for Wi-Fi networking infrastructure. Investors hope that Aruba will get its share of revenue resulting from increased sales of Wi-Fi-related products to meet this increase in demand. Moreover, some believe that the FCC's decision doesn't go nearly far enough toward helping U.S. schools improve their network access, and any future boost in funding for similar programs going forward could help Aruba's business to an even greater extent.

Westmoreland Coal rose 6% after the company successfully made a secondary offering of stock. Westmoreland raised about $52 million by selling roughly 1.46 million shares at $35.50 per share, which was about 4% below the stock's closing price Thursday. Usually, secondary share offerings result in share-price reductions, especially when offering prices are below the market price. But investors clearly believe that the capital-raise is a move in the right direction toward helping Westmoreland reduce its debt. With the industry still struggling from relatively low prices for coal, stabilizing its balance sheet is positive for Westmoreland, at least for the immediate future.

"So many of our fellow retailers [have been] experiencing a retail funk."

That was the actual language used by The Container Store's CEO, Kip Tindell, to describe the difficulty American merchants have had this year. The company released its first-quarter results this week, showing that it, too, was a victim of the funk. Revenue and earnings both missed expectations, full-year guidance was lowered, and quarterly same-store sales were negative for the first time in more than four years.

Still, there is hope for investors. Rule Breakers analyst Simon Erickson and Stock Advisor analyst Sara Hov identify a few promising metrics that could make The Container Store a promising long-term buy after all.

After years of declines, Gartner expects PC shipments to grow again in 2015. While that's good news for related stocks -- Intel and Microsoft , in particular -- a sustainable recovery is unlikely, Fool contributor Tim Beyers says in the following video.

Gartner's estimates peg PC shipments at 317 million in 2015, up from about 308 million this year. Microsoft's retiring of Windows XP appears to be the catalyst. Gartner predicts that 60 million PCs will be upgraded this year, PC World reports.

Yet, that's not repeatable business. Nor can the industry count on shaking lose more upgraders when so many are taking extraordinary steps to stay with XP, including using patches meant for an embedded edition of the OS to patch known security holes in the PC version.

Meanwhile, tablets are on pace to permanently overtake PCs. Gartner expects tablet shipments to top 321 million next year. up from 207 million in 2013. Yet, that's not entirely bad news for Microsoft. To its credit, the company has diversified into gaming and new hardware, including the convertible Surface Pro 3 -- a tablet that takes aim at the very PC laptops that were once Mr. Softy's bread and butter.

What should investors do with this sudden and possibly short-lived resurgence? Probably nothing. Tim says there's no reason to bet on PC-dependent stocks when virtually all other signs point to the rising influence of mobile devices.

The stock market generally behaved well Friday, once again getting off to a slow start as investors weighed the latest releases from the beginning of the new earnings season. By midday, though, stocks had begun to recover from their worst losses of the day, and by the close, the market managed to post modest, but solid, gains. Still, even though the week ended on a confident note for investors generally, not all stocks managed to move higher Friday, with MGIC Investment , Rent-A-Center , and Isle of Capri Casinos among the worst performers in the market.

Source: www.stockmonkeys.com.

MGIC Investment dropped almost 10% today after the mortgage-insurance provider alarmed investors about its potential inability to meet proposed new capital guidelines from the Federal Housing Finance Agency. The FHFA today opened up a draft of Private Mortgage Insurer Eligibility Requirements designed to help mortgage insurance companies like MGIC prove that they can handle future financial crises, with the goal being to prevent a repeat of the mortgage meltdown that led to the bear market in stocks in 2008. But MGIC said that, based on its initial preliminary look at the rules, its available assets wouldn't be enough to meet the minimum required under the new guidelines. MGIC hopes to restructure some of its reinsurance arrangements to better meet the guidelines, but if it can't correct the problem, MGIC could have trouble moving forward in the rapidly changing mortgage market.

Rent-A-Center sank 11% in response to a poor reception to its second-quarter preliminary results. The rental company said same-store sales would rise just 0.6%, and earnings per share could come in as much as 25% short of where investors were expecting. Rent-A-Center responded to the negative news by announcing a new initiative to offer smartphones to rental customers. But the report only heightens what we've already seen for years during this economic recovery: Lower-income customers, who count on rent-to-own arrangements like the ones Rent-A-Center offers, are not participating fully in job and wage gains. Until the recovery becomes fairer, Rent-A-Center could keep seeing pressure to its bottom line.

