Why settle for ordinary quarterly reports?
I take a look at three companies that beat market expectations every week, since I believe that it's the biggest factor in a stock beating the market. Leaving Wall Street's pros with quizzical looks on their faces can be a good thing. It usually means that the companies have more in the tank than analysts figured, and capital appreciation often follows.
Let's take a look at a few companies that humbled the prognosticators over the past few trading days.
We can start with Sealy (NYSE: ZZ). The leading mattress maker has plenty of near-term challenges, but it still managed to post a profit of $0.12 a share in its latest quarter. That may be lower than the $0.22 a share it earned a year ago, but it's comfortably ahead of the $0.08 a share that Mr. Market was expecting.
Sealy's strength came from an unlikely source: high-end mattresses. Its Posturepedic beds above the $1,000 price point sold briskly, no doubt posing challenges for Tempur-Pedic (NYSE: TPX) and Sleep Number bed master Select Comfort (Nasdaq: SCSS).
Yum! Brands (NYSE: YUM) put the "wow" in "Chihuahua," as the company behind Taco Bell, KFC, and Pizza Hut grew its bottom line to $0.58 a share. Analysts were waiting at the $0.54-a-share drive-thru window.
Fast-food chains have been holding up better than casual-dining concepts. It's no surprise to see Yum! hit its earnings out of the park in the same week that Ruby Tuesday (NYSE: RT) missed its net income target and Brinker International (NYSE: EAT) talked down its guidance.
Costco (Nasdaq: COST) is another topper -- at least excluding some one-time charges related to inventory and membership-fee accounting. The warehouse club generated a profit of $0.97 a share before charges. Investors were looking for $0.93 a share in earnings.
Keep watching the companies that lap expectations. Over time, it will be a profitable experience for investors, as the market rewards the overachievers. That's the kind of surprise we look for in the Rule Breakers newsletter service. Want in? Check out a 30-day trial subscription.
Either way, come back next Monday to learn about more stocks that blew the market away.
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