3 Earnings Reports That Caught My Attention Last Week

As first-quarter earnings 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


Allstate (NYSE: ALL  )




Calix (NYSE: CALX  )




Yelp (NYSE: YELP  )




Source: Yahoo! Finance.

Not even an act of God can keep Allstate from turning a profit! Hurricane Sandy had a profound impact on numerous insurers, including Allstate, which saw its catastrophe losses balloon from $66 million to $1.06 billion. But as I've pointed out before, Allstate is in the business of underwriting very profitable policies, and even after its huge run, it could head even higher.

For the quarter, Allstate's property-liability combined ratio (essentially a measure of how profitable it is for Allstate to underwrite policies) fell 400 basis points to 86.7%, demonstrating it was considerably more profitable, even with a natural disaster the size of Sandy, to underwrite policies. Allstate's auto policies remained strong, Esurance continues to grow at an impressive rate (30.9%), and total premiums increased, resulting in higher operating profits and a 17% increase in book value for the full year.

Last, but certainly not least, Allstate boosted its quarterly payout from $0.22 to $0.25, signaling to investors a confidence that cash flow will remain strong and its underwriting will remain conservative. At nine times forward earnings, it's an insurance name you shouldn't ignore.

As goes telecom spending, so goes Calix, a middleman between you and your cable service provider that provides software and hardware that regulate the amount of bandwidth you receive.

Last week, in our roundtable discussion highlighting our top stock to buy for February, I chose Cisco Systems, because it's a predominantly hardware-based developer that should see benefits from an increase in wireless and wireline infrastructure spending from AT&T and Sprint Nextel. As evidence to this trend -- and the reasoning behind my Cisco selection -- I pointed to better-than-expected earnings from much of the fiber optics sector, including JDS Uniphase. The same merits that I discussed with Cisco will carry over to Calix, which should see a trickle-down effect from cable service providers looking to broaden the scope of their networks.

For the recently ended quarter, Calix reported relatively flat year-over-year sales as net income improved 61% to $2.9 million from the previous year. Wall Street may be hung up on Calix's revenue miss, but I'd point to the blatant sectorwide signals that an infrastructure boom is coming, as well as Calix's $47 million in cash with no debt as all the more reason to trust this company over the long term.

Sometimes an earnings miss can be deceiving -- for Yelp, an online review website, it was a true testament to a business model that lacks longevity.

Like Groupon, the social deals site, Yelp relies on local advertising and small businesses to drive growth. But what both Groupon and Yelp lack are any significant barriers to entry and the ability to remove any of the cyclicality associated with the ebb and flow of the economy out of their figures. This means that while revenue is growing now, the introduction of a competitor with considerably more cash -- say, Google -- can undermine their business models with minimal start-up costs.

In Yelp's latest quarter, which highlighted a big move overseas, the company reported a 65% increase in revenue and an 87% increase in local advertising revenue. However, the dangerous aspect of Yelp's revenue stream is that 82% of total sales are reliant on local ad spending. We saw in the dot-com bubble that ad-heavy businesses rarely survive, and I doubt Yelp's an exception to the rule. Even if it does survive, I don't see how it gets past being only marginally profitable. Like Groupon, the health of the economy will dictate profitability, but there are far too few variables both companies can actually control. I'd suggest keeping the yellow caution tape around these two companies.

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.

Does this business model have a chance? See what our top analysts think.
Groupon's story is one of the American Dream. The company went from 400 subscribers in 2008 to over 150 million today. While this story is definitely one of triumph on a business level, its success most certainly hasn't been shared by investors. Company shares have fallen over 80% over the past year and left investors panicked. Will this company live out its American Dream, or leave shareholders empty-handed? In order to answer that question, our analyst has compiled a premium research report with in-depth analysis on whether you should buy or sell Groupon right now, and why. Simply click here now to get started.

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.

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: 2247000, ~/Articles/ArticleHandler.aspx, 9/29/2016 1:21:16 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 3 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
ALL $69.10 Up +0.12 +0.17%
Allstate CAPS Rating: ****
CALX $7.56 Up +0.25 +3.42%
Calix CAPS Rating: ****
YELP $41.71 Up +0.04 +0.10%
Yelp CAPS Rating: **