Isle of Capri Casinos fell almost 14% when the domestic gaming company announced that it would eliminate its executive chairman position on its board of directors, and consolidate its current chief strategy officer into the CFO role. But the decline likely came from speculation that the move reduced the chances of a possible takeover for Isle of Capri Casinos, with the stock having risen more than 50% in just a month. Bullish investors believe that a potential acquirer might be able to do more with the company's casino properties than Isle of Capri has thus far managed. Still, with the gaming market in flux, investors want to be certain about a bid before they're willing to send shares any higher.

All three major U.S. indices finished higher on Friday, reversing a marketwide sell-off that began on Thursday after a Portuguese bank defaulted on some short-term debts. Worries that these liquidity issues would quickly spread to Europe and the rest of the global economy abated, but shares of Fastenal , Family Dollar Stores , and Chesapeake Energy Corporation weren't rising with their peers on Friday. These three finished as the three worst stocks in the S&P 500 Index today, which added two points, or 0.2%, to end at 1,967.

Shares of construction supplies leader Fastenal shed 4.2% on Friday, as investors recoiled at the company's second-quarter report. Nothing jumped out as too disappointing from a revenue or profits standpoint, but margins were far below expectations for the period. Fastenal itself pegs the typical range for its gross profit margin between 51% and 53%, but last quarter its gross margins came in at just 50.8%. Fastenal currently trades at 30 times earnings, so significant earnings growth -- which can be more readily achieved with increasing margins -- is expected from the company. If margins remain below the 51% level for another quarter or two, investors should rethink their theses; but one subpar quarter doesn't spell doom by a long shot.

Carl Icahn is pressuring Family Dollar to sell itself. Image Source: Family Dollar

Family Dollar Stores slumped 3.1% today after earnings fell 33% last quarter. Although sales are actually on the rise, ticking 3.3% higher to $2.66 billion, beating analyst estimates for $2.61 billion, the company finds itself in a vulnerable position. It told shareholders in April that it was cutting prices on 1,000 items and closing 370 underperforming stores. On top of that, notorious activist investor Carl Icahn has assumed a 9.4% stake in Family Dollar, and is pressuring the outfit to sell itself to its competitor, Dollar General.

Finally, shares of natural gas and oil producer Chesapeake Energy Corporation fell 2.9% Friday, as investors continued to react negatively to news that the company will be facing criminal charges. A Michigan judge, while dismissing two other criminal charges against the company, determined that Chesapeake Energy must stand trial for bid-rigging in the state in 2010. The charges allege that Chesapeake illegally conspired with competitor EnCana, striking an agreement that sent land-lease prices tumbling, a practice known as "bid-rigging," and a violation of antitrust laws.

In Part I of our Tesla Motors deep dive, we took a look at what kind of cars Tesla makes, what the Supercharger network is, and the potential of the Gigafactory. To start from the beginning, head to Tesla Motors Deep Dive: Part I.

In this installment, I want to take a closer look at the automaker's Generally Accepted Accounting Principals, or GAAP, versus non-GAAP reporting, to see if there is important information that investors are overlooking. 

Taking a look at earnings per share
Earnings-per-share growth at Tesla looks great. On a non-GAAP basis, the company has posted five consecutive quarters of positive earnings per share, and has topped analysts' estimates in each of those quarters. 

Non-GAAP earnings per share is expected to remain strong, as are revenues. Below is a table of forward annual expectations: 

Source: Thompson Reuters/E*Trade (Asterisk indicates forward-looking estimates).

Although these growth numbers look fantastic, especially on the earnings-per-share side, with 78% average annual growth expected, they are not GAAP numbers. Below, I have a comparison of non-GAAP earnings and revenues versus GAAP earnings and revenues during the past four quarters, to show how different the two measures truly are:

Source: Tesla 10-Q Filings for GAAP results; Thompson Reuters for non-GAAP results. 

As you can see, the difference between non-GAAP and GAAP results are quite noticeable, especially with the revenues. Additionally, in Tesla's latest 10-Q Filing, management stated on page 51:

We have had net losses on a GAAP basis in each quarter since our inception, except for the first quarter of 2013. Even if we are able to continue to increase Model S production and sales, there can be no assurance that we will be profitable.

While Tesla is growing quite quickly -- which is visible by its ability to top vehicle delivery estimates each quarter -- some investors would feel more comfortable seeing GAAP results. When a company uses non-GAAP, it makes me feel like management is doing everything possible to manipulate the numbers into looking as great as they possibly can. 

Source: Tesla Motors

Hidden risks
While this sometimes does not matter, using non-GAAP revenue and earnings-per-share results allows for the company to discount certain risks, and leave out certain aspects of accountability that would otherwise show investors that the picture isn't quite so rosy. 

