3 Earnings Surprises That Caught My Attention Last Week

We're now one month into the new year, and surprisingly the majority of earnings reports continue to be better than what Wall Street had predicted. With so many companies reporting during the several weeks each quarter that comprise earnings season -- some very outstanding, and in some cases subpar -- earnings reports can fall through the cracks.

For the past three weeks, I've taken a look at nine 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:

Company

Consensus EPS

Reported EPS

Surprise %

Alliance Resource Partners (Nasdaq: ARLP  ) $1.78 $1.93 8%
Emulex (NYSE: ELX  ) $0.22 $0.26 18%
Coffee Holding (Nasdaq: JVA  ) $0.30 (0.23) (230%)

Source: Yahoo! Finance.

Alliance Resource Partners
What else can I possibly say about this coal company other than… it did it again! On Friday, Alliance Resource reported its 11th consecutive year of record profits and, in an even more predictable fashion, upped its quarterly distribution for a 15th straight quarter to $0.99.

For the quarter, revenue rose 13.4% while net income skipped 5% higher. Higher coal price realizations aided Alliance Resource's profits even though expenses jumped 14.3% because of higher raw material, labor, and maintenance costs.

Best of all, management appears confident that it will be able to carry its momentum into fiscal 2012. It has nearly all of its coal production under contract through mid-2013 and even has 19.8 million tons of coal contracted through 2015 (for reference, the company guided to 34 million to 35 million tons in 2012). Electric demand is one of those "sure things" you can count on almost regardless of economic booms and busts, and coal is going to continue to fuel that demand (pun fully intended). This company should keep chugging along in 2012.

Emulex
You'd think we almost had a touch of the 2000s last week, with Broadvision rallying more than 100% at one point and both Emulex and Q-Logic (Nasdaq: QLGC  ) crushing EPS estimates. But things aren't always what they appear.

Although the flooding in Thailand had a negative impact on both Emulex and Q-Logic in the data storage sector, it was Emulex that posted the 13% rise in sales and the $0.04 EPS beat compared with Q-Logic, which actually exhibited year-over-year sales and earnings declines. Emulex's earnings beat marked the third straight quarter the company's crushed estimates, and what's more impressive is that management expects this trend to continue. Emulex's third-quarter guidance of $0.17-$0.19 profit on $121 million to $125 million in sales easily surpassed the current consensus expectation of $0.14 on $120.5 million in sales. For 2012, I see more momentum for Emulex, and that CAPScall of outperform I made on the stock a few months back seems like a good call so far.

Coffee Holdings
And you thought that derivative losses were confined just to the banking and oil & gas sectors? Coffee Holding reported a surprising $0.30 per share loss to end its fiscal 2011, a lot worse than the $0.23 gain in EPS that the lone analyst covering the coffee stock had expected.

What caused the shortfall? Rising costs did their damage, but Coffee Holding blamed much of the shortfall on hedging losses. Volatile coffee prices and a lack of liquidity in coffee derivative markets made it difficult to maintain margin requirements and constrained its short-term cash position, forcing it to sell out of many of its positions.

Honestly, this sounds like a company that got caught with its hand in the cookie jar. I've warned against owning Coffee Holding in the past for reasons similar to this. Aside from rapidly growing sales, there isn't much substance behind its figures. Instead, I continue to recommend Starbucks (Nasdaq: SBUX  ) as the coffee play of choice. CEO Howard Schultz has done a masterful job of turning the company around, and its brand image is easily recognizable worldwide.

Foolish roundup
Sometimes an earnings beat or miss isn't as cut-and-dried as it appears on the surface. 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 to keep up on the latest news about each company.

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. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks and Alliance Resource Partners. 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 loves a solid dividend payout.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1768519, ~/Articles/ArticleHandler.aspx, 8/22/2014 3:51:57 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement