Don't settle for ordinary quarterly reports.
Every week I take a look at three companies that beat market expectations, since I believe that it's the biggest factor in a stock beating the market. Leaving Wall Street's pros with stunned expressions can be a good thing. It usually means that the companies have more in the tank than analysts figured. Capital appreciation typically follows.
Let's take a look at a few companies that humbled the pros over the past few trading days.
We can start with Alcoa (NYSE:AA). The leading aluminum producer wasn't supposed to do much this time around. Analysts were banking on Alcoa merely breaking even on a dip in revenue. Well, Alcoa came through with a quarterly profit of $0.03 a share after backing out one-time legal expenses and environmental remediation costs.
Unfortunately for Alcoa shareholders, the shares still took a hit on the report by pairing up better-than-expected profitability with a bleak near-term outlook. The slowing economy in China and meandering markets elsewhere aren't helping.
The parent company of Taco Bell, Pizza Hut, and KFC served up impressive results, with revenue and adjusted earnings per share climbing 9% and 19%, respectively.
Business in China is still booming and comps at all three concepts rose nicely in the U.S. for the quarter. Yum!'s adjusted profit of $0.99 a share bested the $0.97 a share that the market was expecting. Yum! typically finds a way to land ahead of the pros, but it actually had come up short in its previous quarter.
Finally, we have Costco (NASDAQ:COST).
The warehouse club came through with its third consecutive quarter of market-thumping bottom-line results last week. At a time when traditional grocers are dishing out shrinking operating margins -- Safeway (NYSE:SWY) proved that with another poorly received report a day after Costco reported -- warehouse clubs offering customers deep savings on bulk purchases are thriving.
Costco's earnings rose 27% to $1.39 a share, blowing past the $1.31 a share that analysts were forecasting. Is it a coincidence that Wall Street has aimed too low since the company boosted its annual membership rates late last year?
Moving in the right direction
It's important to keep watching the companies that surpass expectations. Over time, it will be a lucrative experience for investors as the market rewards the overachievers. That's the kind of surprise that we look for in the Rule Breakers newsletter service. Want in? Check out a 30-day trial subscription. If that's not up your alley just yet, you can still check out a free special report detailing the next trillion dollar revolution.
Either way, come back next week to learn about more stocks that blew the market away in the coming days.
Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Costco Wholesale. Motley Fool newsletter services recommend Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.