In Tesla's case, it is able to exclude certain expenses -- such as stock-based compensation -- and work its favorable financing plan for consumers into higher revenue figures. If you weren't aware, Tesla provides a minimum repurchase price for its vehicles, meaning that, after three years, the company is willing to buy back customers' vehicle at a certain price. 

As Jonathan Weil wrote at Bloomberg::

The accounting rules say Tesla can't recognize all of the revenue immediately in those instances and must account for such transactions as leases. So after Tesla takes customers' cash, it records liabilities for "deferred revenue" and "resale value guarantee" on its balance sheet...So the non-GAAP revenue isn't comparable to Tesla's sales before the program began, and it may overstate the true growth and demand [emphasis added].

Plus, by adding back the resale-value guarantee, the company assumes that nobody is going to return the vehicle, for purposes of the non-GAAP revenue [emphasis added], [according to Dan Mahoney, director of research at CFRA, an accounting firm.]

Add in the fact that Tesla has admitted to having accounting issues -- although slight -- doesn't help either. In its Form 10-K filed in February 2014, the company stated,

Our management concluded that our internal control over financial reporting was ineffective as of December 31, 2012 because a material weakness existed in our internal control over financial reporting related to the presentation and disclosure of non-cash capital expenditures in our consolidated statements of cash flows. 

We could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on the price of our common stock.

Source: Tesla Motors

Although this information may not have dire consequences on the company's finances, it lowers Tesla's credibility. It forces investors to ask, "Are there more issues we don't know about?"

Don't get me wrong... I'm not calling the company or its management a bunch of fraudulent liars. I'm only saying that it doesn't look quite so hot when the reporting has had a history of mistakes.

The Foolish takeaway
Okay... so now what? While these are not deal-breaking points, there are definitely things investors should be aware of. Instead of going through the motions, and pretending everything is perfect in the world of Tesla, it's important to be aware of these potential hangups going forward. 

I love CEO Elon Musk's vision and charismatic vibe. And I love Tesla's cars. However, putting all of that aside, it's still vital for investors not to get caught up in the emotional side of investing, and to realize what exactly they're putting their hard-earned dollars into. 

Tesla's GAAP and non-GAAP earnings results aren't a make-or-break situation for potential investors. Instead, it's just important to be aware of the different reporting metrics and, in the case of Tesla, some of the risks non-GAAP reporting can overshadow.

You'll have a pretty hard time finding two companies seemingly more different than Keurig Green Mountain and Amazon .

While Keurig is the king of the single-serve beverage industry, Amazon is the king of online retail. While Amazon has a prominent presence throughout the world, Keurig is primarily an American enterprise. Even the stock prices of the companies have fared differently in 2014. Year to date, Keurig shares are up nearly 62%, while Amazon shares are down close to 20%.

Believe it not, however, these two companies possess a key similarity that sets them apart from many others in their respective industries.

Similarities abound
In addition to being the largest online retailer in the world, Amazon has also produced consumer electronics in recent years. Amazon at first only offered e-readers; however, it has since expanded its offerings to include tablets. While these electronics went through several stages of refinement and, as a result, drifted considerably from the originals, they all possessed one key thing in common: they were being sold by Amazon at break-even.

That's right, Amazon was making no money on the actual sale of millions of tablets and e-readers. CEO Jeff Bezos believed that Amazon could make its money when the people using those devices bought e-books, movies, music, TV shows, and apps from the company.

That's where Keurig comes in. In addition to selling K-cups, Keurig also sells coffee makers that can be used with those cups. Just like Amazon, Keurig sells its initial units (at-home coffee makers) at "attractive price points which are approximately at cost, or sometimes at a loss when factoring in the incremental costs related to sales."

Get a coffee machine onto millions of counter tops by offering the unit at an attractive low price, and in turn, fuel the sale of Keurig's portion packs, on which the company is highly profitable.

Amazon is bailing, but should Keurig?
For Amazon, this strategy hasn't worked out that well. Big picture, Amazon is making pennies on the dollar when compared to the likes of competitors such as Apple . Apple not only makes money via its app store, but also makes a healthy profit on the sale of the actual devices, something that would certainly help Amazon's razor-thin 0.38% trailing-12-month profit margin.

Therefore, when Amazon unveiled its new Fire phone in June, the company also unveiled a hefty price tag. A 32 GB Fire phone with no contract will cost $649, which is only $100 less than a comparable iPhone 5s.

