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Don't settle for ordinary quarterly reports.
Every week, I take a look at three companies that beat market expectations, since I believe that it's the biggest factor in a stock beating the market. Leaving Wall Street's pros with stunned expressions can be a good thing. It usually means that the companies have more in the tank than analysts figured. Capital appreciation typically follows.
Let's take a look at a few companies that humbled the pros over the past few trading days.
We can start with Infinera (NASDAQ: INFN ) . The provider of digital optical networking systems posted an adjusted net loss of $0.06 a share on $124.6 million in revenue. Analysts were holding out for a deficit of $0.07 a share on $119.7 million in revenue.
Infinera's strong quarter inspired Needham & Co. to upgrade its rating on the stock to "buy" with a $12 price target. It wasn't just Needham & Co. that was impressed, as Infinera stock was one of the market's biggest winners with a 31% pop last week.
Cliffs Natural Resources (NYSE: CLF ) was another topper. It's been a rough year for the iron-ore miner heading into last week's quarterly report, and last month's announcement that it was halting production at a Canadian iron-ore pellet plant triggered a wave of analysts hosing down their forecasts on the company.
On the surface, it wasn't a good report out of Cliffs. Revenue declined 6%, and adjusted earnings fell even harder. However, the profit of $0.60 a share that Cliffs did ring up was nearly double the $0.32 a share that analysts were projecting.
The stock moved 14% higher on the week.
Finally, we have Level 3 Communications (NYSE: LVLT ) besting the pros on the bottom line. Despite posting revenue that dipped slightly sequentially and year over year, the provider of Web-based communications services posted an adjusted loss of just $0.13 a share.
Analysts were banking on $0.17 a share in red ink. Level 3 had actually come up short against Wall Street's marks in recent quarters, so the beat was a welcome surprise.
Moving in the right direction
It's important to keep watching the companies that surpass expectations. Over time, it will be a lucrative experience for investors as the market rewards the overachievers. That's the kind of surprise that we look for in the Rule Breakers newsletter service. Want in? Check out a 30-day trial subscription.
Cliffs Natural Resources has grown from a domestic iron ore producer into an international player in both the iron ore and metallurgical coal markets. It has also underwhelmed investors lately, especially after its dramatic 76% dividend cut in February. However, it could now be looked at as a possible value play due to several factors that are likely to remain advantageous for Cliffs' management. For details on these advantages and more, click here now to check out The Motley Fool's premium research report on the company.