3 Earnings Reports That Caught My Attention Last Week

As first-quarter earnings get ready to kick into high gear, I can't help but point out that the majority of earnings reports we've covered over the past year 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 for the past 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.


Consensus EPS

Reported EPS


Global Payments (NYSE: GPN  )








Texas Industries (UNKNOWN: TXI.DL  )




Source: Yahoo! Finance.

Global Payments
If I haven't made this completely clear by now, the smartest way you can play the finance sector is by owning payment-processing companies.

Global Payments, an electronic payments middleman, reported a 15% increase in net income to $0.93 for its second quarter and slightly boosted its full-year EPS guidance to a range of $3.61-$3.68 from its own previous guidance of $3.59-$3.66, and is still projecting net revenue growth of 7% to 9%. It fully appears that Global Payments has put its card mishap that allowed hackers access to home addresses and Social Security numbers of 1.5 million Visa (NYSE: V  ) and MasterCard holders in late March in the rearview mirror.

With processing facilitators like Global Payments, there's always the possibility of a security breach, which can cost the company clients and cause it to be fined. Both Visa and MasterCard, as primary credit facilitators, are largely absolved from these worries. Still, at just 12 times forward earnings, with a $300 million share buyback ongoing, and having just purchased Accelerated Payment Technologies for $413 million, I see no reason why Global Payments couldn't continue to rebound.

Home cleaning products and chemical companies like Zep are often very dependent on the economy to dictate their growth potential. When I highlighted DuPont (NYSE: DD  ) as a Watchlist-worthy stock on Wednesday, I noted its reliance on titanium dioxide, a pigment often found in paint, which reinforced just how tied in to the global economy it is. Zep, however, is doing what it can to distance itself from the cyclical ebb and flow of the U.S. economy.

For the first quarter, Zep announced a 3% rise in earnings and a 3% drop in EPS as a $0.04 charge due to integration and acquisition costs dragged down profits. More important, though, that acquisition expanded Zep's cleaning products in the automotive care industry, which tends to resist economic downturns pretty well. Furthermore, even with the slight drop in income, Zep's free cash flow improved to a positive $4.7 million from a cash outflow of $2.1 million in the year-ago period.

Much like Global Payments, Zep is looking particularly attractive from a valuation perspective at just 10 times forward earnings. I would like to see continued FCF improvement and a further push into other less cyclical businesses, but this looks like a much better quarter than Wall Street is giving the company credit for. Tack on an improving housing market, in which Zep generates a decent amount of sales to individuals, and you have a recipe for success. 

Texas Industries
Just as I see the rebounding housing market as underrepresented in Zep's case, I see the promise of an improving housing market pricing Texas Industries, or TXI, far beyond reasonable levels.

As I noted in November when I made an underperform CAPScall on TXI, the cement and heavy products producer was merely relying on cost cuts to drive growth, while cement pricing stayed stagnant and quarterly losses piled up. This quarter brought much of the same.

For the quarter, TXI reported a smaller, but still sizable, loss of $0.40 as net sales for cement rose 20%. This was the fourth time in the past five quarters TXI has missed Wall Street's EPS expectations, and is the 12th time in the past 13 quarters that it reported a loss! Furthermore, cement pricing only improved 3%, and it wasn't enough to get TXI anywhere near profitable despite its major cost-cutting efforts. I would venture a guess that TXI is going to need a 10% to 20% surge in cement prices just to break even, because cost-cutting has nearly hit its apex in terms of bottom-line benefits. With its operations based primarily in Texas and California, I just don't see that surge coming anytime soon with both housing markets still slow to recover in those states. I am still suggesting avoidance of TXI until it can turn that elusive profit.

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.

What's inside Supernova?
If you're an investor looking for big long-term winners, you may want to check out Motley Fool co-founder David Gardner's picks, which have frequently trounced the market. How? Because he's always on the lookout for revolutionary stocks and recommends them before Wall Street catches on to their disruptive potential. If you're interested in how David discovers his winners, click here to get instant access to a personal tour behind David's Supernova service.

Read/Post Comments (1) | Recommend This Article (3)

Comments from our Foolish Readers

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 January 14, 2013, at 12:06 PM, funfundvierzig wrote:

    Many readers may recall how DuPont Chieftess Ellen Kullman blindsided investors back in July 2012 by bragging that DuPont would continue a major expansion of TIO2 and that second half 2012 would see a healthy recovery in the TIO2 market. The vast majority of industry leaders and analysts covering the industry saw the exact opposite, and they were right. Repeated dissimulations by DuPont Senior Management have steadily eroded investor confidence. ...funfun..

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2194234, ~/Articles/ArticleHandler.aspx, 9/29/2016 6:38:59 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 8 hours ago Sponsored by:
DOW 18,339.24 110.94 0.61%
S&P 500 2,171.37 11.44 0.53%
NASD 5,318.55 12.84 0.24%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/28/2016 4:02 PM
GPN $76.78 Up +0.70 +0.92%
Global Payments CAPS Rating: ***
TXI.DL $0.00 Down +0.00 +0.00%
Texas Industries CAPS Rating: No stars
ZEP.DL $0.00 Down +0.00 +0.00%
Zep CAPS Rating: No stars
DD $67.19 Down -0.07 -0.10%
DuPont CAPS Rating: ****
V $82.97 Up +0.81 +0.99%
Visa CAPS Rating: *****