3 Earnings Reports That Caught My Attention Last Week

The first half of 2012 is now in the books, and as we prepare to dive into third-quarter earnings reports, I can't help but point out that the majority of reports up until now have been 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. They may have slid under your radar, but they deserve a look:

Company

Consensus EPS

Reported EPS

Surprise

International Speedway (Nasdaq: ISCA  ) $0.40 $0.52 30%
Accuity Brands (NYSE: AYI  ) $0.78 $0.82 5%
Ambow Education (NYSE: AMBO  ) $0.29 ($0.89) (407%)

Source: Yahoo! Finance.

International Speedway
Apparently America's love for left turns is alive and well.

International Speedway, owner and operator of 13 speedways and promoter of more than 100 races each year, performed its own version of shake-and-bake and drafted past Wall Street's estimates by 30% in the second quarter. However, in spite of the 16% rise in revenue, I feel International Speedway could be running out of gas.

The primary reason results were up in its latest quarter was the addition of two new races to the NASCAR circuit. Other fees were primarily weak with only modest growth in beverage, food, and merchandise sales. The crux of International Speedway's dilemma is that high unemployment rates and weak consumer spending habits are affecting its bread-and-butter middle-class consumer. Data last week further showed that spending is challenged, as retail sales hit their lowest levels since August 2009, and employment figures once again missed the mark in June.

In International Speedway's defense, it did maintain its sales and earnings guidance, but consider me pessimistic on its near-term outlook given persisting macroeconomic worries.

Acuity Brands
"I have seen the light, and it is good," surmised Acuity Brands shareholders after the lighting solutions company brightened investors' day by stepping over Wall Street's estimates by 5%. Contributing to this beat was a 6% rise in sales, which the company attributed mostly to better pricing power but also gave some credit to a favorable mix of product.

However, just like International Speedway above, you can't judge a book by its cover. In addition to the good news, Acuity noted that international weakness in Spain and higher material and component costs are continuing to drag down margins. As my Foolish colleague Brian Pacampara was quick to note, even Acuity CEO Vernon Nagel sees the possibility for continued demand and price volatility in the U.S. and globally moving forward.

Even light-emitting diode supply chain companies have shown signs of weakness recently. Cree (Nasdaq: CREE  ) , which manufactures LEDs for power and wireless applications, continues to tout the technology as the wave of the future, yet demand uncertainty has led to three straight quarterly EPS misses.

Acuity may have had a nice pop last week, but consider me not all that impressed.

Ambow Education
Someone get the crash cart, another China-based equity may have fudged its financials. At least that's one theory right now as Ambow Education, a Beijing-based education services company, has been accused by a former employee of financial wrongdoing relating to the acquisition of a training school in 2008. Ambow has launched an internal investigation into the matter.

Unfortunately, the disaster du jour didn't end there. Despite reporting net revenue growth of 22% and a 17% increase in student enrollment, operating expenses spiked 85% and the company was unable to recognize certain revenue, which resulted in a whopping 407% worse-than-expected quarterly loss. Worse yet, the company's Chief Financial Officer, Gareth Kung, resigned after just six months with the company.

For now, it appears that even China's lending regulations being significantly more relaxed than in the U.S. doesn't make China-based educators any safer. K12 (NYSE: LRN  ) , an online educator focused on children in high school and younger, has the dubious honor of missing earnings estimates in seven straight quarters. Given Ambow's nightmarish report, I see no reason to tip-toe anywhere near the education sector, period.

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 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. 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 International Speedway and K12. 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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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.

  • Report this Comment On July 09, 2012, at 11:50 AM, Medicalrecordman wrote:

    Sean, AMBO's earnings are anything but a disaster if you knew what's going on. Pricewaterhousecoopers changed their policy with regards to all Chinese stocks and the way they recognize revenue. AMBO was forced to defer a great deal of revenue and the company's still not only growing rapidly, they're opening up new training centers at warp speed. With Baring Asia and the CEO recently buying over $50 million in stock at an average of $8.37, look for them to provide a floor here as theh gobble up more shares. GEDU, a Chinese educator with a crappy balance sheet recently went private at a P/E of 32 and I look for AMBO to do the same, providing for monster gains from here. Only a fool would short the stock here.

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