3 Earnings Surprises That Caught My Attention Last Week
Mar 19th 2012 10:34AM
Updated Mar 19th 2012 3:36PM
We're nearly done with the first quarter, and surprisingly, the majority of earnings reports continue to be better than Wall Street had predicted. With so many companies reporting during the 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. If they slid under your radar, they deserve a look:
|Medifast (NYS: MED)||$0.21||$0.09||(57%)|
|Global Power Equipment (NAS: GLPW)||$0.18||$0.43||139%|
|ATP Oil & Gas (NAS: ATPG)||($0.79)||($0.56)||29%|
Source: Yahoo! Finance.
Oh, look -- I'm shocked. Another weight-loss company failed to live up to expectations. If you failed to catch my sarcasm there, I've been shaking my stick at the entire sector for the better part of a month now.
Just two weeks ago, NutriSystem (NAS: NTRI) once again whiffed on its guidance, forecasting a first-quarter loss when analysts had been expecting a profit of $0.10. Similarly, Weight Watchers (NYS: WTW) came in light with its fourth-quarter sales. The point I've been trying to make is that there's little loyalty in the weight-loss sector. Whether customers lose their desire to stick with the program, become bored with the diet, or simply have the attention span of a goldfish is up for debate, but the facts don't lie: Consumers aren't loyal to weight-loss companies.
For Medifast, this was its third straight quarterly EPS miss as it continues to open new weight-loss centers. Gross margin did improve, but that's not helping Medifast where it counts. If you want to shed pounds and profits, this is definitely the sector to be in right now.
Global Power Equipment
It's not often a company completely flies under my radar, but Global Power Equipment is one such company. But when you blow earnings away by 139%, you're just about guaranteed to get my attention.
The company is actually based in a fantastic niche: It provides maintenance and outage services to nuclear reactors and fossil-fuel and hydroelectric power plants, as well as equipment for gas turbine power plants. Remember my whole spiel on buying necessity products? This is what I'm talking about.
Global Power ended the quarter with a $4 million uptick in its backlog to $344 million, while its cash position strengthened even further to $99.5 million ($6.09 per share) with no debt. Although its revenue was actually down year over year, its backlog and cash flow actually increased. This is definitely a name worth keeping an eye on in the energy sector.
ATP Oil & Gas
Yes, the company reported a smaller-than-expected loss and turned a $40 million cash outflow into a $68.5 million cash inflow when compared to the year-ago period. But I still don't like it.
ATP continues to struggle where it counts: in the earnings column. The oil and gas deepwater driller has an accumulated deficit that's grown to nearly $550 million, and it continues to spend liberally on new operating initiatives. In 2011 alone, despite the reduction in spending by roughly a third, it still spent about $400 million on its oil and gas properties.
Then there are the astronomical levels of debt that it's coping with. At the moment I'm not sounding an alarm on the company's $1.98 billion in long-term debt, but this figure has been growing with some regularity over the years, and shareholders are growing weary of waiting for ATP to produce a profit. I'm maintaining my bearish stance on the company until it can provide ample cash flow to cover its interest payments and exhibit some semblance of fiscal prudence.
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.
- Add Medifast to My Watchlist.
- Add Global Power Equipment to My Watchlist.
- Add ATP Oil & Gas to My 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!
At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. 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.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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