5 Stocks That Laugh at Wall Street

In these heady economic times, Mr. Market seems to enjoy dogpiling on any stock that dares to fall short of analysts' estimates. To defy that trend, we're here to celebrate stocks that didn't merely meet Wall Street's predictions, but laughed in analysts' faces by leaving their miserly forecasts in the dust. The companies below have all soundly trounced earnings estimates by 20% or more in the last quarter:

Source: Yahoo.com; NC= not calculable, SIRI broke even vs. ($0.02) est.; AMD earned $1.52 vs. ($0.18) est.

Nonetheless, beating estimates isn't enough to make a stock a winner. Analysts are notoriously lousy at forecasting results, and one-time items can sometimes push earnings over the top. Wall Street professionals typically don't include such extraordinary events in their forecasts.  

Rather than focusing only on the past, we'll check whether analysts have a bead on future performance. With help from Motley Fool CAPS, we'll see which of the top companies listed above will have the last laugh.

The joke's on us
OK, even with Howard Stern on its airwaves, Sirius XM Radio isn't exactly laughing at Wall Street -- but maybe it's chuckling in spite of itself. Despite a surprisingly profitable quarter, the satellite radio station saw its shares drop below $1 each, dooming its latest chance to maintain its Nasdaq listing by trading north of the decimal point for 10 consecutive days.

Sirius did enjoy substantial subscriber growth in the quarter, had good customer conversion numbers (while lowering churn), and saw average revenues per customer rise. Yet debt remains substantial, and losses might not only return, but also grow substantially. Liberty Capital's (Nasdaq: LCAPA) huge ownership stake also continues to loom over the company's fortunes.

Tell us in the comments section below whether Sirius will keep flying high, or crash back to earth.

A stock by any other name …
Maybe investors were so confused about the name change contemplated by KHD Humboldt Wedag International that they didn't see the value of the spinoff it announced in January. The stock dropped as much as 19% in the weeks following the news that KHD was splitting off its industrial plant technology and equipment business, and changing the name of the mineral royalty business to Terra Nova. Though the shares have recovered some ground since then, they're still 7% below where they traded the day KHD's big news broke.

Yesterday's announcement didn't make the situation any clearer. KHD originally envisioned a straight spinoff for the industrial plant business. Now, to minimize the tax impact of the transaction, the company says it will conduct the spinoff in several tranches. The first, comprising 26% of the new stock, could arrive as soon as the end of the month.

In his book You Can Be a Stock Market Genius, author and money manager Joel Greenblatt notes that investors who are willing to delve into complex and difficult special situations could reap extraordinary profits. KHD's spinoff might be just such a case.

KHD's cement business, for example, doesn't seem to be carrying the same degree of baggage as rivals such as Cemex (NYSE: CX). The latter company took on excess debt to make untimely (and expensive) acquisitions.

CAPS member blues4you  eyes the spinoff as a way to unlock the value in KHD's disparate entities. Harry0925 agrees, asserting that the company is "extremely undervalued" at current prices.

Another CAPS member, spoofhopper, says that when you look at its operations, then at the metrics used to value it, you'll find KHD a bargain:

industrial distribution (materials and know-how to cement/coal/mineral facilities, emerging markets, management good at allocating capital, soon will start building/operating cement plants, price/cash flow = 6, low debt, 22% EPS estimate, cyclical aggressive growth

Not every special situation is a winner simply because it's complex, of course; a handful of CAPS members do think KHD will still underperform the market. Why not spin off your ideas on the KHD Humboldt Wedag International CAPS page, and let us know whether the company has cemented your support.

Yukking it up
The market's rally, once mostly fueled by low-quality stocks, has now begun dragging most others along, thanks to lower year-over-year comparables. If you think there's some funny business afoot, let us know -- head over to Motley Fool CAPS and sound off.