3 Earnings Reports That Caught My Attention Last Week

The first half of 2012 is now in the books, and now that we're more than halfway through the third-quarter, 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

Michael Kors (NYSE: KORS  ) $0.20 $0.34 70%
PetSmart (Nasdaq: PETM  ) $0.66 $0.71 8%
DryShips (Nasdaq: DRYS  ) $0.04 $0.01 (75%)

Source: Yahoo! Finance.

Michael Kors
Michael Kors isn't human... there is no other explanation! The luxury apparel and accessories company continued to defy Wall Street -- even the loftiest expectations -- by reporting first-quarter results that blew estimates out of the water once again.

For the quarter, Michael Kors noted a 76% increase in total sales as net retail sales jumped 71% with the addition of 76 new stores since the first quarter last year. What's truly remarkable is the company's 37% increase in comparable-store sales and 185% spike in net income, especially in light of weak spending in Europe and slowing growth in Asia. For those of you at home keeping score, those are earnings beats of 122%, 38%, and 70% since going public.

Expectations for Michael Kors had been pretty tame after the previously untouchable Coach (NYSE: COH  ) reported weaker-than-expected North American sales due to eliminating the practice of offering coupons at its factory outlet stores. Michael Kors, on the other hand, is finding robust growth among all geographic regions and is appealing to all types of income groups. The coup de grace of the report was the company's increased full-year guidance to $1.34 per share in earnings from its previous forecast of $1.12.

Can anything stop Michael Kors? Maybe Chuck Norris, but it's unlikely!

PetSmart
Fido knows best, and if you were smart you'd pay attention to him pointing his paw in approval at PetSmart's continued outperformance.

According to the American Pet Products Association, total revenue generated from pet sales is estimated to be $52.9 billion this year -- more than triple where we were at in 1994! Of that $52.9 billion in expected sales, food and pet services are expected to make up nearly half of the total. This is where PetSmart and its diverse line of products and services come in handy.

In PetSmart's most recent quarter, the pet supplies superstore reported a 9% increase in sales and a 28% jump in net income. More importantly, the company boosted its full-year EPS and sales guidance for the second time this year. You can throw out those previous estimates forecasting sales growth of 9%-10% and EPS of $3.19-$3.31 and replace them with sales growth of 10%-11% and EPS of $3.30-$3.40.

As a pet owner myself, what investors need to understand is that pets are quickly becoming "part of the family." As such, pet owners are willing to spend on their four-legged members almost without regard for the state of the economy. That should translate into robust and steady growth for PetSmart.

DryShips
Not many on Wall Street expected DryShips' second-quarter report to be good, but I'm not sure anyone really expected it to be this bad. The dry bulk shipper is suffering from the lowest dry bulk contract shipping rates since December 2008 as a mixture of increased competition and a weak global economy constrain shipping demand.

In DryShips' second quarter, the company reported an adjusted profit that was 75% worse than expected. The biggest problem for DryShips is that the company has opted to take shorter-term contracts now in the hope of not being caught in long-term contracts at low daily rates when dry bulk daily charter rates do rebound. It sounds great on paper, but it's left the company with a horribly low utilization rate of just 44%

The one bright spot for DryShips is its ownership stake in driller Ocean Rig UDW (Nasdaq: ORIG  ) . Although Ocean Rig reported tepid quarterly results, its $2.6 billion backlog and the fact that it has several long-term contracts bode well for DryShips' stake in the company.

Investors with an affinity for risk might be intrigued by DryShips at these levels given the cash it could generate from selling its Ocean Rig stake; however, I feel the smarter move might be to purchase Ocean Rig directly and avoid the sinking ship that is DryShips like the plague.

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.

The Motley Fool owns shares of Coach. Motley Fool newsletter services have recommended buying shares of Coach and PetSmart. 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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