These Stocks 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.

Sometimes a company will be forecast to lose money, but it upends the analysts' apple cart by recording profits. You sometimes can't actually calculate by how much they beat the estimates (seventh-grade math tells us we can't divide by zero or less and get a meaningful result!), but it's still useful to understand why they were able to exceed expectations.

Company

CAPS Rating

Last Qtr. EPS Estimate

Last Qtr. EPS Actual

Est. LT Growth

Baidu.com (Nasdaq: BIDU  )

**

$0.15

$0.20

48%

Bank of America (NYSE: BAC  )

***

$0.09

$0.28

4%

Ford (NYSE: F  )

**

$0.31

$0.46

19%

Source: Yahoo! Finance and CAPS.

The above three companies beat estimates recently, but that isn't necessarily enough to make the 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 read on future performance. With help from Motley Fool CAPS, we'll see which of the companies listed above will have the last laugh.

Laugh, clown, laugh!
Now with Google (Nasdaq: GOOG  ) essentially gone, Baidu.com owns the search market in China. Sure, it was always a leader, but analysts at ThinkEquity say the search engine commands almost two-thirds of the revenue share in the country and more than three-quarters of the query share.

Of course, that doesn't match Google's share of the global market where it has nearly 85% of the market to itself. Yahoo! (Nasdaq: YHOO  ) is second at 6%, and Microsoft's (Nasdaq: MSFT  ) Bing follows at a distant third with just a 3% share.

The disparity, if you want to call it that, could be due to the fact that China has yet to shut off searches through Google's Hong Kong site. China searchers of Google.cn are redirected to the island's portal, which are generally unfiltered, though terms such as "Tiananmen Square" are still sent off to the memory hole.

CAPS member GearCat has an ongoing, though secret love affair with Baidu.com, despite its sky-high valuation:

I try to think of this stock as one would a wild girlfriend or boyfriend. You probably will not introduce them to your parents or friends right away, cause their P/E ratio is out of control, and you told yourself you would never do that. but in them you detect great potential, because of their 1.2 billon population, emerging middle class, and their protective older/big brother. This is a risk.

Sunny days are here again
Improvement's improvement, I guess, and you take positive developments where you can find them these days. Credit card delinquencies fell in May for Bank of America, one of the biggest credit-card issuers in the country. Now, this was no steep drop-off, mind you, rather just a little incremental move in the right direction. Charge-offs fell to 12.7% in April, down from 12.71% the month before.

Fitch Ratings says its credit-card index, which includes issuers Bank of America, Citigroup, and JPMorgan Chase, saw delinquencies fall for the fourth straight month.

CAPS member ozzfan1317 isn't worried about those issues catching up with the financial institution, thanks to other business:

Almost 300 billion more assets than Liabilities controls so much of the mortagage and investment banking markets its like a borderline monopoly.

Dim the lights
It's tough to be more upbeat about Ford than investors already are, but thanks to Toyota's (NYSE: TM  ) self-inflicted wounds, the carmaker has marched up the ranks of top quality cars.

J.D. Power & Associates released its initial quality survey and Ford came in fifth, bested only by four luxury car manufacturers. Toyota, on the other hand, once synonymous with quality cars, tumbled all the way down to 21st place. The stars certainly aligned themselves for Ford, and the reversal of fortunes could not have come at a better time.

Ford didn't take government handouts, its cars caught the imagination of the car buying public, it returned to profitability faster than originally planned, and now quality is on the rise. As CAPS member akarren noted earlier this year, Ford has earned the public's respect again:

Toyota has given Ford an Image Redemption which is a miracle. Everybody is watching and seeing how maybe Ford doesn't have bad quality. Parent's children are learning that Fords aren't bad. I know they have high debt, but people are starting to trust Ford again, and that hasn't happened in a long time. Expect sales only to go up.

Yucking 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.

Microsoft is a Motley Fool Inside Value selection. Baidu and Google are Rule Breakers recommendations. Ford is a Stock Advisor selection. Motley Fool Options has recommended a diagonal call position on Microsoft.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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