3 Earnings Reports That Caught My Attention Last Week

As we dive headfirst into the meat-and-potatoes of fourth-quarter earnings reports, 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

Mellanox Technologies

(Nasdaq: MLNX  )

$1.13

$1.37

21%

Ironwood Pharmaceuticals

(Nasdaq: IRWD  )

$0.13

$0.42

223%

SUPERVALU (NYSE: SVU  )

$0.13

$0.00

(100%)

Source: Yahoo! Finance.

Mellanox Technologies
Finally, the space shuttle has returned from fantasyland!

Mellanox Technologies has been one of the few big beneficiaries from the hardware side of the big data center cloud-computing boom. The company's products interconnecting servers and big data centers allow data to easily be transmitted back and forth. In addition, buyout rumors have been circling around Mellanox like vultures since it crushed earnings expectations last quarter.

However, the third quarter for Mellanox didn't bring those visions of unicorns dancing in everyone's head like the second quarter did. Although Mellanox reported a 145% boost in gross profits and gross margin rose 420 basis points, total operating expenses also spiked by 54% thanks to higher research and development costs. Those costs, when compounded with a weak spending environment, caused Mellanox to guide fourth-quarter revenue into a range of $145 million to $150 million -- well below the $157 million Wall Street had forecast.

Mellanox is still growing faster than its peers, but with a buyout currently off the table, and growth slowing to reasonable levels, it could still have room to fall.

Ironwood Pharmaceuticals
There's nothing quite like the confusion on biotech investors' faces after a company they hold reports better-than-expected earnings due to receiving a milestone payment. This week's candidate was Ironwood Pharmaceuticals, which received an $85 million payment from marketing partner Forest Labs (NYSE: FRX  ) following the FDA approval of irritable bowel syndrome treatment Linzess at the end of August.

However, it's not all peaches and cream for Ironwood, despite the payment. Due to delays from the FDA in getting Linzess approved, Forest Labs drastically reduced its 2012 sales estimates of the drug from $60 million to $25 million. Analysts at Wedbush Securities see the drug having $2 billion potential at its peak, but I can't exactly say I'm thrilled with its start even before it's out of the gate. The drug will cater to a wide market of roughly 15 million people who suffer from IBS, according to the National Institutes of Health, but with fierce competition in this space, I can't say I'm 100% sold on Ironwood's drug being a success. My advice would be to take this quarter's earnings report with a grain of salt.

SUPERVALU
Now in the case of SUPERVALU, what you see is exactly what you get!

There doesn't appear to be a big enough broom, pan, or cleaning crew that can help save SUPERVALU from further downside. For the quarter, the grocer widely missed Wall Street's earnings expectations while reporting a 4.6% decline in total sales, led by a 7.3% tumble in retail food sales. Higher food costs, a lack of fuel station revenue, and renovation costs continue to weigh on SUPERVALU. Furthermore, it ended the quarter with a measly $148 million in cash and $6.1 billion in debt, yet has the idea that it'll be adding 20 Save-A-Lot stores to its portfolio this year in spite of reducing capital expenditures.

Ironically, the safest bet in the grocery aisle has been to stick with premium-priced natural and organic offerings like those you'd find at Whole Foods Market (Nasdaq: WFM  ) . With fantastic management comes fantastic results, and Whole Foods has had little trouble in passing along the rising costs of food to its customers, who are more than willing to pay for better-quality products. My suggestion would be to do yourself a favor and leave SUPERVALU in a ditch and never look back.

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 anything actually stop Whole Foods from heading higher? Find out the answer to this question and much more by getting your copy of our latest premium research report on Whole Foods. Packed with in-depth and unbiased analysis on the opportunities and threats facing Whole Foods -- and complete with a year of regular updates -- this report will give you the tools needed to make smart long-term investing decisions. Click here to 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 SUPERVALU and Whole Foods Market. Motley Fool newsletter services have recommended buying shares of, and calls on, Whole Foods Market. 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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