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.

The market's coming off another week of encouraging economic news as housing and employment data point to a continuing recovery.

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

Diamond Foods (NASDAQ: DMND  )

($0.17)

($0.22)

Ulta Beauty (NASDAQ: ULTA  )

$0.62

$0.54

H&R Block (NYSE: HRB  )

$2.61

$2.04

LDK Solar (NASDAQOTH: LDKSY  )

($0.96)

($1.46)

Capstone Turbine (NASDAQ: CPST  )

($0.01)

($0.03)

Source: Thomson Reuters.

Clearing the table
Let's start at the top with Diamond Foods. The company behind Kettle potato chips, Pop Secret microwaveable popcorn, and its signature nut snacks has been pretty volatile for a food company. It's certainly not light on drama, as investors found out last year when it lost out on its deal to acquire Pringles in light of illegal payments to walnut growers that resulted in its CEO and CFO being ousted last year.

Analysts see Diamond posting a loss in its latest quarter, but it should be a narrower deficit than it posted a year earlier.

Ulta Beauty runs a chain of salons that sell beauty care products and perform salon services. This is a growing business, as expansion and same-store sales have combined for consistently healthy double-digit revenue growth over the years.

Analysts see a profit of $0.62 per share in earnings from Ulta, but the only real surprise here would be if it only earns that much. Ulta has blasted through Wall Street income targets in each of the past 17 quarters.

H&R Block is the country's leading tax preparer. This is the money quarter for the accounting services juggernaut, since it includes the April 15 tax filing deadline.

H&R Block and its peers stumbled earlier this year. The fiscal cliff standoff at the end of last year delayed the start of tax filing season. There was also a poorly publicized change in one particular form that led to refund delays for some H&R Block clients (as well as those who filed elsewhere). However, all of these tax code changes probably helped H&R Block, as confused taxpayers sought out professional advice this time around.

LDK Solar is yet another solar energy company that's losing money. Its heavily leveraged balance sheet and recent partial default on bonds that came due have some wondering if it will survive the inevitable shakeout.

Analysts see LDK generating less than half as much revenue as it did a year earlier, but they do see it shining through with a narrowing deficit. LDK will have to do more than that to stick around in the long run, but it's at least a baby step in the right direction.

Finally, we have Capstone. The microturbine maker saw its shares soar 12% last week. The move wasn't in anticipation of a blowout quarter this week; Capstone announced a new order earlier in the week to kick off the rally.

I singled out Capstone in my "5 Stocks Under $10" column four months ago, and shares have climbed 25% since then. Revenue is growing, gross margins are improving, and losses are narrowing. Capstone is finally expected to break even in the new fiscal year that began in April, and that's the easiest path to earning respect on Wall Street.

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.

Minimize your retirement worries
The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "
3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


Read/Post Comments (0) | Recommend This Article (2)

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: 2480098, ~/Articles/ArticleHandler.aspx, 8/20/2014 3:12:29 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