The first half of 2012 is now in the books and, as we dive into the heart of third-quarter earnings reports, I can't help pointing out that the majority of reports up until now have been better than expected. With so many companies reporting during the weeks that comprise earnings season, it's easy for some earnings reports to fall through the cracks.
Each week this year, I've taken a look at three companies that could be worth further research after either beating or missing their profit expectations. Today, we'll take a gander at three more companies that reported earnings last week. They may have slid under your radar, but they deserve a look.
Golden Star Resources
Source: Yahoo! Finance.
For those of you, myself included, that thought Alliant Techsystems was set up for a disastrous quarter, you can just put those pitchforks away now. The stage was set for a big miss given that Alliant is reliant on U.S. defense budget spending and aerospace programs like NASA for a big chunk of its revenue. What we got was a very unexpected and sizable earnings beat.
Alliant reported flat year-over-year sales despite its aerospace revenue falling 17% due to the absence of orders from NASA. Net income actually managed to creep higher to $2.16 from $2.13 as ammunition sales drove 19% growth in its sporting group division.
However, Alliant's growth comes at a price. Its robust ammunition growth is being countered by selling significantly more lower-price, lower-margin rounds which hurt the segment's year-over-year profits. Alliant also relies on U.S. defense spending for nearly half of its revenue. With that figure expected to shrink at a steady clip in the coming years as the U.S. government restricts budgetary spending, I can't help but be concerned about Alliant's future growth prospects -- or lack thereof, I should say. These results may spur an intermediate rally in Alliant, but over the longer-term view I remain notably pessimistic on its growth prospects.
Changing its name from Neutral Tandem to Inteliquent did sound catchy; unfortunately, it didn't do a darn thing to improve the company's bottom line results.
In what's becoming an almost regular occurrence, Inteliquent, a provider of interconnection and interoperability solutions to the telecom industry broadly missed Wall Street's estimates by 40% last week and blamed a shortfall in domestic telecom spending as the reason. For the second quarter, sales rose by 5%, but it was forced to lower its sales and profitability forecast for the remainder of 2012. The $64,000 question then becomes: Is Inteliquent a buy?
In spite of being suckered in countless times over only to be disappointed, I'm still buying into the Inteliquent story. I feel it's just a matter of time until network spending increases and Verizon and AT&T stick to their guns and ramp up their infrastructure expenditures. At the moment, most of the spending is being done on the cloud-computing side of the business with Intel
Inteliquent's special dividend could also provide a short-term boost in optimism. I much prefer recurring dividends, and I loathe when company's take on debt (in this case up to $100 million) in order to pay a special dividend, but given Inteliquent's strong cash position and cash flow, I might let it slide. It's definitely worth keeping an eye on.
Golden Star Resources
As an owner of junior gold miner Golden Star Resources, I can't even begin to tell you what sort of elation I felt after reading the company's second-quarter-earnings results.
Although Golden Star tripped up and missed Wall Street's EPS estimates by $0.01, something I'm quite used to by now, nearly every other aspect of the report signals that production and cost control actions might finally be working. Gold production rose by 10% sequentially for the second consecutive quarter as cash operating costs plummeted to $921/oz. from $1,118/oz. in the first quarter. That's right -- I just said Golden Star's cash costs actually dropped! I told you I was giddy...
Golden Star has now produced four straight quarters of operating cash flow and is reaping the rewards of higher margins as costs drop. The company isn't completely out of the woods considering that development projects are still ongoing and water treatment costs are anticipated to add $60 per ounce at Bogoso mine through 2014, but things seem to be moving notably in the right direction for once. Call this long-term investor in Golden Star mildly intrigued!
Sometimes an earnings beat or miss isn't as cut-and-dried as it appears. I've given my two cents on what's next for each of these companies -- now it's your turn to sound off. Share your thoughts in the comments section below, and consider adding these stocks to your free and personalized Watchlist.
- Add Alliant Techsystems to My Watchlist.
- Add Inteliquent to My Watchlist.
- Add Golden Star Resources to My Watchlist.
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Fool contributor Sean Williams owns shares of Golden Star Resources, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
The Motley Fool owns shares of Inteliquent, Intel, and Cisco Systems. Motley Fool newsletter services have recommended buying shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that always exceeds expectations.