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.

Goldman Sachs
My Foolish colleague and banking sector analyst Matt Koppenheffer dove into Goldman Sachs' earnings report last week for Foolish readers, but I think it's worth rehashing because this was a considerably stronger report than Wall Street is giving the investment bank credit for.

What's of particular interest to me is Goldman's debt underwriting business, which produced net revenue of $1.96 billion -- more than double the year-ago period. This is important because it signifies businesses' willingness to take on more debt and refinance existing debt because of record-low lending rates. Furthermore, the Federal Reserve has made it abundantly clear that it plans to keep lending-rate targets near historic lows until sometime in mid-2015, providing ample clarity for business and allowing Goldman a free and clear path to further debt underwriting gains.

Another report highlight worth noting is the near-tripling in return on equity to 16.5% from the year-ago period. To demonstrate how ridiculously good Goldman's ROE is relative to the competition, Morgan Stanley's (MS 1.11%) CEO, James Gorman, estimates his firm's ROE could reach 10% given today's very favorable market conditions. Morgan Stanley, arguably Goldman's chief rival, has relied on compensation cuts and layoffs to reduce expenses and boost its bottom line. For Goldman Sachs, it's almost entirely from top-line growth. Goldman really looks like a financial company you can buy right now!

Capital One Financial
Whereas Goldman knocked Wall Street's socks off, Capital One had investors bundling up after an icy fourth-quarter earnings report that saw the company miss estimates by 11%.

Capital One's results were largely uninspiring because of a 45-basis-point drop in its net interest margin, to 6.52% from the previous quarter, and a 70-basis-point drop from the year-ago period. This drop, which can somewhat be accredited to the same historically low lending rates that helped Goldman Sachs to a great quarter, was accompanied by a $137 million sequential quarter increase in provisions for credit losses.

One of my biggest beefs with Capital One is the bank's overwhelming reliance on its credit division to drive results. Because of this reliance, it'll boast net interest margins that are usually twice as high as the nation's largest money center banks, but it will also be quickly affected by negative shifts in credit card delinquency trends and a slowdown in consumer spending. With a forecast that calls for little revenue growth in 2013, I'd just as soon avoid Capital One altogether. 

Forest Laboratories
Yuck! That's both my technical and professional opinion on Forest Lab's third-quarter results.

We already knew things would be bad given the loss of Lexapro, its lead antidepressant, to patent expiration, but we didn't know it'd be this bad! Sales of the drug were ransacked by generic competition, falling to just $20.3 million from $593 million in the year-ago period. In total, even with many of its other drugs seeing a rise in sales, revenue plummeted 41.6%. Namenda, which is slated to lose patent protection in 2015, saw a sales increase of just 1.6% to $345.8 million and also missed Wall Street's expectations.

Among the carnage, there were a few bright spots, including two new drugs that may begin to make up for some of Lexapro's lost revenue. One, which I highlighted in December, is Linzess, an irritable bowel syndrome and constipation drug developed with Ironwood Pharmaceuticals. Sales of the drug, which only came to market in December, have totaled $19.2 million -- a great start in my book. Tudorza, Forest's inhaled COPD treatment, also launched in December, bringing in $12.2 million. 

Still, with generics threatening to eat up another $300 million-plus in revenue from Namenda in just two years, I'd take these warning signs from Forest Labs and throw the yellow caution tape around this company until further notice.

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 Goldman Sachs to My Watchlist.
• Add Capital One Financial to My Watchlist.
• Add Forest Laboratories to My Watchlist.