5 Reasons Not to Worry This Week

It's not a perfect world out there for investors, but things may be starting to get better.

A report on Friday indicated that consumer sentiment in this country is at a five-year high. Conspiracy theorists will argue that it's a partisan counter to the "Are you better off then you were four years ago" salvo, but there are definitely signs of improvement out there.

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

Baidu (Nasdaq: BIDU  )

$1.28

$0.84

Add

American Tower (NYSE: AMT  )

$0.38

($0.04)

Add

Skullcandy (Nasdaq: SKUL  )

$0.23

$0.17

Add

ZAGG (Nasdaq: ZAGG  )

$0.16

$0.07

Add

Stratasys (Nasdaq: SSYS  )

$0.37

$0.27

Add

Source: Thomson Reuters.

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

China's leading search engine has come under fire in recent months. A fledgling rival launched a new platform over the summer that's gaining traction, presumably at Baidu's expense. It's a long way down when you command roughly three-quarters of the search market for the world's most populous nation.

However, Baidu is still growing -- and growing fast. Analysts see revenue and earnings climbing 53% and 54%, respectively, in its latest quarter. Baidu is scheduled to report tonight, and it's the main reason why I suggested over the weekend that Baidu will move higher this week.

American Tower owns a growing network of radio towers that get leased out to wireless carriers, radio stations, and anyone needing a little more reach. American Tower turned heads this year by turning into a REIT. The lion's share of its profits pass through to shareholders in a tax-advantaged manner for the company.

The payouts aren't much. It's not as if the 1.3% yield is all that competitive with most REITs or income-producing investments. However, American Tower gives income chasers a healthy amount of growth as wireless companies scramble to build out their coverage maps.

Skullcandy is a busted IPO. The maker of edgy headphones and earbuds went public at $20 a share during the summer of last year. It kicks off the new trading week in the pre-teens.

How did Skullcandy fall? Don't look at its fiscal performance. Skullcandy has actually beaten Wall Street's profit estimates in each and every quarter as a public company. It's not as if the stock is expensive. Skullcandy trades at just 11 times this year's earnings and just nine times next year's profit target. The market just feels that the fashionable nature of Skullcandy's wares will eventually fall out of favor, especially with bigger players moving in. Either way, the stock can be admired right now for its growth -- and for its cheap earnings multiple in light of that growth.

ZAGG makes screen protectors and other accessories for smartphones, tablets, and other devices. ZAGG's flagship product is the invisibleSHIELD, a thin and transparent film sheet that protects the screens of a growing number of devices.

When form factors change, ZAGG thrives. No one was happier to see a bigger iPhone 5 than ZAGG. Last week's introduction of the iPad mini was another high-five moment. As soon as the iPad mini was announced, ZAGG introduced an invisibleSHIELD for the petite tablet, as well as iFrogz cases and ZAGG bluetooth keyboards for the iPad mini.

There is still plenty of skepticism on ZAGG. Even though analysts see profitability more than doubling when it reports on Thursday with a 32% pop in revenue, cynics contend that ZAGG isn't all that it seems to be. Critics also argue that the nature of being a perpetual coattail hopper isn't a sustainable model.

Finally we have Stratasys. The popularity of 3-D printing is booming, and it's only going to get better as these printers of physical objects get cheaper.

There's an ugly trend at Stratasys. A year ago, the company beat Wall Street's income expectations by 29%. Three months later, that margin was just 15%, falling to 4% the following quarter. Stratasys then went on to merely meet analyst targets three months ago. This is an ominous trend heading into Friday morning's report, but it's not all bad. Rival 3D Systems (NYSE: DDD  ) came through with a strong report last week. It's too important a market to assume that analysts have finally caught up to Stratasys.

The smart money has to be on the company resuming its market-thumping ways on Friday.

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.

 

Lately, Baidu's stock has been one of the more volatile in an already unpredictable Chinese stock market. Many have sold it off in fear of a competitive threat from Qihoo, but many Fools continue to stick by it as a way to play Chinese Internet growth despite the uncertainty. The Motley Fool's chief technology officer, Jeremy Phillips, has likened it to buying an already-thriving Google long before most of America had even heard of the Internet. To detail both the opportunity and the key area you must watch before you become a Baidu investor, The Motley Fool has assembled a special report, which you can gain access to by clicking here now.

Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Baidu, 3D Systems, and Skullcandy and has the following options: short NOV 2012 $35.00 calls on 3D Systems. Motley Fool newsletter services recommend American Tower , Baidu, 3D Systems, and Stratasys. 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.


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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 October 29, 2012, at 11:35 AM, topsider12 wrote:

    We still do not hear or see any numbers about Qihuu 360's market share. In Analysys International's recent report from last week it did not even register a number behind the top three which listed Baidu at the top with 78.6% market share. Then we have Cynthia Meng, the analyst who seemed to back away from her claim on CNBC Asia that Qihuu had taken 10% from Baidu by now stating Qihu took 5%-10% total market share from all competitors in the search business and maybe just 5% from Baidu. Well, based on latest numbers Baidu did not lose even 5% to Qihu, but maybe 1.5% to the total competition. She is already setting the stage for her and others next attack on Baidu by claiming compressed margins caused by competition. I hope Baidu addresses this directly in the CC.

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