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.

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 (V 0.65%) 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.

Zep
Home cleaning products and chemical companies like Zep are often very dependent on the economy to dictate their growth potential. When I highlighted DuPont (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.

• Add Global Payments to My Watchlist.
• Add Zep to My Watchlist.
• Add Texas Industries to My Watchlist.