5 Reasons Not to Worry This Week

It's not a perfect world out there for investors.

I recently went over some of the companies that are expected to post lower quarterly profits when they report this week.   

Thankfully, they're the exceptions and not the rule. Let's go over some publicly traded companies that are expected to stand tall this week by posting year-over-year improvement on the bottom line.

Company

Latest-Quarter EPS (Estimated)

Year-Ago Quarter EPS

My Watchlist

Conn's (Nasdaq: CONN  ) $0.35 $0.17 Add
VeriFone (NYSE: PAY  ) $0.70 $0.49 Add
Hovnanian Enterprises (NYSE: HOV  ) ($0.12) ($0.47) Add
Smith & Wesson (Nasdaq: SWHC  ) $0.18 $0.04 Add
Ulta (Nasdaq: ULTA  ) $0.51 $0.38 Add

Source: Thomson Reuters.

Clearing the table
Let's start at the top with Conn's.

It's easy to lump Conn's into the pool of struggling consumer electronics retailers, but Conn's does more than sell TVs and camcorders. The chain also sells appliances, mattresses, and even lawn equipment.

Can you find an online store to sell you a cheap leather recliner or a riding mower? You probably can, but between the costly shipping and the need for hands-on research it's probably the smarter bet to just lean on Conn's.

We've seen Circuit City liquidate, and you're seeing the downward spiral at the khaki-donning superstore leader. None of this means that Conn's is dead. In fact, analysts see profitability nearly doubling in its latest quarter on a double-digit uptick in sales.

VeriFone is a major player in electronic payment solutions. The next time you're swiping your credit card at a retailer you may be interacting with a VeriFone system. Its retail enterprise applications are also an important part of its business.

Wall Street's banking on a big quarter out of VeriFone. The forecast calls for a quarterly profit of $0.70 a share when it reports on Wednesday, well ahead of the $0.49 a share it rang up a year earlier.

Hovnanian is a homebuilder. Being a real estate developer has been a tough gig in recent years, but there are signs of life in the housing industry. The glut of available homes has stabilized. Mortgage rates remain near historic lows.

Perhaps more important, it was revealed last week that home prices have posted their first year-over-year increase in nearly two years.

Hovnanian may not be doing as well as the profitable builders. It posted its first quarterly profit in two years three months ago, but analysts see a deficit this time around. However, these same pros also thought that Hovnanian would deliver a quarterly loss at the time. Either way, Hovnanian is still expected to post a significantly narrower deficit this time around.

Smith & Wesson is also improving its aim. In a morbid twist, investors are drawn to gun makers when violent events in this country -- such as this summer's movie theater shooting in Aurora -- spur the debate for tighter gun control laws. The assumption is that folks will make a run for guns before laws governing future ownership tighten.

However, this isn't why analysts see Smith & Wesson's quarterly profit more than quadrupling to $0.18 a share. That has been the steady Wall Street estimate on the stock for two months, even though the Aurora tragedy took place just before the quarter came to a close.

If recent history is any indicator, though, Smith & Wesson will earn even more than that. The company has been blasting away Wall Street targets with ease lately. Smith & Wesson has surpassed bottom-line guesstimates by 125%, 75%, and 59% in its three previous quarters, respectively.

Finally we have Ulta Salon. The beauty goods retailer and hair salon is rolling in rollers. The pros see Ulta's quarterly net income soaring 34% when it reports on Thursday.   

Cross those fingers, but know the fundamentals
Investors in these five stocks have a right to be excited. They are all improving their financial situations. They are worthy of the gains that the market rally has bestowed upon them over the past year.

I wouldn't be uncomfortable owning any of these companies. They're doing the right thing, regardless of Mr. Market's mood swings.

The expectations may be high, but these five stocks wouldn't have it any other way.

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Motley Fool newsletter services have recommended buying shares of Ulta Salon and Cosmetics & Fragrance. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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  • Report this Comment On September 05, 2012, at 12:18 AM, Risky88 wrote:

    it could be tough for ulta with expectations so high

    but they always are for growth

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