It's a simple two-step dance on Wall Street: Provide guidance. Exceed guidance. Easy as that. However, these serial masters of the undersell usually come in just a penny or two a share above analyst targets. When a company really smacks the cover off the ball, that's when it's a good idea for investors to pay attention.
Usually, something notably exciting is going on at those companies that blow the numbers away, and the professional analysts have no idea how long the good times may continue. So let's take a closer look at a few of the companies that humbled the prognosticators this past week in just this way.
We'll start with Hewlett-Packard (NYSE:HPQ). New CEO Mark Hurd has started off on a good foot quicker than you can say "Carly who?" Earnings for this first quarter came in at $0.36 a share, while the market was banking on a $0.31 showing. No, this doesn't exactly signal a full recovery in the company's computer business. Many of Hurd's cost-cutting moves are just starting to go into effect, so it's not as if you can even give Hurd all of the credit here. However, it was great to see the company's flagship printing and imaging business -- the only thing that was really working when Carly Fiorina was at the helm -- not being the only driver behind a decent quarter.
Trying to win back the market share crown from Motley Fool Stock Advisor recommendation Dell (NASDAQ:DELL) won't be easy. That goal is even harder now that some of the smaller computer players, such as Gateway (NYSE:GTW) and Apple Computer (NASDAQ:AAPL), are starting to make some noise. However, Hurd helped turn NCR (NYSE:NCR) around before joining HP. Topping the period's targets? Nice. Now let's see what he does for an encore.
Provide Commerce (NASDAQ:PRVD) was another topper. The company behind ProFlowers.com came up strong when it posted pro forma profits of $0.39 a share. Wall Street was expecting earnings to come in four cents lower. Provide Commerce has taken an eclectic path to get where it is now. Back in January, it had pegged its fiscal 2005 profits to clock in at $0.62 a share. Feeling worrisome in April, Provide lowered guidance for its year -- which ended in June -- to a range of $0.52 to $0.54 a share. So how did it all turn out in the end? Earnings came in at $0.65 a share, rendering April's warning a clear overreaction. As far as surprises go, these are the good ones.
Applied Materials (NASDAQ:AMAT) is our third spotlight winner. The semiconductor equipment specialist earned $0.23 a share. That bottom-line number obliterated the market's $0.14 mark. The victory was bittersweet, though, since sales and income still dipped for the period. Then again, beating the market isn't always about growing faster than expected. With Applied Materials, winning is simply a matter of not retreating as far back as investors were expecting.
So keep watching the companies that lap expectations. Over time, it will be a rewarding experience for investors. That's the kind of surprise that market watchers relish in the Rule Breakers newsletter service. In fact, we recommended Provide Commerce earlier this year. The strategy has paid off: The average Rule Breakers selection has more than tripled the S&P 500's market return. Want in? Check out a 30-day trial subscription.
Either way, come back next Monday to learn about more stocks that blew the market away.
Longtime Fool contributor Rick Munarriz is a fan of toppers, but he does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
