3 Earnings Reports That Caught My Attention Last Week

After wrapping up an incredibly strong first quarter of earnings reports, we're about halfway through the second quarter, with many reports still coming in better than expected. With so many companies reporting during the weeks that comprise earnings season, it's easy for some earnings reports to fall through the cracks.

Each week this year, I've taken a look at three companies that could be worth further research after either beating or missing their profit expectations. Today we'll take a gander at three more companies that reported earnings last week. If they slid under your radar, they deserve a look:

Company

Consensus EPS

Reported EPS

Surprise

Assured Guaranty (NYSE: AGO  ) $0.38 $1.41 292%
Medifast (NYSE: MED  ) $0.37 $0.29 (22%)
KEMET (NYSE: KEM  ) ($0.07) ($0.16) (129%)

Source: Yahoo! Finance.

Assured Guaranty
Lesson numero uno about investing: There's more to a company than its name. Assured Guaranty's name may give the impression of a solid business, but the reality of it ends there.

As the only active municipal bond insurer left after Ambac Financial's bankruptcy and MBIA's largely bowing out of new business, Assured Guaranty noted in its first-quarter report that while it was profitable, it will lose a net total of $231.9 million as a direct result of Greece's default. Buoying results was a one-time $165.6 million payment from Deutsche Bank (NYSE: DB  ) , which settled a lawsuit stemming from security losses backed by home loans. If you choose to include the impact of downward fair value adjustments of $560 million, Assured Guaranty's one-time laden quarter actually turns into a $2.65 quarterly loss!

Although Assured Guaranty is pretty much the last company standing, finding quality bonds to insure isn't as easy as it used to be, and we're seeing this reflected in the wild swings present in Assured Guaranty's results. With the global economy on shaky ground, a bond insurer like Assured Guaranty is one of the last places I'd personally put my money.

Medifast
If you needed more proof in the pudding that weight-loss centers will help you burn both pounds and profits, then look no further than Medifast.

Just a week after Weight Watchers International (NYSE: WTW  ) reported a profit that missed Wall Street's mark by 5% due to higher advertising expenses, Medifast proved to investors that anything Weight Watchers can do, it can do even worse. Medifast significantly reduced its year-earlier profit of $0.44 to a $0.29 profit as the weight-control company ramped up marketing and expansion expenses in order to open five new locations. Revenue shot up 20%, but that will prove meaningless if Medifast can't keep its costs under control.

This seems to be the catch-22 of weight-loss centers: Either they get crushed by high marketing expenses but bring in enough new clients to neutralize the high turnover, or they lower their advertising budget enough to beat Wall Street's expectations for two or three quarters before customer attrition rates begin to shoot up. This looks like a no-win scenario to me.

KEMET
There may be no glory in being one of the leading manufacturers of tantalum capacitors, which are used in everything from medical devices to space equipment. But when the economic cycle is booming, it sure is profitable!

Unfortunately for KEMET shareholders, the global economy is far from booming, outside of select emerging-market economies. KEMET is currently very profitable on an annual basis, but it has historically traded at a low earnings multiple when profitable, largely due to its reliance on the health of the global economy to drive its business. In its latest quarter, sales fell 3.3% as it blamed a restructuring effort of its manufacturing facilities in Europe for the weakness. With austerity deals threatening growth in many European countries, KEMET's prospects for a quick rebound don't look so hot. Don't be surprised if its earnings estimates continue to fall, but also be ready to give KEMET another look when the outlook in Europe does rebound.

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!

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He refers to his fast metabolism as his "weight-loss center." 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.

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 always exceeds expectations.


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