Most Impressive Companies of this Earnings Season

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

This earnings season we’ve seen a trend: The majority of companies have met or exceeded bottom line expectations but have been weak on top line numbers. This shows a trend of companies being more conservative and cutting costs due to a drop in demand/growth. However, there are some companies that outperformed, and simply shocked Wall Street with their quarterly report. With that being said, I am looking at the top five biggest earnings surprises of the quarter, and what it might mean moving forward.

<table> <tbody> <tr> <td> <p>Company</p> </td> <td> <p>Ticker</p> </td> <td> <p>Earnings Day Gains</p> </td> </tr> <tr> <td> <p>K Swiss Inc</p> </td> <td> <p><span class="ticker" data-id="204196">(NASDAQ: <a href="http://caps.fool.com/Ticker/KSWS.aspx">KSWS</a>)</span></p> </td> <td> <p>35.53%</p> </td> </tr> <tr> <td> <p>Big 5 Sporting Goods</p> </td> <td> <p><span class="ticker" data-id="202946">(NASDAQ: <a href="http://caps.fool.com/Ticker/BGFV.aspx">BGFV</a>)</span></p> </td> <td> <p>34.76%</p> </td> </tr> <tr> <td> <p>Green Plains Renewable Energy</p> </td> <td> <p><span class="ticker" data-id="216054">(NASDAQ: <a href="http://caps.fool.com/Ticker/GPRE.aspx">GPRE</a>)</span></p> </td> <td> <p>28.19%</p> </td> </tr> <tr> <td> <p>Angie’s List</p> </td> <td> <p><span class="ticker" data-id="270249">(NASDAQ: <a href="http://caps.fool.com/Ticker/ANGI.aspx">ANGI</a>)</span></p> </td> <td> <p>27.17%</p> </td> </tr> <tr> <td> <p>TASER International</p> </td> <td> <p><span class="ticker" data-id="205639">(NASDAQ: <a href="http://caps.fool.com/Ticker/TASR.aspx">TASR</a>)</span></p> </td> <td> <p>26.29%</p> </td> </tr> </tbody> </table>

When a company’s stock jumps to the degree as seen above it is usually a result of extremely low expectations. In the case of each company above, this statement holds true. None of these companies were expected to perform particularly well, but all exceeded expectations by a significant margin and posted an incredible return for investors. Now, with the spotlight on these companies, and expectations slightly higher, let’s look at what might happen moving forward.

  • Prior to November 1, K Swiss had fallen from $3.80 to under $2.30 in preparation of what most thought would be a horrible earnings report. However, the company shocked Wall Street and posted the biggest one-day gain of the season. The company posted an EPS of ($0.05), beating expectations by $0.08, combined with top line growth of 16% year-over-year, also beating expectations. Furthermore, the company boosted its guidance and continues to show signs that it’s cutting costs to be more effective. However, the stock has retraced, losing a lot of its gains and has now found support around $3.05. Therefore, I believe it is priced to buy, as earnings have been strong and there might be some substance to the takeover rumors.
  • Since Big 5 crushed top and bottom line expectations it has been creating new 52 week highs on a weekly basis. The stock had fallen to a large degree back in 2011, but now appears to be on an uptrend. However, its 7.3% revenue growth is suspect at best. The good news is that the stock trades with a price/sales of just 0.32, meaning it doesn’t need huge top line growth to create value for shareholders.  The company is seeing increased customer traffic and far better margins, therefore this might be a stock worth watching, a company that could become significantly more profitable with its current sales.
  • It’s somewhat rare to see an ethanol clean tech based company trade higher in this market. Most ethanol stocks have been destroyed in the last few years, but Green Plains is making a recovery. In its last quarter, the company lost just $0.03 per share, a beat of $0.24! In addition its $947 million in revenue topped expectations by nearly $100 million. This was a breakthrough incredible quarter. The only bad news is that ethanol based companies have a history of volatility, and unpredictable quarters. Therefore, I’d like to see one more great quarter before establishing its recovery, and at that point, the stock would be worth the additional premium.
  • Angie’s List has been one of the more punished internet based companies in the space. Yet all it has done is post solid growth quarter-after-quarter, and on October 24 it was finally rewarded. The company posted a quarter where it grew sales by 75% including a 68% rise in total paid memberships. The Street continues to worry about the company’s cost per new paid subscriber, but at this point the company seems to be progressing fairly rapid in the development of its future. As a result, with the stock trading towards the bottom of its 52 week range, I think ANGI is a “buy.”
  • TASER International is a stock that had traded flat for four years, but then broke out after its strong quarter. My only concern with TASER is that its stock has rallied 55% in the last three months and its year-over-year growth was only 18%. Its EPS beat was huge but its top line was moderate, and the company trades at a large premium compared to sales. Therefore, it is possible that TASER continues to rally, but it’s a little too expensive for my blood.

Everyone has different preferences; for every seller there is a buyer, so by all means don’t make a decision based on my opinion. Perform your own due diligence to determine if one of these stocks fit into your portfolio. With enough due diligence, you may find and correctly determine that one of these stocks will continue to rally due to great fundamental performance. 


BrianNichols has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Taser International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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