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 PriceSmart (NASDAQ:PSMT). The operator of warehouse clubs throughout Latin America and the Caribbean rang up a quarterly profit of $0.82 a share, well ahead of the $0.77 a share that Wall Street was forecasting. The 30-unit discounter posted double-digit top-line growth as a result of strong comps at its 29 older stores and a new location that opened up last year.
Rite Aid (NYSE:RAD) also prescribed a strong bottom line. The drugstore operator has been consistently in the red since 2007, but losses had been narrowing heading into last week's report. Rite Aid surprised the market with earnings of $0.13 a share. Some one-time items inflated the profitability, but the pharmacy chain still would have posted positive results at a time when Wall Street was settling for a deficit of $0.02 a share.
Finally, we have Alcoa (NYSE:AA) putting the pedal to the metal. The aluminum producer came through with quarterly net income of $0.11 a share, just ahead of the $0.10 a share that it posted a year earlier. It's actually a bigger beat than you think. The pros were actually targeting profitability at Alcoa to decline to $0.08 a share.
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.