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3 Stocks That Crushed Earnings Estimates

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We're hardly a week into earnings season, and already the surprises are mounting up.

Alcoa kicked off the reporting calendar with a solid base hit. The aluminum producer just met earnings expectations and came in stronger than expected on revenue. But we can do better than that.

Here's a look at three companies that showed surprisingly high profits this quarter.

1. PriceSmart (NASDAQ: PSMT  )
Affectionately referred to as the "Caribbean Costco," PriceSmart runs membership-based warehouse clubs in Latin America and the Caribbean. And that business model appears just as lucrative in Latin America as it is in the U.S. PriceSmart surprised analysts by turning in a $0.66-per-share profit, or $20 million better than the year-ago quarter. The street had been lulled into expecting earnings of just $0.60 a share.

Powering that earnings beat was an 11.8% jump in sales and a 20% boost in membership income. The company also opened one new warehouse during the quarter, bringing the total to 30 locations. We're still early on in PriceSmart's story, as the average age of its warehouses is less than 10 years. And its most penetrated market, Costa Rica, boasts just five locations. Still, investors are paying up for that solid growth potential. PriceSmart's P/E ratio, at 35, is high even compared to Costco's (NASDAQ: COST  ) still-rich 25. But with PriceSmart beating earnings estimates and Costco leading retail in comparable sales increases, I wouldn't expect either company to get much cheaper.

2. Constellation Brands (NYSE: STZ  )
Constellation Brands didn't disappoint this quarter either. The wine and spirits purveyor booked $0.63 a share in net income, better than the $0.55 that analysts were expecting. Sure, a surprising low tax rate helped. But the company also managed to significantly outgrow the U.S. wine and spirits industry, too.

Constellation had some other good news for investors. It raised its full-year profit forecast by a dime, to about $2.15 a share. Profitability expanded too, with operating margin ticking up by almost a full percentage point, to 22.5%. And free cash flow is expected to reach half a billion in 2013. Of course, Constellation isn't alone in that outperformance. Boston Beer (NYSE: SAM  ) ratcheted up its full-year profit projection last month, raising it from $4.00 to $4.45. The Sam Adams producer should have good news to report in its own fourth-quarter results. Why choose between beer and wine when you can have both?

Still, it wasn't all good news for Constellation. CEO Rob Sands said in the company's conference call with analysts that the industry hit a rough patch at the end of the quarter, just as the fiscal cliff drama was heating up. Alcohol sales are sensitive to shifts in consumer spending, so the company needs to get ahead of any dip in demand.

Surging by 71% on the year, Constellation was a top performer in 2012. Investors will be eager for clues as to whether the company can beat the market again in 2013. This quarter's report is a good start.

3. Monsanto (NYSE: MON  )
Agricultural tech giant Monsanto turned in some stellar results to begin the year. The company reported profits of $0.63 a share, nearly double what analysts were looking for. Thanks to a huge boost in sales from the company's corn seed division, total revenue sprouted by more than 20%.

But Monsanto isn't ignoring investments in the future, either. It plowed cash into R&D, stuffing its development pipeline with a record 18 projects. The company just doesn't skimp on research. Spending on R&D was $1.5 billion last year, up from $1.2 billion in 2010.

Also critical to investors, the seed leader upgraded its profit outlook for the coming year. It now expects to deliver $4.35 a share, well above the $3.83 it clocked in 2012.

At 24 times earnings, we're not looking at a cheap stock. But profit growth looks strong. If it meets its ambitious targets, Monsanto's earnings should rise 14% this year. To boot, shares are yielding better than 1.5% in dividends -- even while sitting close to a multiyear high. Monsanto raised its dividend payout by 7% in 2011 and by a whopping 25% last year. Given that track record, I'd say it's a pretty safe bet that the current $0.38-a-share quarterly dividend will increase along with profits this year. That would be just one more welcome surprise for investors.

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Related Tickers

9/23/2016 4:01 PM
MON $103.50 Down -0.70 -0.67%
Monsanto CAPS Rating: ***
PSMT $81.26 Down -0.97 -1.18%
PriceSmart CAPS Rating: ***
STZ $166.63 Up +0.61 +0.37%
Constellation Bran… CAPS Rating: ****
COST $152.53 Down -0.62 -0.40%
Costco Wholesale CAPS Rating: ****
SAM $152.30 Up +0.98 +0.65%
Boston Beer CAPS Rating: ****