3 Earnings Reports That Caught My Attention Last Week

As fourth-quarter earnings reports wind down, 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

Jack in the Box (Nasdaq: JACK  )

$0.37

$0.43

16%

Deere (NYSE: DE  )

$1.88

$1.75

(7%)

Zale (NYSE: ZLC  )

($0.68)

($0.88)

(29%)

Source: Yahoo! Finance.

Jack in the Box
For those of you wondering whether Jack in the Box, which has been a McDonald's (NYSE: MCD  ) emulator, from menus to interior redesign, would suffer the same earnings fate as McDonald's, the answer is, unfortunately, yes!

Although Jack in the Box crushed estimates based on adjusted EPS, it fell far short of expectations in many other categories. Its Qdoba franchise demonstrated the biggest downturn, with same-store sales growth dipping to just 0.4% from 3.7% in the year prior. Revenue also dipped 2.5% led by a 5.8% dip in restaurant sales. Whereas Jack in the Box is shielded from international spending problems in Europe and currency translation issues unlike McDonald's, it too suffered from weak customer traffic and spending, as well as rising food inflation.

The most disturbing factor might be the company's expansion plans next year. Jack in the Box's 2013 guidance calls for the opening of 20-25 new Jack in the Box restaurants and a whopping 70-85 Qdoba restaurants. Personally, I feel this ratio should be reversed as this could be their chance to beat McDonald's at their own game with fresh menu items before the restaurant sector begins heading higher again. All told, this wasn't a great quarter for Jack in the Box.

Deere
Deere may have driven into a ditch with its latest earnings report, missing Wall Street's estimates by $0.13, but its long-term forecast still has the maker of farm machinery shining brighter than ever.

For the quarter, Deere used higher prices to boost its sales 14% to $9.79 billion, but was hurt by 3% percentage points (as most multinational companies have been) by currency translation costs. Specifically, U.S. and Canadian sales were very strong, but everywhere else, they dipped by 2%, collectively. In addition, Deere's 2013 forecast for European sales and within the U.S. was less than satisfying for investors. 

Yet there are still positives to take away, including Deere's emerging market potential, strong performance in commodities, which should yield long-term demand for Deere's equipment, and an incredibly attractive valuation at just nine times forward earnings. Deere is also a consistent dividend payer and deserves some close attention after this latest miss.

Zale
If a jeweler misses forecasts by a mile and no one is around to see it, does it make a whimpering sound? I'm pretty sure the answer is yes!

Zale's first-quarter report was miserable in almost every sense of the word. EPS missed by $0.20, revenue fell shy of estimates by $8 million, and inventory levels jumped by $51 million which is a ton considering that Zale isn't even considered a higher-end jewelry store. All signs are once again pointing to consumers tightening their spending habits, and Zale having issues moving higher margin items.

We know this isn't necessarily a sectorwide problem as Signet Jewelers (NYSE: SIG  ) recently recorded a much better than expected third-quarter profit that was led by its mid-tier price point chain, Kay Jewelers. This is wholly a Zale issue, and despite management holding to its forecast for a profit in 2013, I'm not too optimistic that it'll achieve that goal.

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.

Are McDonald's European woes a major concern, or merely a blip in the company's long-term international expansion plans? Get the full story by getting your copy of our latest premium research report on McDonald's. Packed with in-depth analysis on the opportunities and threats facing McDonald's – 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 learn more.


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