These three companies just didn't live up to Mr. Market's expectations last week. Whether the target was set by the company's own management, by Wall Street analysts, or by the market at large, that miss can have serious consequences, and share prices can suffer in a very real way as a result.
Sometimes an earnings stumble is a signal to sell, but digging in the dirt is also a good way to find turnaround candidates while they're getting beaten down. In this unusually cheerful edition of our bottom-scraping checkup, I'll get poultry mixed up with geography, get a second opinion, and drop my jaw at the end.
Gobble-gobble this stock up
So let's talk turkey. I mean Turkey, which is the home base for our first miscreant this week -- Turkcell Iletisim Hizmetleri AS (NYSE:TKC). Perhaps I'm being a bit unfair to the Turkish telecom giant in calling this quarter a miss, but the $0.30 earnings-per-ADR result lagged the Thomson First Call estimate of $0.41. From one analyst.
Still, the market took this as a serious blunder, and the stock closed 8.3% lower the next day. Never mind, then, that net income more than tripled over last year, and revenue increased 29% to $1.5 billion. The company has 42.5 million subscribers in markets such as Turkey and Ukraine, with an eye toward opening shop in Kuwait and Iraq.
The foreign flavor of all this may scare a few American investors, but Turkcell operates in some mighty vibrant markets. Management claims a 59% market share in Turkey, where a young population in a booming economy is clamoring for mobile services, and willing to pay well for it. The situation in Ukraine is similar, but with a lot more market penetration awaiting the company, and Kuwait certainly is a rich opportunity as well.
The domestic competition comes from Telecom Italia (NYSE:TI) and Vodafone (NYSE:VOD), but neither is growing as fast as Turkcell, and there's still a hefty chunk of addressable market to grab under the red banner. Motley Fool analyst Bill Mann has seen this stock deliver a market-crushing 20.4% return to Motley Fool Global Gains subscribers since he recommended it only five months ago.
Ouch. You got insurance for that?
Next up is multifaceted financial services provider Marsh & McLennan (NYSE:MMC), which turned in earnings of $0.29 per share. That's essentially flat from last year, and it missed the Street's consensus earnings target by $0.07 per share. A 7% revenue boost didn't help the bottom line this time.
One of the world's largest insurance brokers, Marsh Mac has been in plenty of trouble over the past few years, but our Motley Fool Inside Value advisor, Philip Durell, thinks that the worst is over. The company joined the scorecard of our deep-discount investing service only a couple of months ago.
And if Philip thought the company looked cheap then, and the fundamentals haven't changed, it should be a screaming value today. Its disappointing report simply cemented a monthlong decline, leaving prospective buyers with a 15% discount from early July prices. Fellow Fool Ryan Fuhrmann gave us the long view of these results with some encouraging words:
During the earnings conference call, management highlighted that 2005 was a year of survival, 2006 was devoted to stabilizing the business, and 2007 is the first year in which it can return to focusing on growth initiatives. It also mentioned that Marsh is once again attracting and retaining employees after they began jumping ship to archrivals such as Aon (NYSE:AOC) [and] Brown & Brown (NYSE:BRO).
Has the insurance titan reached rock bottom yet? That's a tough call, but the stock certainly hasn't been significantly cheaper than this in the last 10 years or so. Our CAPS community gives the stock a solid four-star rating, and the newsletter advisors are keeping the faith. Maybe you should have a look, too.
The eighth world wonder
Let's swing out in style, with a surprisingly slow quarter from superhero supervisor Marvel Entertainment (NYSE:MVL). Earnings were up 78% thanks to the Spider-Man 3 release, but the company still missed the Street target by a nickel because of soft toy sales. I mean, the sales were soft, not the toys. Not all of the toys, anyway. Oh, you get my drift.
I'd go into the details of why you really shouldn't care too much about this short-term miss, but another one of my fellow Fools -- Tim Beyers this time -- already did a fine job of that. Let me just say that I think Marvel has its best years way ahead of itself, which is high praise for a stock that has given Stock Advisor investors a five-bagger since its first recommendation in 2002.
Marvel is about to take the financial reins of its future, with the big-screen version of Iron Man already in production. That will be the first fully Marvel-backed film release based on the company's rich catalog of characters, and that's when we'll really know where the company is headed in the long term. I think it's up, up, and away -- but that's a quote from the wrong comic-book house. Let's settle for clobbering time!
Fare thee well, Fool!
Some of these underperformers are victims of larger circumstances, while others might have only themselves to blame. It's up to you to decide which down-on-their-luck companies should be able to pull themselves up by the bootstraps, and which really are stuck in the mud. Come back next week, and we'll take a look at another batch of mishaps and disappointments. It'll be fun and educational.
Further Foolish Reading:
Seeking great deals on unfairly punished stocks? Philip Durell and his merry band of Fools at the Motley Fool Inside Value newsletter service are standing by to help you find great stocks at ridiculously low markdowns. Try a 30-day trial subscription to see whether bargain-hunting is right for you.
Marsh & McLellan and Vodafone are two of our Inside Value recommendations. Marvel is a Motley Fool Stock Advisor pick and Turkcell is a Global Gains find.
Fool contributor Anders Bylund holds no position in the companies discussed this week, and is still kicking himself for selling his Marvel shares at a double -- at $4 a share, many years ago. The Fool has a disclosure policy, and you can see his current holdings for yourself.
