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.

Sometimes a company will be forecast to lose money, but they'll upend the analysts' apple cart by recording profits. You sometimes can't actually calculate by how much they beat the estimates (7th-grade math tells us we can't divide by zero or less and get a meaningful result!), but it's still useful to understand why they were able to exceed expectations.


CAPS Rating

Last Qtr. EPS Estimate

Last Qtr. EPS Actual

Est. LT Growth

Frontier Communications (NYSE: FTR)





SandRidge Energy (NYSE: SD)





StemCells (Nasdaq: STEM)





Source: Yahoo! Finance.

The above three companies beat estimates recently, but that isn't necessarily enough to make the 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 companies listed above will have the last laugh.

Laugh, clown, laugh!
There's been some close examination lately of Frontier Communications dividends and whether or not they're sustainable, particularly when compared to rivals CenturyLink (NYSE: CTL) and Windstream (NYSE: WIN), let alone the larger carriers. Although its payout ratio may seem high (233%), we also see that it generates sufficient free cash flow to pay for it. The rural telecom carrier has huge deferred tax benefits and its depreciation and amortization exceed capital expenditures, making it a little cash-generating dynamo.

Despite reporting lower revenues in its most recent quarter as a result of Frontier's declining landline business, in an era of greater access to high-speed Internet, cable, and satellite TV, that's not so surprising, even in the rural areas that Frontier serves. It's aggressively building out its high-speed Internet and satellite TV offerings, which along with cost-cutting measures, allowed it to reaffirm its forecast of strong growth in free cash flow. Adjusted FCF was up 33% year over year, and it anticipates full year free cash flows of as much as $475 million.

The asset acquisition from Verizon (NYSE: VZ) won't interrupt its drive for profitable growth, which CAPS member subdriver683 sees as ultimately helping to boost the share price.

With the recent expansion due to the acquisitions from verizon, fourth quarter profits will increase and once investors get over the recent dividend cut (which was announced a year ago) this stock will grow significantly. Definitely see this stock doubling up, and the dividend is still nice for this price point.

Light at the end of the tunnel
SandRidge Energy hasn't been as fortunate as Frontier, despite returning to profitability, and handily beating analyst estimates. Its recently completed acquisition of Arena Resources burdens it with debt just at the time that revenues are weakening more than the Street thinks they should be. While SandRidge beat on earnings, revenues were a huge miss. The market has bludgeoned the stock price, sending it down more than 60% over the past 12 months. In fact it's down over 50% just this year.

Seems the market is discounting SandRidge's move into oil, which gives it a more diverse revenue stream going forward. When natural gas recovers -- and no one really doubts that it eventually will -- SandRidge stands to gain on both fronts, perhaps more than Chesapeake Energy (NYSE: CHK) as a natural gas pure play.

CAPS member techpatriot says insider purchases of the stock are just underscoring how cheap this energy play is.

This stock is crazy oversold at this point, when you account for the joint assets after the merger. This is either an easy 5 bagger from here, or a takeover candidate at these levels. Even if you assume oil and nat gas NEVER increase again, and even decline from the levels we are currently at, this stock is grossly undervalued. Strong insider buying now.

Dim the lights
Of the three companies highlighted here, StemCells is the one with perhaps the most promise but the least to show for it, at least right now anyway. And that's really just the nature of its business. Commercializing novel stem cell therapies has a ways to got yet before its mainstream, but StemCells continues to advance the clinical development of its lead product candidates.

The very real risk here is the financial situation, both at the company itself and in the economy at large. Management seems to recognize the risk and it's important that investors themselves go in with eyes wide open here. This is not a stock for the feint of heart, and even CAPS All-Star and biotech guru zzlangerhans finds it hard to come up with a near-term lever for it to pull.

I'm not foreseeing any short-term catalysts for StemCells. They've got one phase I trial in progress and another hopefully to begin before the end of the year. They've been progressing very slowly and inexorably burning cash as long as I've been following them.

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.

Chesapeake Energy is a Motley Fool Inside Value selection. The Fool owns shares of Chesapeake Energy. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.