Three Out-of-Consensus Ideas
Masam is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The earnings season is almost at its end. However, this doesn’t mean that the ‘spice’ for investors has finished in this season. There are still some stocks that are expected to move at their earnings release and therefore are expected to provide money-making opportunities for investors. The following three stocks are a good example of this concept.
Tronox Limited (NYSE: TROX) – miss the earnings
Tronox produces and markets titanium oxide. The company’s pigment products are components of everyday consumer applications, such as coatings, plastics, and paper. The channel checks suggest that titanium dioxide prices were down $0.20/lb. (-12% YoY) in 4Q12 after falling $0.10/lb. in 3Q12, and the market anticipates additional price declines in 1Q13 before the market finds a bottom. The prices for zircon, a by-product of Tronox's ore manufacturing process, are also expected to fall over the next few quarters amid flagging demand and high producer inventories. The Street forecasts that Tronox will generate 4Q12 EBITDA of $68 million, below the company's guidance of $100 million.
The Street expects the company to post no profit/loss per share and quarterly revenue of $491.5 million in 4Q. The company will announce its quarterly earnings on Feb. 20.
Visteon Corp (NYSE: VC) – beat the earnings
Visteon Corporation supplies automotive systems, modules, and components to vehicle manufacturers and the aftermarket on a worldwide basis. The company manufactures products such as climate control systems, electronics, interiors, and lighting.
Visteon should outperform in 4Q due to the expected 4Q EPS beat. 4Q should benefit from higher climate control profits driven by the launch of new business in 4Q, higher profits from their growing JV in China, and European restructuring actions. The surging auto sales in the US are expected to be beneficial for the company. The Street’s estimate of $2.50 is in-line with the company’s guidance of $2.39-$2.77. The company maintained its guidance on Jan. 15 at the Detroit Auto Show. Moreover, the company’s announcement of an increase in its repurchase amount has also sent bullish signals to the market.
The Street expects the company to post EPS of 80 cents and quarterly revenue of $1.7 billion in 4Q. However, I believe that the company will beat the earnings because of the reasons already mentioned above. The company will report on Feb. 27.
Weatherford International (NYSE: WFT) – miss the earnings
Weatherford is a Swiss-based, multinational oilfield service company. The company provides mechanical solutions, technology and services for the drilling and production sectors of the oil and gas industry.
The Street estimates the company to post an EPS of $0.18. It is interesting to note that the consensus has come down from $0.23 in mid-November. However, I am expecting the company to miss its earnings estimates (post an EPS of approx. 16 cents only). Similarly, I believe that the company will be well short of the 2013 EPS estimate of $1.03.
North America: The Street recently revised its forecasts to reflect a sequential decline in North America margins and revenues in 4Q (versus flat originally). North American margins are expected to be 15.5% in 4Q vs Q3-12 margins of 17.2%, which is a result of a sequential decline of 2.5% in revenues.
International: International operating margins are expected to remain flattish at 10.8% in 4Q. Also, sequential revenue growth of 5% is expected in 4Q. The original estimates were for slightly higher margins. The 4Q margins for operations in Latin America are expected to reflect weakness in Colombia/Mexico (forecasting Latin America 4Q margins of 12.0% down from 12.6% in Q3).
Foolish Bottom Line
Sometimes, it feels strange to realize that there are some surefire money-making opportunities in the market that haven’t priced in all the news expected to be revealed in their earnings releases. The above-mentioned three stocks are just the type.
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