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3 Investors Share the Companies That Surprised Them the Most This Earnings Season

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There were a few bombshells this past quarter.

Earnings season always keeps investors on their toes, but this one certainly held a few surprises along the way. In this segment of Backstage Pass, recorded on Nov. 5, Fool contributors Toby Bordelon, Rachel Warren, and Vicki Hutchison share the companies that surprised them (good or bad) this earnings season.

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Toby Bordelon: We have a bonus question I want to get you really quickly here. If you got more questions, drop them in. We've got some time to answer them. You know what? We're going to work ProShopGuy's question into this. Our bonus question I had for us was, we've had a bunch of earnings, let's think about one company that's surprised you. What earnings report has surprised you. We all came up with a company. We're going to go through those.

But I also want you to throw in, if you would respond to ProShopGuy's question, "What was your bigger surprise, Zillow or Peloton?"

Both of them announced, not awesome earnings, I guess we'll put it that way. We use more surprised by one or the other, but let's also a share of your initial take on what companies surprised you. Let's start with you, Rachel.

Rachel Warren: Both of these were surprising. I would say after Zillow's announcement that it was pausing initially its iBuying program, I think that was a few weeks ago now. It foreshadowed its most recent announcement. The Peloton one, I think of the two surprised me the most. I know this was one of those really hot pandemic stocks.

Some of these companies, like when I talk about a lot on the show is Teladoc, a healthcare stock, I think is a great long-term investment. Peloton, I haven't studied as much, but I have liked the business from what I've learned a bit. I was very surprised to see that they were basically halting hiring and obviously less than stellar with earnings.

That's been a big shock to investors. I try not to form a full assumption of a company based on maybe one event or one quarter, but if this is something that continues, that could be interesting to look at in terms of the long-term growth potential of the company.

For me, I was more pleased than surprised, but I was very happy with Pfizer's (PFE 0.52%) third quarter earnings. Not surprisingly, this is a company that's had vast commercial success from its COVID vaccine. Every quarter, it's essentially been raising its guidance both for vaccine sales as well as overall guidance.

The quarter before this, the second quarter, it had reported revenue growth in the upper double digits inclusive of the vaccine. In this most recent quarter, the third quarter, which it reported on November 2nd, the company said it grew its revenue 130% year-over-year, which of course includes its COVID vaccine.

But even without the vaccine, revenues were up seven percent year-over-year, so a more modest amount, but still healthy growth. The company raised its full-year guidance again. It's also seeing a lot of really strong revenue growth across its other business segments, not just from its COVID vaccine, but also from its other vaccines. Its oncology medicines, hospital medicines.

I was very pleased with this report. I don't think it was a huge surprise to investors. We know what a huge commercial success the vaccine has been. But just to see that it continues to raise its guidance each quarter.

Then with the news that came out today about the potentially game-changing therapeutic, I think there's a lot of interesting quarters ahead of positive growth for Pfizer.

Toby Bordelon: Thanks. Vicki, what about you?

Vicki Hutchison: I don't follow Peloton very closely, Zillow a little more. I don't know that I think that either them are that surprising. I think they're disappointing, but I'm not sure that they're that surprising. But I think that one thing about the Zillow, maybe it was just their approach.

iBuying may still be a fine thing for Redfin. I know Tim Beyers was really hot about Redfin and their ability and their approach in Earnings Show today.

On a company that surprised me, I would say, I'm really pleased with Qualcomm's (QCOM 0.49%) results, that they've really been able to do that dual sourcing. In the case of their customers, both Qualcomm with their foundry space and their customers have decided, if you can only get 10 widgets, are you going to do the one with the high-margin or the low-margin.

Basically, everybody is trading up to the higher-margin, and that turned into a better profit. Also Qualcomm, well, their customers electronics has to be on that boat out in the harbor coming in on the West Coast.

Most of the electronics are actually built in Asia, very near the foundries where Qualcomm builds their chips. It was a really good quarter and even though just like everybody else, maybe they're not getting as quite as many semiconductors built as they would like.

Toby Bordelon: Thanks. Yeah I don't know. Between those two companies that ProShopGuy asked about, I would honestly say probably Zillow is more surprising to me in terms of the announcement. Peloton I've had concerns about and I expected this thing to happen, but I didn't expect it would necessarily hit the stock this hard initially.

What surprised me about Zillow is they came out a couple of weeks ago, and said we're pausing the iBuying program. Then to in your next earning report, say we're totally icing the business. That was weird to me. I would've thought they would just made that announcement initially.

It's clear the timeframe was too short. I think the timeframe was to short from pause to earnings to announcements to believe they didn't know they were just going to get out. That was a little weird. I'm a little, I don't want to say peeved but wondering what management was thinking by taking that approach. Let's say that. 

As to me, the company that was surprising me honestly, Amazon (AMZN -0.59%) was a little surprising. Maybe it shouldn't be, but I would not have expected them to be suffering from the supply chain issues like they are. Maybe I shouldn't be. Maybe it's just if I can get everyone, why would there be any different.

I just expected them as good as they are logistics to be a little more on top of it and be able to overcome it, but it may just be that the issues are too big for even them to not be affected to the degree they've been. That was a little bit of a surprise.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rachel Warren owns shares of Amazon and Teladoc Health. Toby Bordelon owns shares of Amazon and has the following options: short February 2022 $35 puts on Redfin and short February 2022 $40 puts on Peloton Interactive. Vicki Hutchison owns shares of Amazon, Qualcomm, Redfin, Teladoc Health, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool owns shares of and recommends Amazon, Peloton Interactive, Qualcomm, Redfin, Teladoc Health, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, short February 2022 $65 calls on Redfin, and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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