3 Earnings Reports That Caught My Attention Last Week

As we edge into the fourth quarter, and with three-quarters of the year already in the books, 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

Wells Fargo (NYSE: WFC  )

$0.87

$0.88

1%

Ruby Tuesday (NYSE: RT  )

$0.06

$0.06

0%

Heartland Express (Nasdaq: HTLD  )

$0.18

$0.14

(22%)

Source: Yahoo! Finance.

Wells Fargo
I know what you're thinking: "How could I have missed Wells Fargo's third-quarter earnings report?" But for a company that has generally done a good job of keeping itself out of the limelight, Wells Fargo's quarterly results definitely should have turned a few heads.

A $0.01 earnings beat from Wells Fargo wasn't enough to send the bank higher on Friday, especially after investors noted that its net revenue of $21.2 billion fell just short of expectations. JPMorgan Chase (NYSE: JPM  ) received little leeway itself after reporting an even more decisive earnings beat and a 37% rise in EPS over the previous year.

What I'd like to do is reiterate a point that Foolish financial guru Anand Chokkavelu has made previously: that Wells Fargo is a great company. Some of the weaker areas of growth, including mortgage lending, demonstrated double-digit growth, with its asset management and trading operations also showing steady improvement. Wells Fargo is well-capitalized and, next to US Bancorp, likely the best-run big bank in the United States. There's a reason Wells Fargo is one of Warren Buffett's largest holdings, and long-term investors shouldn't allow a few skittish investors to scare them away.

Ruby Tuesday
Ruby Tuesday is another story altogether. This is a case where I would definitely encourage investors to understand the risks involved with this company before jumping on board after one "non-miserable" quarter.

Ruby Tuesday reported a slight drop in year-over-year net income thanks to its continuing search for a new CEO. The company's founder, Sandy Beall, stepped down in June -- possibly the best move for the struggling brand, but costs related to finding a replacement have dragged down results.

One bright spot for the restaurant company was that it reported its first jump in sales (albeit just 1%) in seven quarters due to the closing of 34 owned and 17 franchised stores over the year-ago period. However, cutting costs will only get a restaurant company so far. Ruby Tuesday completely lacks a catalyst to get customers into its restaurants, and food inflation is only driving those fringe customers to cheaper alternatives. Although the company's full-year EPS expectations of $0.24 to $0.34 are within the range Wall Street is forecasting ($0.28), I highly doubt Ruby Tuesday will be able to meet or beat that range. I believe I know a ham sandwich when I see one, and I won't be looking to purchase Ruby Tuesday anytime soon.

Heartland Express
If you thought that the real losers from the high gas prices were consumers, then you're only partially right. Trucking companies, like Arkansas Best (Nasdaq: ABFS  ) , which is firmly planted on my buy radar, have absolutely been taken to the toolshed because of rapidly vacillating fuel prices and unstable demand for transporting freight. We've seen J.B. Hunt Transport Services and Werner Enterprises both miss Wall Street's consensus EPS estimates as well.

For Heartland Express, its third quarter was marred by a decrease in gains from the disposal of property and equipment, as well as higher-than-normal fuel prices. Still, plenty of positives littered this report and could make Heartland an attractive buy candidate.

To begin with, revenue was still up 2% despite the challenging conditions, which included a 1% decline in fuel surcharges. Trucking companies can make up for higher fuel costs by improving operating efficiencies, reducing driving hours, and purchasing newer trucks. For Heartland, the average age of its tractor and trailer fleet is just 2.4 years and 3.3 years, respectively. That means higher fuel efficiency and fewer trucks off the road due to mechanical problems.

I feel it's also worth noting that Heartland Express stated that its earnings suffered from a lack of qualified drivers. Translation: We're looking to hire! This is optimistic news for both the labor market and the freight sector as a whole.

Keep your eye on these trucking stocks, as they could be a surprise winner next year.

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.

Want a company you can bank on? Our analysts at Stock Advisor have you covered and recently highlighted the one bank they feel is built to last in our latest, free, special report. Click here and get your copy.

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 Wells Fargo, JP Morgan Chase, and Heartland Express. Motley Fool newsletter services have recommended buying shares of Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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  • Report this Comment On October 15, 2012, at 10:55 AM, quickymart wrote:

    The author is impressed that Heartland needs drivers and is looking to hire. That situation has existed across the Truckload trucking industry for years, at every single company in the sector. High driver turnover, a lack of new drivers in the industry and increasing governmental regulation make it increasingly difficults for truckers to get their seats filled. To characterize this as optimistic news is naive and ignorant.

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