3 Earnings Surprises That Caught My Attention Last Week

We're more than a month into the new year, and surprisingly the majority of earnings reports continue to be better than Wall Street had predicted. With so many companies reporting during the several weeks that comprise earnings season each quarter, earnings reports can fall through the cracks.

For the past couple of weeks, I've taken a look at more than a dozen 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 %

BP (NYSE: BP  ) $1.59 $2.41 52%
AMERCO (Nasdaq: UHAL  ) $0.87 $1.65 90%
Calpine (NYSE: CPN  ) ($0.01) ($0.09) (800%)

Source: Yahoo! Finance.

BP
Dare I say -- is BP back? The deepwater driller that is still dealing with the repercussions of its April 2010 oil spill in the Gulf of Mexico reported fourth-quarter earnings that trounced Wall Street's expectations by 52% and raised its dividend for the first time since the tragic spill. BP has paid off 75% of its $20 billion Deepwater Horizon Trust Fund obligation that it has pledged to help the victims of the oil spill, and management seems generally bullish about the company's expansion plans heading into 2013 and 2014.

As for me, I just see a very inexpensive oil play that has nearly put its PR nightmare completely behind it. BP is trading at just seven times forward earnings, cheaper than personal favorite Chevron (NYSE: CVX  ) , which reported two weeks ago and actually missed Wall Street's consensus EPS figure. Investors have factored in the company's Gulf of Mexico uncertainty a bit too much, I suspect, and this quarter's earnings beat serves as evidence of that. There could be plenty of room left for BP to run higher.

AMERCO
AMERCO, the parent of self-moving juggernaut U-Haul, reported what looks like one stellar quarter on Wednesday, beating expectations by a clean 90%. However, if you dig past the initial beat, things aren't as bright as they appear.

The majority of AMERCO's earnings are as a result of adjusting for a $31.4 million increase in loan loss reserves related to workers' compensation claims in its Repwest Insurance segment. In fact, a good portion of AMERCO's insurance revenue increase is related to acquisitions, not organic growth. Rising expenses also could become a problem. For the third quarter, sales rose by 19% but expenses jumped 27%, with expenses rising across all business segments. This is particularly worrisome given that AMERCO has $1.5 billion in debt to contend with. If you ask me, I'd consider putting this one in storage and throwing away the key.

Calpine
The "less bad" rally continues on Wall Street -- but this one has an odd Catch-22 twist that you probably didn't see coming.

Calpine was expected to report a loss of just $0.01. Instead, the company reported a loss of $0.09 -- narrower than last year, but still worse than Wall Street had expected. Oddly, the stock rallied on the news. With most of Calpine's power plants being powered by natural gas, and coal prices still relatively high, the hope is that Calpine will receive a boost in demand.

Now for that Catch-22 I promised you: Because natural gas prices are so low, even if demand increases, revenue is almost assuredly going to fall, making profitability even more challenging. It's these same low natural gas prices that recently coerced Chesapeake Energy (NYSE: CHK  ) to furlough up to 70% of its natural gas field spending until prices improve. Calpine continues to struggle with a double-edged sword and looks like a company worth avoiding.

Foolish roundup
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.

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!

  • Add BP to my watchlist.
  • Add AMERCO to my watchlist.
  • Add Calpine to my watchlist.

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. Motley Fool newsletter services have recommended buying shares of Chevron. 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 isn't full of gas.


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