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's EPS (Estimated)

Year-Ago Quarter's EPS

Herbalife (NYSE: HLF  )

$1.03

$0.86

SodaStream (NASDAQ: SODA  )

$0.38

$0.32

Trex (NYSE: TREX  )

($0.18)

($0.54)

Tesla Motors (NASDAQ: TSLA  )

($0.53)

($0.69)

IMAX (NYSE: IMAX  )

$0.16

$0.14

Source: Thomson Reuters.

Clearing the table
Let's start at the top. Herbalife has become one of the most fiercely debated public companies lately. Activist hedge-fund manager Bill Ackman has argued that the multilevel-marketing company is worthless. He questions the model in which hefty commissions encourage people to sell the wellness products at huge markups.

At the other end of the spectrum, you have folks including rival activist Carl Icahn and hedge-fund manager Dan Loeb who see a buying opportunity. Would Herbalife be buying back shares and paying out a healthy dividend if it wasn't a real business? Icahn made things interesting last week, revealing in an SEC filing on Thursday night that he had taken a substantial stake in the company.

It's against this backdrop that Herbalife is expected to post improving profitability on Tuesday. Ackman and fellow skeptics may argue that the financials are merely an opinion, but analysts think profitability will continue to improve here.

SodaStream checks in on Wednesday. The company behind the popular system that turns flat tap water into sparkling soda is on a roll. It closed out last year's third quarter with record sales of starter systems, carbonator refills, and flavor bottles. In other words, folks are both buying the starter kits and actually using them.

SodaStream is coming off its first Super Bowl commercial earlier this month. Slurping cold soft drinks isn't necessarily a wintry pastime, but SodaStream probably sold a ton of systems and consumables as holiday gifts.

Then we have Trex. The leading provider of wood-alternative decking has been bouncing back lately. The real estate market is showing signs of life, and improving home prices mean that fewer homes are underwater. As fears of foreclosure subside, it's logical to see homeowners invest in home-improvement projects, and building weather-resistant decks is a popular choice.

This is a seasonal business. Consumers usually wait until spring and early summer to expand their living space with decks. Yes, Trex will probably post a deficit when it reports on Tuesday, but it's expected to report a loss that is just a third of the red ink it posted during last year's holiday quarter.

Tesla Motors has been revving up production of its Model S sedan. After niche success with its high-end Roadster, Tesla's more inexpensive Model S hit the market this past June. That doesn't mean you can head out to your nearest Tesla showroom and drive out with an electric car, though. There's a long waiting list of buyers, and interest is already building for its Model X crossover.

Tesla isn't profitable, though analysts see the electric-car speedster turning the corner by the end of this year. For now, investors will have to settle for narrower shortfalls.

Finally we have IMAX. Multiplex operators have been struggling with poor attendance over the past couple of years, but IMAX has been bucking the trend. Moviegoers are willing to pay a premium to see enhanced screenings, and IMAX's supersized projections are a major draw for exhibitors. IMAX's biggest growth is taking place overseas, particularly in China and Russia.

Analysts see double-digit growth in revenue and earnings at IMAX when it reports on Thursday. We'll see how that one plays out.

Cross those fingers, but know the fundamentals
Investors in these five stocks have a right to be excited. They're all improving their financial situations. They're 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.

One more reason not to worry
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  • Report this Comment On February 18, 2013, at 9:14 AM, bestwaytoriches wrote:

    Rick,

    These battle ground stock only push investors away take for example Motly fool has put out 30 article telling readers Soda is great if so why does it take you so many artile to prove it. One simple rule should be implemented if the valuations are richare than aapl and the article are many stay away. With this rule in mind consider RAD $ 1.58 a turn around bounce off the bottom plays. Flu season continues and all drug stores will benefit. RAD $1.58 price to sales .05 1/10 the fair value of competitors WAG CVS ESRX and no over the top pumping articles.

    RAD has now turned the corner and growth and profitability is the norm. Raised margins are now common place at RAD. Most professional money managers predict 2013 RAD $ 1.58 to triple with a fair value of $ 3.20. RAD at current price and debt should and could get bought out.

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