5 Stocks That Laugh at Wall Street

In these dour 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! Finance.
NA = not available; EPS = earnings per share; LT = long-term.

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 looking only at 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 might have the last laugh.

The joke's on them
The recent cold snap across much of the country helped lift hopes that demand for natural gas will return. Pricing for the heating fuel rose yesterday to around $4.50 per million Btu before the government released its storage numbers, as traders had believed there would be only an incremental increase in inventory levels of 53 billion cubic feet. However, the Energy Information Administration said that inventories leapt much higher, rising 58 billion cubic feet and causing natural gas prices to fall by about $0.10.

But CAPS member rayveloso believes Chesapeake Energy will outperform the market because industry factors favor natural gas:

I got in at $20 and I think that in a year it will be worth $40-45. Natural Gas will rebound, production will be smaller, hedges will end and demand will increase along with green economy.

The problem seems to be that the immediate outlook for natural gas doesn't appear favorable. After hitting bottom at 665 rigs in July, Baker Hughes (NYSE:BHI) says the U.S. natural gas drilling rig count has risen to 726. The anticipation of higher prices next year has drillers re-entering the market, and this means that the production declines many forecast for 2010 may not be as substantial as previously expected. Moreover, storage inventories are now nearing capacity and there are still several weeks of injections remaining.

In sum, I'd say the forecast for natural gas is downright chilly. We've got plenty of natural gas in storage, demand is off, drilling rig counts are rebounding, and even national weather temperatures are forecast to increase. While The Old Farmer's Almanac predicts a colder-than-normal winter, particularly in the Northeast, there are other fundamentals at play that may keep prices and producers out in the cold.

And we're off!
Shares of industrial goods manufacturers have been bouncing back this year as production jumped overseas, particularly in China. The resurgence is connected to increases in commodity prices, imports, and expanding international economies. Even though Caterpillar reported global machinery sales that fell 48% in August -- the 12th straight month of declines -- its stock is up 38% from a year ago. Energy project specialist McDermott International (NYSE:MDR) is up more than 58% over the same period.

CAPS member toms66gtstang thinks that if the U.S. economy can also show additional signs of life, Caterpillar will metamorphose into a stellar grower:

Global (China) business will help in short term, but I think if & when the US economy really picks up that CAT will see a huge growth over the next 3 to 5 years. I'm in with a small position at $26.40 so I'm feeling pretty good already, just wish I had bought more.

Foolish takeaway
Thus far, the market's rally has been mostly fueled by low-quality stocks. Got a different take on Chesapeake or Caterpillar? If you think there's some funny business afoot, let us know in CAPS. It's free.