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Why Caesarstone, Kforce, and Trimble Navigation Are Today's 3 Best Stocks

By Sean Williams – Feb 12, 2014 at 5:15PM

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The broad-based S&P falls fractionally as Caesarstone, Kforce, and Trimble Navigation rocket higher by double-digits after strong earnings reports.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Following four straight days of strong gains, the broad-based S&P 500 (^GSPC -0.03%) appeared to take a breather today after unimpressive economic data failed to outweigh a slew of earnings reports, and pushed the markets lower.

Specifically, investors seemed to focus on a weak loan originations report from the Mortgage Brokers Association. The weekly report showed a 2% week-over-week decline in originations, which is concerning given that lending rates are still historically low, and that originations rose 0.4% last week. On the other hand, fluctuations in this figure aren't uncommon. But, considering that loan originations hit a nearly two-decade low in December despite a 4%, 30-year mortgage rate, this decline should give homebuilders and banks cause for concern.

The release of the Treasury Budget for January also failed to excite investors. Although the deficit of $10.4 billion was right in line with estimates, and down nearly 37% from the prior year, it reversed a surplus of $2.9 billion in the prior month, and points to plenty of work left to be done by Congress to reduce federal spending and the deficit. Given Congress' inability to work together during the past couple of years, this deficit serves as a worrisome reminder for investors.

By day's end, the S&P 500 had broken its four-day winning streak, and fallen modestly by 0.49 points (-0.03%), to close at 1,819.26.

Topping the charts and leading all companies to the upside, was quartz-countertop maker Caesarstone Sdot-Yam (CSTE 3.01%), which gained 19.6% after the company reported better-than-expected fourth-quarter results. For the fourth quarter, Caesarstone reported a 27% increase in revenue to a record $96.8 million (and that includes a nearly 3% negative effect from foreign currency translation), as net income jumped 58%, to $0.48 per share. By comparison, Wall Street had expected Caesarstone to report revenue of just $87.6 million on $0.40 in EPS. Overall, Caesarstone announced partnerships with all U.S.-based IKEA stores to supply them with quartz countertops, and saw its margin expand 120 basis points, to 43%. Furthermore, Caesarstone now anticipates fiscal 2014 full-year revenue of $410 million-$420 million, which perfectly brackets the $412.1 million estimate of Wall Street.

The story was very similar for professional and technical staffing solutions company Kforce (KFRC -1.37%), which advanced 14.1% after reporting its fourth-quarter results, and guiding its first-quarter revenue and EPS well ahead of the Street's current consensus estimates. For the quarter, Kforce's revenue improved 12%, to $302.9 million, as net income inched ever-so-slightly higher to $0.28, from $0.27 in the prior year. Kforce's CEO David Dunkel notes that Tech Flex provided the biggest boost to Kforce, with revenue up 18.3% year over year. What really excited investors, though, was the company's first-quarter guidance of $298 million-$304 million in revenue, and $0.15-$0.18 in EPS. Comparatively speaking, Wall Street analysts expected Kforce to report $292.6 million in revenue and $0.15 in EPS for the first-quarter. As for me, I'd still suggest approaching Kforce cautiously, as its top-line growth isn't translating par-for-par with its earnings growth, which could be a worrisome sign that Kforce's costs aren't under control.

Finally -- and keeping our theme of strong earnings reports driving big gains today -- position products developer Trimble Navigation (TRMB -0.29%) tacked on 14% after reporting better-than-expected fourth-quarter results. For the quarter Trimble delivered a 16% increase in year-over-year revenue, to $599.2 million, as adjusted EPS expanded to $0.43, from $0.28. Both results were clearly ahead of expectations that had called for just $0.36 in adjusted EPS on $567.4 million in revenue. Although the company's results demonstrate a better mix of higher-margin product sales, Trimble's CEO Steven Berglund noted that the company's growth in certain regions still remains uncertain. Following today's pop, I believe those cautious words should be enough to keep shareholders safely on the sidelines.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool recommends Caesarstone. 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

S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,026.12 (-0.03%) $-1.14
Trimble Inc. Stock Quote
Trimble Inc.
TRMB
$58.54 (-0.29%) $0.17
Kforce Stock Quote
Kforce
KFRC
$58.97 (-1.37%) $0.82
Caesarstone Stock Quote
Caesarstone
CSTE
$6.51 (3.01%) $0.19

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

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