Even though Amazon is bailing on this break-even strategy, Keurig should hold firm. Not only is Keurig profitable, the company sports an impressive trailing-12-month profit margin of 12.07%.

Just think about the dynamics of each situation. An active Keurig brewer owner needs at least one portion pack a day. Meanwhile, an active Kindle owner buys,maybe a book a month.

Consider this: in 2013, Keurig sold $3.18 billion worth of portion packs, yet only sold $827 million worth of brewers. That's nearly a 4 to 1 ratio of high margin sales to breakeven sales. Amazon doesn't break out its own device sales in its annual report, yet just by observing the pricing of their latest device, we know its ratio was nowhere near as profitable.

The Foolish takeaway
Sure, Keurig Green Mountain and Amazon have their differences, but they do share a key similarity in terms of strategy, or at least they used to. Nevertheless, Keurig shouldn't abandon this strategy just because Amazon is. Keurig has proven that it can sell initial units at breakeven and still make a healthy profit, and it should continue to do so into the future.

The Dow Jones Industrials gained almost 29 points Friday, limiting their losses for the week to 125 points. While that might not sound like a good result, many investors breathed a sigh of relief as they considered just how much worse the market might have done. With the specter of a renewed sovereign debt crisis in Europe hanging over the Dow, investors remained remarkably calm, succumbing to a single day of partial panic, but eventually coming to the realization that the strength in the U.S. economy wouldn't evaporate overnight. Today, gains in General Electric and Boeing helped refocus attention back on longer-term support for the Dow and its future.

Source: Boeing.

Source: General Electric.

General Electric's gains of 1.3% came amid optimism that the conglomerate's earnings could continue to see substantial growth when GE reports its second-quarter results. General Electric has a lot going on right now, with its acquisition of Alstom, and its spinoff of its Synchrony Financial consumer-finance unit, as well as ongoing contributions from its various core business units. Even with so many one-time factors distracting from the continuity of General Electric's performance, the Dow component will still rely on a solid commercial aerospace environment to help drive sales growth in the key part of its business. With its aircraft engines featured prominently on aircraft from both major wide-body manufacturers, General Electric has plenty of room to move higher.

For its part, Boeing obviously has cast its lot with the aerospace industry, as well, and it believes that the opportunity in the current environment is even bigger than it previously projected. Boeing said today that it expected its customers to spend $5.2 trillion on almost 37,000 new aircraft between now and 2033, an increase of more than 4% from its previous 20-year forecast. Yet, the bigger challenge that Boeing has is how to make the most of the orders it already has, with a huge backlog, and the need to increase production capacity in order to meet delivery commitments. Boeing has to juggle a huge array of suppliers, like General Electric, to keep its own schedule on track, and the aerospace giant hopes to keep those suppliers in line in order to boost its own margins and make more of its sales opportunity. With so much money on the line, Boeing will have a big challenge in negotiating more favorable supply arrangements, but success could send profits soaring.

The Dow's strength relies on solid performers like General Electric and Boeing adding to its overall gains. With so many favorable prospects, the Dow could easily shake off this week's losses, and start climbing toward new records again in the near future.

With earnings season ready to go full tilt next week, stocks finished modestly higher today as fears of a banking collapse in Portugal faded. The Dow Jones Industrial Average  finished up 29 points, or 0.2%, while the S&P 500 gained by the same percentage, and the Nasdaq added on 0.4%, as some Internet stocks made strong gains. 

Wells Fargo was the first of the banking giants to report earnings today, falling 0.6% as profits improved 4%, to $1.01 a share, and revenue fell 1.5%, to $21.1 billion. Those results were essentially in line with estimates. Loans and deposits grew briskly for the country's No. 1 mortgage lender, a positive sign for the overall economy, as CEO John Stumpf said credit quality had improved alongside the economy and the housing market. In the energy sector, crude oil fell 2.4% to just more than $100 a barrel, making Chevron and Exxon the worst performers on the Dow, falling 1.4% and 0.8%, respectively. There were no major economic reports released today.

Other big movers today included Amazon.com , which finished up 5.6% as it asked the FAA for permission to test-fly drones, which it plans to ultimately use for package delivery. The online behemoth has called the service Amazon Prime Air, and believes drones could one day deliver small packages to customers in less than 30 minutes. The drone-delivery idea, which first emerged last December, is just the latest example of the company's ability to push the limits of online retail, and of its constant mission to invent and focus on the customer. Only two commercial drones have been approved thus far by the FAA, and the approval process is a lengthy and complex one; but Amazon management believes strongly in the project, implying it's willing to bring the project to other countries if the FAA does not approve it. 

