Don't settle for ordinary quarterly reports.
If a stock can beat the market's expectations, I believe it has a great chance to beat the market, too. Each week, I spotlight three companies that topped analysts' predictions. Leaving Wall Street's pros with stunned expressions can be a good thing. It usually means that the companies have more in the tank than analysts figured, and capital appreciation typically follows.
Let's take a look at a few companies that humbled the prognosticators over the past few trading days.
We can start with Hasbro (NYSE: HAS ) . The toymaker didn't have to whip out the Sorry! board after posting a quarterly profit of $0.26 a share before a positive tax adjustment. Analysts were settling for just $0.16 a share on the bottom line. With rival Mattel also delivering better-than-expected results a week earlier, this news bodes well for the toy industry.
Chipotle Mexican Grill (NYSE: CMG ) is another winner. Earnings at the quick-service restaurant chain soared 49% to $1.19 a share in the first quarter, well ahead of Wall Street's $0.95-a-share target.
Analysts never seem to realize that the burrito baron routinely sets the bar low. Chipotle even had the audacity to project flat comps this year -- even though it has routinely posted positive store-level growth during the recession. I knew it was lying. Comps climbed 4.3% during the quarter, and it's now projecting a store-level gain in the mid-single-digits for 2010.
Knowing Chipotle, it may be lowballing again. Just check out how it's zoomed past the pros over the past year alone:
|
Time Period
|
Est. EPS
|
EPS
|
Difference
|
|
Q2 2009
|
$0.88
|
$1.10
|
25%
|
|
Q3 2009
|
$0.88
|
$1.08
|
23%
|
|
Q4 2009
|
$0.81
|
$0.99
|
22%
|
|
Q1 2010
|
$0.95
|
$1.19
|
25%
|
Source: Yahoo! Finance.
It's practically a no-brainer. Eateries with a reputation for high-quality food will be big winners during the recovery. Chipotle and Cheesecake Factory obliterated estimates last week. It's a fair wager that Panera Bread will follow suit this week.
Finally, we have Apple (Nasdaq: AAPL ) making the grade. A ton of iPhones, Macs, and iPods translated into a profit of $3.33 a share. Mr. Market was perched at $2.45 a share. I'd include a Chipotle-esque table of Apple's history of beating analyst marks, but it would be too long. Apple has landed ahead of Wall Street on a quarterly basis for years now.
It's important to keep watching the companies that surpass expectations. Over time, it will be a profitable experience for investors, as the market rewards the overachievers. That's the kind of surprise we look for in the Rule Breakers newsletter service. Want in? Check out a 30-day trial subscription.
Either way, come back next Monday to learn about more stocks that blew the market away.
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