Most Impressive Companies of this Earnings Season (Part 2)

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

During an earnings season that was marked with a trend of conservative spending and slow growth there are some companies that broke the trend with breakout quarters. Last week I looked at the top five earning performers of this last quarter, and made an assessment based on the information. In this article we’re looking at the runner-ups, and determining the best way to play each stock.

<table> <tbody> <tr> <td> <p><strong>Company</strong></p> </td> <td> <p><strong>Ticker</strong></p> </td> <td> <p>Earnings Day Performance</p> </td> </tr> <tr> <td> <p><strong>Applied Micro Circuits</strong></p> </td> <td> <p><strong><span class="ticker" data-id="202798">(NASDAQ: <a href="">AMCC</a>)</span></strong></p> </td> <td> <p>26.21%</p> </td> </tr> <tr> <td> <p><strong>DeVry Inc.</strong></p> </td> <td> <p><strong><span class="ticker" data-id="203349">(NYSE: <a href="">DV</a>)</span></strong></p> </td> <td> <p>24.93%</p> </td> </tr> <tr> <td> <p><strong>Wabash National Corporation</strong></p> </td> <td> <p><strong><span class="ticker" data-id="206103">(NYSE: <a href="">WNC</a>)</span></strong></p> </td> <td> <p>23.45%</p> </td> </tr> <tr> <td> <p><strong>Red Robin</strong></p> </td> <td> <p><strong><span class="ticker" data-id="205262">(NASDAQ: <a href="">RRGB</a>)</span></strong></p> </td> <td> <p>21.51%</p> </td> </tr> <tr> <td> <p><strong>Gentiva Health Services</strong></p> </td> <td> <p><strong><span class="ticker" data-id="203788">(NASDAQ: <a href="">GTIV</a>)</span></strong></p> </td> <td> <p>21.24</p> </td> </tr> </tbody> </table>

A 20% jump following a quarterly report is no easy task. Aside from a quarter of near perfection a company must also give some indication of future performance, and be oversold in order to pull off such a large gain. With that being said, let’s take a look at what moved these stocks, and my opinion on each.

  • Applied Micro Circuits was the sixth best performing stock of the season after announcing earnings. Therefore, you’d think it posted a blowout report. However, the company’s earnings were in-line with expectations, which include a 28.7% revenue loss year-over-year.  The stock was pushed higher because it slightly increased revenue guidance for Q3. In addition, it announced partnerships with Red Hat and ARM to develop server designs. Some believe AMCC is now a good value investment, however I am not too confident. A 28.7% revenue loss is significant, and I think investors would be better suited to wait and see if the company can regain market share in coming quarters.
  • DeVry is a perfect example of a company with low expectations that rallied huge with a nice beat. The stock has seen gains in excess of 30% over the last three months, thanks to its strong quarter. However, it is still trading with a YTD loss of nearly 35%. In the quarter, the company did see a revenue loss of 7% year-over-year, but with its EPS of $0.49 it beat expectations by $0.18. In regards to a potential investment, DeVry still faces some challenges in the future, and uncertainty due to the fiscal cliff. However, it remains priced for a worst case scenario. Therefore, I think it makes an intriguing play after the new year, because it’s a company making progress and becoming more efficient.
  • Despite missing Q3 expectations, Wabash jumped higher due to its 26% top line growth. The company looks to be fairly valued and has continued to trade higher since its Q3 report. One reason for its continued strength, and a strong reaction after earnings, was guidance and even better monthly sales. Therefore, I think it is a stock worth watching.
  • In the six weeks prior to earnings, Red Robin fell 21% in preparation of a missed quarter. The company’s valuation was punished for weakness within the industry. However, Red Robin turned out to be a pleasant surprise. The company’s revenue growth was moderate, but was in-line with expectations, and its earnings were far ahead of guidance. Furthermore, the company has continued to show higher store traffic and larger margins. Like I said, the company is seeing slowed growth but continues to be one of the more efficient restaurant stocks in the market, but is unfortunately priced accordingly.
  • Gentiva Health traded similar to Red Robin before its quarterly report. The stock traded lower by 25% in anticipation of a weak quarter but then rallied after exceeding low expectations.  The company still saw revenue loss year-over-year but posted solid bottom line gains. Furthermore, I do think the stock is fairly valued, but before buying, I would like to see one more strong quarter.

As you can see, each of the companies on this list had problems with their quarterly reports. However, because of being undervalued each was able to trade considerably higher. With that being said, each of these stocks are a bit more expensive compared to their pre-quarter price, and now you’d have to pay that premium to invest. If you like any of these companies then you will need further due diligence, but personally, not one of these stocks pop off the board as a must have in my portfolio.   

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 Red Robin Gourmet Burgers. 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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