8 Reasons to Love Earnings Season

This is shaping up to be a scary earnings season.

Fueled by expectations that this will be the first time in nearly three years that companies in the S&P 500 will post an overall decline in profitability, I singled out many of the targeted offenders last week.

Thankfully, there are still plenty of companies doing the right thing on the bottom line.

Despite the economic challenges abroad and the likelihood that many companies have run out of fat to cut in order to beef up their margins during this period of slow growth, there are still more than a few companies that the pros expect to post year-over-year improvement.

Let's check out some of the potential winners.

Company	Latest-Quarter EPS (Estimated)	Year-Ago-Quarter EPS	My Watchlist
SodaStream (Nasdaq: SODA  )	$0.72	$0.56	Add
Baidu (Nasdaq: BIDU  )	$1.28	$0.84	Add
Arena Pharmaceuticals (Nasdaq: ARNA  )	($0.08)	($0.16)	Add
Frontier Communications (Nasdaq: FTR  )	$0.07	$0.05	Add
MannKind (Nasdaq: MNKD  )	($0.24)	($0.31)	Add
Silver Wheaton (NYSE: SLW  )	$0.40	$0.38	Add
New York Community Bancorp (NYSE: NYB  )	$0.29	$0.27	Add
Macquarie Infrastructure (NYSE: MIC  )	$0.90	$0.15	Add

Source: Thomson Reuters.

Searching for upside
SodaStream is the Israeli-based company behind the popular namesake beverage system that turns flat water from the tap into sparkling water that can be flavored with sweet soda syrups. The cherry on top of this Shirley Temple is that it has also blown through analyst estimates in each and every quarter since going public two years ago.

Baidu is China's leading search engine. The stock has been taking a hit in recent weeks. A new search platform appears to be gaining market share at Baidu's expense. However, Baidu still commands roughly three-quarters of the search queries performed in the world's most populous nation -- and it's still growing pretty darn fast. Wall Street sees both revenue and earnings growing by more than 50% this quarter.

Arena Pharmaceuticals received some welcome news in June when the FDA gave its obesity drug marketing approval. Arena's lorcaserin -- hitting the market under the Belviq brand name -- could very well be a blockbuster at a time when a few companies are making big gains in weight loss. Arena isn't profitable as it waits for that opportunity, but losses are narrowing.

Frontier Communications is a regional telecom operator, providing phone, Internet, and television services in underserved rural markets. This may not seem like fertile soil for growth, and that's a fair assessment. Wall Street sees a slight dip in revenue, and the company cut its still-juicy dividend earlier this year. However, margins are apparently improving to the point where the market's comfortable forecasting bottom-line growth.

MannKind has had its setbacks in trying to get its inhalable insulin on the market. Afrezza could be a blockbuster if it ever clears regulatory hurdles. After all, who would prefer pin pricks over an inhalant? For now, the fledgling biotech is expected to post a smaller deficit on a per-share basis, though that may not amount to much of a victory, as the number of shares outstanding has risen substantially over the past year.

Beyond the obvious improvement in fundamentals, income investors will have another reason to cheer Silver Wheaton's increased profitability. The silver producer has a policy in place returning 20% of the operating cash generated during a quarter to its stockholders, so bigger earnings should translate into bigger payouts.

New York Community Bancorp isn't as big as the "too big to fail" financial-services giants that have kicked off this iffy earnings season, but this also isn't one of the stress-test busters limited to shelling out a token $0.01 per-share quarterly dividend: New York Community Bancorp boasts a meaty 7% yield. Then again, posting year-over-year improvement in net income also makes you look pretty good.

Finally, we have Macquarie Infrastructure Company. Macquarie's businesses include a gas processing and distribution business, a controlling interest in a district energy business, and a 50% stake in a bulk liquid-storage terminal business. Macquarie also owns a provider of aviation-related airport services business. It may be an odd assortment of energy and travel businesses, but the end result appears to be working. Analysts see its profitability soaring sixfold when it reports on Nov. 1.

Standing tall
It's definitely possible that one or more of these companies will fail to grow on the bottom line. That would be unfortunate, but that undesirable result is less likely to happen for these eight companies than it is for the growing list of stocks where Wall Street's bracing for the worst.

Keep an eye open for falling earnings this earnings season, but don't miss out on the winners, either.

SodaStream's carbonation technology sounds simple, right? Well, this razor-and-blade company offers an intriguing opportunity for growth that may be harder to duplicate than you might think. Our premium report on SodaStream explains the opportunities and risks facing the company. The report comes with a year's worth of updates, so just click here to get started.