After wrapping up an incredibly strong first quarter of earnings reports, we're nearing an end to 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
|
| Rite Aid (NYSE: RAD ) |
($0.04) |
($0.03) |
25% |
| Barnes & Noble (NYSE: BKS ) |
($0.93) |
($0.98) |
(5%) |
| Micron Technology (Nasdaq: MU ) |
($0.20) |
($0.32) |
(60%) |
Source: Yahoo! Finance.
Rite Aid
Another quarter down, and the losses continue to stream in for Rite Aid. The first-quarter loss of $0.03, while a penny better than expectations, marked the 20th consecutive quarterly loss.
Rite Aid has actually seen its fair share of positives recently, which include rising same-store sales figures and a continuing squabble between Walgreen (NYSE: WAG ) and Express Scripts that has led to both Rite Aid and CVS Caremark gaining pharmacy customers.
But aside from these rays of sunshine, there long-term forecast looks gloomier than Seattle in winter. Rite Aid retired $459 million in debt in February by issuing $481 million in debt due in 2020. With very little in the way of positive cash flow, Rite Aid is making very little progress on its nearly $6 billion in net debt. Rite Aid is also dealing with the negative effect a rise in generic pharmaceuticals has on margins in its pharmacy operations. The effect of those generics actually caused the company to forecast a full-year loss ranging from $0.13 to $0.29 for fiscal 2013.
Rite Aid may have topped Wall Street's expectations this quarter, but nothing has fundamentally changed with this train wreck.
Barnes & Noble
Speaking of train wrecks, enter Barnes & Noble, stage left.
Barnes & Noble was expected to slide in and vulture market share from Borders Group once in went bankrupt, and a Nook-excluded same-store sales rise of 7% demonstrates that that may be happening to a minimal extent, but not as much as I would have hoped to see. With content continuing to shift online, Barnes & Noble is doing its best to play catch-up to Amazon.com's Kindle and Apple's iPad, with limited success.
In its latest quarter, Barnes & Noble noted an 11% decline in Nook e-reader sales as it made the decision to pull its simply e-readers off retailers' shelves in favor of its Nook tablet, which offers a higher price point and better margins. Weakness was also attributed by management to low selling volumes and weak selling prices. Overall, however, Nook sales increased 34% over last year, and the Nook still holds around one-quarter of all digital reader market share, according to Wall Street analysts.
Perhaps the one bright spot for Barnes & Noble is Microsoft's (Nasdaq: MSFT ) $300 million investment in expanding the Nook into the digital college textbook business -- perhaps the one area I feel Barnes & Noble may have an edge. Although partnering with Microsoft doesn't guarantee success (I'm looking right at you, Nokia), it's perhaps Barnes & Noble's last chance at remaining relevant.
Micron Technology
The commoditization of flash memory prices strikes again!
Micron, which supplies flash memory components for mobile phones and tablets, saw earnings fall well short of Wall Street's expectations as memory prices slipped despite better inventory management. The catch-22 with memory prices is that as prices slip, tech companies are encouraged to purchase more. This demand eventually reduces supply, but Micron's margins suffer in the meantime. When prices rebound, Micron's margins grow, but demand weakens from customers as prices rise. Sometimes, Micron just can't win for trying.
However, at just 71% of book value, Micron is beginning to look very attractive, especially when you consider that Microsoft's Windows 8 is due out later this year and should be a catalyst that increases memory sales. As long as you understand the fact that Micron's business is highly cyclical and dependent on global demand, it could be a company worth digging deeper into.
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!
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