Finally, Lorillard  finished up 4.6% after it confirmed merger talks with Reynolds American. The parent of cigarette brands including Newport and the leading eCigarette, Blu, said it was nearing an agreement to be acquired by Reynolds American, the parent of brands such as Camel and Pall Mall. Lorillard is particularly appealing to the Camel parent because of its Blu e-cig brand, which has 40% share in the fast-growing category. In Newport, Lorillard also has the leading brand of menthol category, another of the rare growing segments in tobacco. A combination of the country's No. 2 and No. 3 tobacco companies would present a powerful rival to Altria, but would also require antitrust approval from the Justice Department, as a deal would mean that 90% of cigarette sales are controlled by just two companies. Sources said a merger announcement could come as soon as Monday. No price tag has been tied to the offer, but Lorillard shares have gained nearly 20% since word of deal first came out in May.

U.S. markets managed to close out the week on a winning note, with the benchmark S&P 500 rising 0.1% on Friday, while the narrower Dow Jones Industrial Average was up 0.2%. The technology-heavy Nasdaq Composite Index gained 0.4%. One of the most prominent Nasdaq components, Microsoft , managed to put together a second straight day of outperformance, with a 1% gain. Investors may still be digesting a 3,100-word memo that CEO Satya Nadella sent out to all Microsoft employees on Thursday regarding the company's mission and direction. Although it was short on specific actions, Mr. Nadella laid out an ambitious vision for Microsoft in a "mobile-first and cloud-first world" (six mentions).

Quoting not one, but two 19th century Germanic intellectuals -- Rilke and Nietzche -- in this memo (can you imagine the same in a Steve Ballmer memo?), Microsoft CEO Satya Nadella waxed lyrically on the company's future role in people's lives, promising nothing less than "reinvent productivity to empower every person and every organization on the planet to do more and achieve more."

"A devices and services company" -- Mr. Ballmer's expression -- was just the beginning of Microsoft's transformation:

At our core, Microsoft is the productivity and platform company for the mobile-first and cloud-first world... Microsoft has a unique ability to harmonize the world's devices, apps, docs, data and social networks in digital work and life experiences so that people are at the center and are empowered to do more and achieve more with what is becoming an increasingly scarce commodity -- time!

In doing so, Microsoft "will think of every user as a potential 'dual user' -- people who will use technology for their work or school, and also deeply use it in their personal digital life":

Across Microsoft, we will obsess over reinventing productivity and platforms. We will relentlessly focus on and build great digital work and life experiences with specific focus on dual use... Apps will be designed as dual use with the intelligence to partition data between work and life and with the respect for each person's privacy choices.

Incidentally, managing that very "partition" was the motivation behind Google's May acquisition of Divide.

The new key buzzwords at Microsoft are now (after "mobile-first and cloud-first world," which goes without saying): productivity, user experiences, platforms, and dual users. But beyond this 30,000 foot view, what concrete indications about the business' direction can we glean from the memo? Here are three:

Microsoft remains committed to hardware. Mr. Nadella writes "the Windows device OS and first-party hardware will set the bar for productivity experiences." I have a hard time believing they will achieve it, but Microsoft is committed to that goal. Nadella even committed Microsoft to developing "new categories [of hardware] like we did with Surface." Which also means that...

Nokia stays. "We will responsibly make the market for Windows Phone, which is our goal with the Nokia devices and services acquisition."

Xbox stays, too (for now). Even though he made it clear that the Xbox gaming system is non-core at Microsoft -- it's not "dual use," after all -- Nadella says the company is "fortunate to have Xbox in our family." Beyond the opportunity in gaming -- "the single biggest digital life category" -- he pointed out the overlap in technologies between gaming and productivity.

From the outside looking in, then, Microsoft may look relatively unchanged in 12 months' time, but Nadella made it clear that the organizational culture must become more agile:

Every team across Microsoft must find ways to simplify and move faster, more efficiently. We will increase the fluidity of information and ideas by taking actions to flatten the organization and develop leaner business processes.

Journalists and analysts have already begun (justifiably) speculating that this could mean significant layoffs, but Mr. Nadella would not expand on this point in several interviews yesterday.

By and large, I've been very impressed with Mr. Nadella's tenure to date - he's certainly a more inspiring figure than his predecessor. However, you can't rate a leader on a sweeping vision alone; the difference comes down to its execution. Mr. Nadella promised more detail when Microsoft announces its quarterly results on Jul. 22. Stay tuned.