3 Earnings Surprises That Caught My Attention Last Week
Feb 21st 2012 11:18AM
Updated Feb 21st 2012 1:48PM
We're nearly two months into the new year, and surprisingly the majority of earnings reports continue to be better than Wall Street had predicted. With so many companies reporting during the several weeks that comprise earnings season each quarter, earnings reports can fall through the cracks.
Each week this year, I've taken a look at three companies that could be worth further research after either beating or missing their profit expectations. Today, we're going to take a look at three more companies that reported earnings last week and may have slid under your radar, and that you should give a second look:
|FreightCar America (NAS: RAIL)||$0.13||$0.71||446%|
|Michael Kors (NAS: KORS)||$0.09||$0.20||122%|
|RealNetworks (NAS: RNWK)||($0.08)||($0.16)||(100%)|
Source: Yahoo! Finance.
If you want talk about sending mixed signals, then FreightCar America has to be tops on that list right now. Earlier in the week, Genesee & Wyoming, a railcar operator, released its January traffic update, which reflected a 40% decline in coal shipments. It makes sense that with natural gas prices near decade lows, electric utilities would switch from coal to gas to generate electricity since it's cheaper. That weakness should probably have translated into FreightCar's fourth-quarter results as well last week -- but it didn't.
In fact, FreightCar didn't just beat estimates -- it destroyed them by 446%, with profits more than tripling over the year-ago period. The company also noted that 4,481 railcars were ordered during the quarter, up from just 331 in the previous quarter. FreightCar CEO Ed Whalen sees a positive outlook for his company, but he cautioned that early 2012 weakness could dampen expectations. Are you confused yet? Because I sure as heck am! I'll need to see the company's first-quarter results before I can make a final assessment on this baffling company.
Behold the power of a strong brand name! Michael Kors didn't disappoint with its first report as a public company, crushing EPS estimates by 122% and growing revenue by a blistering 68%. Surprisingly, that wasn't the figure that dropped my jaw. It was the fact that North American same-store sales popped 38% and European same-store sales rose 34.4%, all while many of Europe's economies sink into the abyss.
Michael Kors has benefited from licensing agreements as well. Its partnership with Fossil (NAS: FOSL) , which makes watches for Michael Kors then rebrands them under the Kors line, has worked out well as license revenue ticked up 44% for the quarter. The company's dual approach of operating its own locations while also being sold in luxury stores like Saks and Neiman Marcus is working out flawlessly. Michael Kors could be a bit pricey here, but it's hard to argue against 38% same-store sales growth.
On the other side of the coin, RealNetworks CEO Thomas Nielsen more or less sounded the emergency alarm in his company's fourth-quarter results. In his own words, "We are clearly not satisfied with the company's 2011 performance and, as a result, we have an increased sense of urgency to refocus RealNetworks for growth and profitability." Mr. Nielsen went on to say that the company is looking at strategic buyout possibilities to create growth.
I don't know about you, but I read this as, "Help! I don't know how to create growth so maybe we'll go out and try to buy growth." RealNetworks has seen its revenue contract for three straight years -- from $605 million in 2008 all the way down to just $335 million in 2011. It has also lost money in three of the past four years. The company does have more than $5 in cash per share with no debt and is going to generate $120 million in the upcoming quarter from the sale of 190 patents and 170 patent applications to Intel (NAS: INTC) , but all of that cash seems fruitless if it can't figure out how to grow. I'd slap the yellow caution tape all over this stock.
Sometimes, an earnings beat or miss isn't as cut-and-dried as it appears. I've given my two cents on what's next for each of these companies; now it's your turn to sound off. Share your thoughts in the comments section below, and consider adding these stocks to your free and personalized watchlist.
If you'd like the inside track on three more companies that could wind up in the earnings beat column, then I suggest you get a copy of our latest special report, "3 American Companies Set to Dominate the World." Did I mention the best part? This report is completely free, so don't miss out!
- Add FreightCar America to My Watchlist.
- Add Michael Kors to My Watchlist.
- Add RealNetworks to My Watchlist.
At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He freely admits to being a watch addict. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Fossil and Intel. Motley Fool newsletter services have recommended buying shares of Genesee & Wyoming, Fossil, and Intel, while also, in a separate newsletter service, recommending shorting shares of Fossil.Try any of our Foolish newsletter services free for 30 days. We Fools don't 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 that always exceeds expectations.
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