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5 Reasons Not to Worry This Week

By Rick Munarriz – Dec 17, 2012 at 9:01AM

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It won't be a bad week if you know where to look.

It's not a perfect world out there for investors, but things may be starting to get better.

I recently went over some of the companies that are expected to post lower quarterly profits when they report this week. Thankfully, they're the exceptions and not the rule.

Let's go over some publicly traded companies that are expected to stand tall this week by posting year-over-year improvement on the bottom line.

Company

Latest-Quarter EPS (Estimated)

Year-Ago Quarter EPS

My Watchlist

Oracle (ORCL -2.01%)

$0.61

$0.54

Add

Paychex (PAYX -2.53%)

$0.41

$0.39

Add

Red Hat (RHT)

$0.29

$0.28

Add

Rite Aid (RAD -3.51%)

($0.03)

($0.06)

Add

General Mills (GIS -2.83%)

$0.79

$0.76

Add

Source: Thomson Reuters.

Clearing the table
Let's start at the top with Oracle.

The leading enterprise software company has found a way to keep growing, even if it's not always organically. CEO Larry Ellison has a voracious appetite when it comes to snapping up smaller companies that will help fortify Oracle's market position.

Oracle was one of the tech darlings that would routinely blow through Wall Street profit targets, but that hasn't been a given these days. Oracle has only beaten analyst bottom-line projections in two of the past four quarters, merely meeting the forecast last time out.

However, when it comes to merely posting year-over-year improvement -- and that's what we're looking for here -- you have to go all the way back to the summer of 2009 to find the last time that Oracle didn't find a way to post higher quarterly earnings per share than it did a year earlier.

Paychex will be an important name to watch. If business is going well at the leading payroll processor, it likely means that companies are feeling comfortable about hiring again. The market's not expecting great things here. The prognosticators see both revenue and net income inching just 5% higher. Well, at least that's baby steps in the right direction.

Red Hat has carved out a cozy living by turning open-source Linux software into subscription-based enterprise software solutions. Red Hat isn't merely bottling tap water here. Corporate clients get a lot for their money, and that's why Red Hat has been a consistent grower.

The market sees revenue at Red Hat growing in the mid teens in its fiscal year that ends in February and also in the fiscal year that lies ahead.

Earnings growth, on the other hand, may not be as rosy. Analysts only see net income of $0.29 a share after Red Hat rang up a profit of $0.28 a share a year earlier. That's not bad, but keep in mind that these same analysts thought that Red Hat would earn $0.29 a share in the prior quarter. It only delivered a profit of $0.28 a share.

Rite Aid is the drugstore chain that has seen better days. It's been more than four years since Rite Aid posted its last quarterly profit.

Will this be the period that finds the pharmacy store operator grabbing one of its Visine bottles and getting the red out? Nope. However, the retailer is getting closer. The $0.03-a-share deficit that the market is eyeing matches its smallest loss during this deficit-riddled period.

Finally, we have General Mills hoping to be a cereal thriller.

Now, General Mills is about more than merely its boxes of Lucky Charms, Cheerios, and Trix. General Mills is also the company behind Betty Crocker cake mixes, Pillsbury refrigerated dough, and Yoplait yogurt.

Analysts see the supermarket-staple provider announcing a profit of $0.79 a share when it reports on Wednesday, just ahead of the $0.76 a share it poured into its bowl a year ago.

Cross those fingers, but know the fundamentals
Investors in these five stocks have a right to be excited. They are all improving their financial situations. They are worthy of the gains that the market rally has bestowed upon them over the past year.

I wouldn't be uncomfortable owning any of these companies. They're doing the right thing, regardless of Mr. Market's mood swings.

The expectations may be high, but these five stocks wouldn't have it any other way.

Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Oracle. Motley Fool newsletter services recommend Paychex. 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.

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Stocks Mentioned

Red Hat Stock Quote
Red Hat
RHT
Paychex Stock Quote
Paychex
PAYX
$111.69 (-2.53%) $-2.90
Rite Aid Stock Quote
Rite Aid
RAD
$5.22 (-3.51%) $0.19
Oracle Corporation Stock Quote
Oracle Corporation
ORCL
$65.30 (-2.01%) $-1.34
General Mills, Inc. Stock Quote
General Mills, Inc.
GIS
$74.97 (-2.83%) $-2.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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