5 Stocks That Laugh at Wall Street

These days, Mr. Market seems to enjoy dogpiling on any company 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 soundly trounced earnings estimates by 20% or more in the latest quarter:

Source: Yahoo! Finance and CAPS.

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 them
Wells Fargo joined the conga line of banks including Citigroup (NYSE:C) and Bank of America (NYSE:BAC) paying back their TARP loans. It will sell $10.4 billion in new stock -- diluting shareholders including Warren Buffett -- to pay back its $20 billion debt. Of course, that's not as bad as what Citigroup is doing to the taxpayer.

Where we used to own preferred shares in the troubled bank, we now own common stock because we converted it when Citigroup needed to get bailed out for a third time. That took care of $25 billion of the $45 billion in TARP funds it received. Some analysts believe we gave it a gift of free money that time because the conversion was priced, well, high. Now that Citigroup wants to pay back the rest of the TARP loan, it sold more common shares at a price 20% below our $3.25 cost basis.

Worse, the offering was a massive dilution of the taxpayers' holdings. We're going from owning 34% of Citigroup to just 26%, by one estimate. While the government will no longer guarantee risky assets once the deal is finished, as a large shareholder, it's still exposed to the risk of that stuff going bad.

Although CAPS All-Star TSIF believes Citigroup will outperform the market over time as its portfolio slowly improves, TSIF clearly sees it as having rushed the repayment solely to avoid government pay restrictions.

Some suggest, and I agree, that Citigroup rushed the share issue deal. While being "free of tarp" give Citigroup some positives, [there] was no need to rush the event. It could be that as the stock market stabilizes and Citigroups investment portfolio stabalizes that Citigroup does not see a large gain in the near future. More likely, as with their peers, they want to be "free" to compensate and pay dividends as they wish, rather than be under the [government's] authority. This is not a sufficient reason to push through, but whatever the reason, this phase is over. Barring another wave of defaults ... Citi should be on a slow mend.

Although Wells Fargo's TARP repayment is expected to be mildly dilute earnings for the immediate future, a number of analysts generally believe it is a net plus for the bank.

CAPS member AskRaja writes that Wells Fargo and its big banking brethren are ready to rule the roost, now that they're on firmer ground.

With few players in the bank market, [JPMorgan Chase, Wells Fargo, Goldman Sachs, and Morgan Stanley] are well positioned to rule the next [few] years. Still not a bad bet and interest rates can only go up from here. With near zero interest rates and increasing restrictions around loans, these companies are well set to play a leading role going forward.

Yucking it up
The market's rally has changed from being mostly fueled by low-quality stocks to dragging most others along, based on 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.