5 Reasons Not to Worry This Week

It's not a perfect world out there for investors, but things may be starting to get better.

I recently went over some of the companies that are expected to post lower quarterly profits when they report this week. Thankfully, they're the exceptions and not the rule.

Let's go over some publicly traded companies that are expected to stand tall this week by posting year-over-year improvement on the bottom line.

Company

Latest-Quarter EPS (Estimated)

Year-Ago Quarter EPS

RF Micro Devices (NASDAQ: RFMD  )

$0.06

$0.02

Intuitive Surgical (NASDAQ: ISRG  )

$4.09

$3.75

8x8 (NASDAQ: EGHT  )

$0.05

$0.04

Select Comfort (NASDAQ: SCSS  )

$0.32

$0.27

Starbucks (NASDAQ: SBUX  )

$0.57

$0.50

Source: Thomson Reuters.

Clearing the table
Let's start at the top with RF Micro Devices. The maker and designer of radio frequency components is expected to post a quarterly profit of $0.06 a share, three times what it earned a year earlier. This doesn't mean that RF Micro's business itself is tripling. Analysts are banking on a modest 9% increase in revenue. However, even that is reasonable improvement.

Intuitive Surgical has revolutionized the operating table with its da Vinci surgical system that uses a robotic arm that is manned by a surgeon. The system provides precise incisions for a growing number of procedures, making hospitals more efficient by reducing surgeon fatigue, increasing the number of procedures that can be performed, and often lowering the recovery time for patients. It's a win-win-win scenario, even in these volatile times for health care.

The stock isn't cheap. Intuitive Surgical shares are fetching 34 times this past year's earnings and 29 times Wall Street's forecast for 2013. Yes, Intuitive Surgical has never been cheap, but growth has been decelerating. Analysts see revenue and earnings climbing 17% and 19%, respectively, in 2013. Is that strong enough to justify the lofty profit multiple? History argues that the company has earned its healthy market premium. We'll see how things play out after this afternoon's report.

8x8 -- a provider of PBX telephony, video conferencing, and other Web-based communication services -- is also moving in the right direction. Wall Street's banking on a 17% pop in revenue at 8x8 when it reports on Thursday. The $0.05 a share that the pros are targeting on the bottom line is also a pretty safe bet. 8x8 has met or exceeded income projections in each of the past four quarters.

Select Comfort is the company behind the Sleep Number bed. The air-chambered mattress with customized firmness settings is a unique product in a niche where traditional box-spring mattresses and form-fitting memory foam beds are the norm.

All three of the major publicly traded mattress companies are reporting this week, and Select Comfort stands alone as the top dog in terms of growth. One rival is expected to post another quarterly deficit, and the other is expected to post sharp declines on both ends of the income statement. Select Comfort's sleeping pretty, with the market sleeping on expectations of revenue and earnings climbing 21% and 19%, respectively.

Finally, we have Starbucks serving up what should be another caffeinated quarter. Yes, Starbucks stumbled a couple of years ago. The initial stages of the recession freeze-dried traffic, and the baron of baristas actually had to close stores.

It's a different world for Starbucks these days, and the seemingly saturated domestic market will actually be getting a lot of new stores in the coming years. Starbucks has also made acquisitions in the juice bar and tea retail segments, and it's just starting to scratch the surface of potential in those new markets. No one should be surprised to see Starbucks growing again.

Cross those fingers, but know the fundamentals
Investors in these five stocks have a right to be excited. They are all improving their financial situations. They are worthy of the gains that the market rally has bestowed upon them over the past year.

I wouldn't be uncomfortable owning any of these companies. They're doing the right thing, regardless of Mr. Market's mood swings.

The expectations may be high, but these five stocks wouldn't have it any other way.

If you have high expectations for your portfolio, you may be interested to know that the Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | 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.

Be the first one to comment on this article.

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: 2207186, ~/Articles/ArticleHandler.aspx, 8/31/2014 6:43:59 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...


Advertisement