5 Stocks That Laugh at Wall Street

In these heady economic times, Mr. Market seems to enjoy dogpiling on any stock that dares to fall short of analysts' estimates. To defy that trend, we're here to celebrate stocks that didn't merely meet Wall Street's predictions, but laughed in analysts' faces by leaving their miserly forecasts in the dust. The companies below have all soundly trounced earnings estimates by 20% or more in the last quarter:

Source: Yahoo! Finance. EPS = earnings per share; LT = long-term; NA = not available.

Nonetheless, beating estimates isn't enough to make a stock a winner. Analysts are notoriously lousy at forecasting results, and one-time items can sometimes push earnings over the top. Wall Street professionals typically don't include such extraordinary events in their forecasts.  

Rather than focusing only on the past, we'll check whether analysts have a bead on future performance. With help from Motley Fool CAPS, we'll see which of the top companies listed above will have the last laugh.

The joke's on them
Unlike airlines, which can cut capacity and reduce flights to fill cabin seats, the hospitality industry doesn't have that luxury. Even worse for casino operators like MGM Mirage and Las Vegas Sands (NYSE:LVS), which have been taking on debt to build more venues, is that they're going to face even more pricing pressure as they roll the dice on luring high rollers back to the tables.

While Sands reports that 2010 bookings already exceed 2009 results, and MGM came in with a surprisingly narrower loss, Wynn Resorts (NASDAQ:WYNN) cast a bit of a pall over the lights and ringing bells as its revenues came in lower year over year. Macau is proving to be a bit of a high-stakes gamble as the Chinese government gives mixed signals on whether it really wants its people traveling there to gamble.

MGM has more exposure to the Las Vegas strip than to Macau, so it has more riding on its CityCenter project, which is slated to open next month. Yet adding 6,000 rooms to a location already swimming in excess capacity ought to spell weakness in future quarters.

Revenue per available room dropped 23% year over year, even though average occupancy remained at 95%. According to PricewaterhouseCoopers Hospitality & Leisure Practice, hotel rates are down 8.8% in 2009 as a result of a 3% increase in room inventory added this year. They expect a continuation of this trend in 2010, though at a much lower pace.

CAPS All-Star phauenstein is betting on a general economic recovery to finance industry growth:

The minute spare funds are available, casinos will be back to their prime. Companies like WYNN, MGM, and LVS are highly leveraged in their desire to expand, but will ultimately survive and be stronger for it. The timing of the downturn was bad, but even local to me (Western New York) the casinos here are upset that instead of making $120 million, they only make $102 million. Believe me, they aren't losing money and the only thing that has these larger traded companies in a bind is the poor timing to be highly leveraged. I don't think they are losing any money, they have just lost all ability to find financial flexibility, further leverage themselves, or possibly to maintain any loan covenants that would otherwise be a non-issue.

Belly laughs galore
Back in June, another highly rated All-Star, TSIF, admitted he was getting jazzed about the potential Jazz Pharmaceuticals offered, considering all the drugs in its pipeline:

It is becoming harder to buy a drug between Phase III and FDA approval/disapproval with a decent risk reward as speculators abound. I think JAZZ has a good valuation. To have only been in business since 2003, Jazz's portfolio of neurology and psychiatry drugs/candidates has some great potential. I'm JAZZ'd up on JAZZ.

That proved prescient, as the pharmaceutical's third-quarter earnings report showed it was able to narrow the losses it's been realizing on higher sales for its drugs. Sleep disorder drug Xyrem shot up 76% over last year, while Luvox CR, a controlled-release anxiety and obsessive-compulsive disorder therapy, more than doubled. Of course, that didn't stop the stock from sliding on the news, but it represents the opportunity Jazz's portfolio holds.

Yukking it up
The market's rally has changed from being mostly fueled by low-quality stocks to dragging most others along based on lower year-over-year comparables. If you think there's some funny business afoot, let us know -- head over to Motley Fool CAPS and sound off.