3 Earnings Reports That Caught My Attention Last Week

The first half of 2012 is now in the books, and now that we're nearly 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

Palo Alto Networks (Nasdaq: PANW  ) $0.00 $0.03 NM
Majesco Entertainment (Nasdaq: COOL  ) ($0.05) ($0.09) (80%)
Coffee Holding (Nasdaq: JVA  ) $0.01 $0.19 1800%

Source: Yahoo! Finance. NM = not meaningful.

Palo Alto Networks
Wall Street didn't take too kindly to cloud-focused security company Palo Alto Networks' earnings report last Monday, which highlighted "just" 88% revenue growth after multiple quarters of triple-digit revenue increases. Palo Alto's EPS topped estimates by $0.03 and its upcoming quarterly forecast of $80 million to $84 million in revenue and a $0.03 profit compared well with Wall Street's expectations for $80 million and a profit of $0.03, but the stock still tanked.

To Wall Street, I emphatically say, "You're nuts!" Palo Alto is by no means a cheap company based on its current valuation, but its software is the future of data center security. As I highlighted previously, unlike Cisco Systems (Nasdaq: CSCO  ) , whose built-in network security software requires constant updates and doesn't adapt well to new-architecture social media platforms, Palo Alto's security is easily adapted by users to their tastes and requires minimal updates since the majority of those factors can be handled on Palo Alto's end. With a projected growth rate of 50% over the next five years, Palo Alto looks like a force to reckon with in the security sector.

Majesco Entertainment
Warning! Please ignore the shiny objects that resemble low future P/E ratios, as they may be hazardous to your health.

Majesco Entertainment's third-quarter report last week was absolutely abysmal, and I'm terrified that some investors might note Majesco's small forward P/E and assume they're getting a great deal here when it appears they aren't. Year-over-year revenue collapsed 53% to just $9.1 million, which Majesco blamed on the aging of the Nintendo Wii and DS gaming systems. If anything, this shows how brutally tied to the gaming console cycle Majesco's line of peripherals truly is. There's some hope that the Nintendo Wii U will drive sales this holiday season, but the last time I checked, "hope" is an investment strategy that only works in the biotech sector.

With gaming moving away from traditional consoles and going increasingly digital, Majesco is going to have a hard time producing consistent results, at least over the near-term. It's a company I'd suggest keeping your distance from.

Coffee Holding
Well, isn't that a nice change? After a string of simply horrid earnings reports, Coffee Holding trounced the Street's estimates and beat expectations by $0.18. Coffee Holding overcame a 24% drop in coffee prices to boost its sales volume and increase its profit margin by 290 basis points. But can it last?

As you can guess by my unforgiving skepticism of Coffee Holding over the past year, I'm not sold on this turnaround. I feel that a lot of Coffee Holding's rally has to do with renewed optimism that things at Green Mountain Coffee Roasters (Nasdaq: GMCR  ) aren't nearly as bad as expected. Green Mountain is by far Coffee Holding's largest customer and its recent rally could be a major factor why Coffee Holding is higher. I also look to Coffee Holding's poor history of controlling expenses as another reason that I doubt this rally can last. Tread lightly around this name, is all I have to say.

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.

Can the recent run-up in Green Mountain Coffee Roasters last? Find out the answer to this question and much more by getting your copy of our latest premium research report on Green Mountain. Packed with in-depth and unbiased analysis on the opportunities and threats that could affect the company over the long-term, and complete with a year's worth of regular updates, this is the report that'll give you the investing edge you need.

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 Cisco Systems and Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended buying shares of, and creating a lurking gator position in, Green Mountain Coffee Roasters. 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.


Read/Post Comments (2) | Recommend This Article (2)

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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 September 17, 2012, at 11:24 AM, plange01 wrote:

    a great earning report from JVA this company is just entering their busy cool weather season when coffee drinking increases.a double on this stock and its still well off its 52 week high!

  • Report this Comment On September 20, 2012, at 12:23 PM, Momentum21 wrote:

    Sean: I think further review is in order here. You may be right in the long run on COOL but it won't be because of your 5 minutes of DD.

    I don't think many are only looking at the forward p/e of a $60MM gaming co and making a call to go long. there is a tremendous amount of risk when you are tied to gaming platforms as they are, and gaming fads come and go, but they are in sound financial shape and do have new products and partnerships that could be worth significant upside from these levels. In my opinion this one has a darn good shot at being over 2 before you even come back to look at your comments in this article. : ) Ho Ho Ho!

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