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 Infinera (NASDAQ:INFN). The provider of digital optical networking systems posted an adjusted net loss of $0.06 a share on $124.6 million in revenue. Analysts were holding out for a deficit of $0.07 a share on $119.7 million in revenue.
Infinera's strong quarter inspired Needham & Co. to upgrade its rating on the stock to "buy" with a $12 price target. It wasn't just Needham & Co. that was impressed, as Infinera stock was one of the market's biggest winners with a 31% pop last week.
Cliffs Natural Resources (NYSE:CLF) was another topper. It's been a rough year for the iron-ore miner heading into last week's quarterly report, and last month's announcement that it was halting production at a Canadian iron-ore pellet plant triggered a wave of analysts hosing down their forecasts on the company.
On the surface, it wasn't a good report out of Cliffs. Revenue declined 6%, and adjusted earnings fell even harder. However, the profit of $0.60 a share that Cliffs did ring up was nearly double the $0.32 a share that analysts were projecting.
The stock moved 14% higher on the week.
Finally, we have Level 3 Communications (NYSE:LVLT) besting the pros on the bottom line. Despite posting revenue that dipped slightly sequentially and year over year, the provider of Web-based communications services posted an adjusted loss of just $0.13 a share.
Analysts were banking on $0.17 a share in red ink. Level 3 had actually come up short against Wall Street's marks in recent quarters, so the beat was a welcome surprise.
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.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Infinera. The Motley Fool owns shares of Infinera. 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.