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3 Earnings Reports That Caught My Attention Last Week

By Sean Williams - Apr 15, 2013 at 9:52AM

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These three earnings reports may have flown under investors' radar, but they certainly didn't escape mine!

As second-quarter earnings reports begin to kick into gear, I can't help but point out that the majority of earnings reports we've covered over the past year 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 for the past 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.

Company

Consensus EPS

Reported EPS

Surprise

Rite Aid (RAD -7.92%)

$0.02

$0.13

750%

JinkoSolar Holding (JKS 7.71%)

($0.80)

($5.04)

(530%)

Ruby Tuesday (RT)

$0.10

$0.05

(50%)

Source: Yahoo! Finance.

Rite Aid
I admit that I was completely stunned when Rite Aid reported a fourth-quarter profit of $0.13. Prior to this report, which put Rite Aid into the black for the year, the company hadn't turned an annual profit since 2007. But, just as I suspected after diving into the report, it was mostly through one-time accounting boosts and big cost cuts that Rite Aid was able to achieve its profit.

For the quarter, revenue tumbled by nearly 9.7%, but that was without the benefit of a 53rd week, which the company had in the year before. Giving the company the benefit of the doubt here still doesn't explain how comparable-store sales dipped (again!) by 2% from the previous year. According to management, sales declines were primarily attributable to generic drug weakness, which reduced margins in its pharmacies.

As for its profit, Rite Aid claimed a LIFO credit from "significant drug inflation," which, when combined with its reduced expenses, was enough to push it toward a profit. Looking forward, investors seem quite pleased with Rite Aid's potential as well. Even management projected a full-year profit of $0.04 to $0.20, which incited what I'd term the rampant buying of Rite Aid shares. But I'd advocate that not a thing has changed other than lower expenses.

In Rite Aid's March sales report, same-store sales again declined 2% and were headed by a negative 566-basis-point impact from newly introduced generic medications. There is simply only so much profit Rite Aid can squeeze out before cost-cutting no longer provides any bottom-line benefits. Without the company having any tangible growth prospects, I'd still strongly suggest looking elsewhere in the drugstore sector.

JinkoSolar Holding
If you still don't believe that U.S. solar manufacturers now have the upper hand when it comes to production cost, pricing, and overall demand, then let me introduce you to China's latest disaster, JinkoSolar.

If a small miss represented the size of a bread box, and a big miss the size of a car, then JinkoSolar's miss would be about equal to the size of Montana. Although JinkoSolar's revenue dipped only 3% to $187.3 million, its loss-per-share more than doubled and missed expectations by a lot! Now here's the truly phenomenal part: The stock actually soared on the news! This was due to JinkoSolar's 270MW to 300MW shipment forecast in the first quarter, which was higher than the 252.3MW it shipped in the fourth quarter. 

Unfortunately for JinkoSolar investors, this gets the company nowhere near profitable. It did land a $58 million loan agreement with China Development Bank to fund solar power plant projects in China, but it does nothing but put a Band-Aid over a gaping hole that's bleeding cash. Furthermore, JinkoSolar ended the quarter with $67.4 million in cash compared to a lofty $387.1 million in debt. That may not sound like much, but considering that it lost better than $11 per share in 2012, I'm not all that excited about its future prospects. 

The real winner of JinkoSolar's suffering has been U.S.-based First Solar (FSLR 1.93%), which last week boosted its forecast for 2013 through 2015 well beyond Street estimates. First Solar has benefited from large domestic projects, as well as domestic duty protections, which make Chinese solar panels (like JinkoSolar's) comparably priced to First Solar's usually more efficient panels. This has moved pricing and demand back to U.S. solar manufacturers and put the entire Chinese solar industry on shaky ground.

Ruby Tuesday
No, you aren't experiencing deja vu: Ruby Tuesday has once again made the list! The casual-dining restaurant chain moved notably higher this past week after reporting its third-quarter results. But as I always wonder anytime Ruby Tuesday has a green arrow next to its ticker symbol, "Is this warranted?"

For the quarter, same-store sales dipped 2.8% and profit fell 52%; not exactly the kind of figures that would inspire confidence in a rally. What's really behind the sizzle in Ruby Tuesday's share price is a forecast for flat same-store sales for 2013 and EPS of $0.28-$0.32, which is higher than its own previous forecast of $0.24-$0.30. 

Still, I have to wonder what's going on with existing locations and why it can't seem to get more traffic into its restaurants. Ruby Tuesday tried promoting its brand and boosting its advertising budget on multiple occasions, but soon realized that it doesn't have the brand power or budget that some of its competitors do. One perfect case in point is Buffalo Wild Wings (BWLD), which has done a phenomenal job claiming would-be Ruby Tuesday faithful for itself. Buffalo Wild Wings offers customers a clearly defined niche (wings and sports), and has allowed word of mouth advertising to do a lot of the work in bringing in new customers and repeat business. Ruby Tuesday doesn't really have a niche. It's just another casual-dining experience that lacks a direction.

Until I see clearly defined progress on the same-store sales front, I don't think you can trust an increased forecast as conclusive evidence that this restaurant chain has turned the corner.

Foolish roundup
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.

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Stocks Mentioned

Rite Aid Corporation Stock Quote
Rite Aid Corporation
RAD
$6.74 (-7.92%) $0.58
Ruby Tuesday, Inc. Stock Quote
Ruby Tuesday, Inc.
RT
JinkoSolar Holding Co., Ltd. Stock Quote
JinkoSolar Holding Co., Ltd.
JKS
$69.18 (7.71%) $4.95
First Solar, Inc. Stock Quote
First Solar, Inc.
FSLR
$68.13 (1.93%) $1.29
Buffalo Wild Wings, Inc. Stock Quote
Buffalo Wild Wings, Inc.
BWLD

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

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