As second-quarter earnings reports begin to kick into gear, I can’t help but point out that the majority of earnings reports we’ve covered over the past year have been better than expected. With so many companies reporting during the weeks that comprise earnings season, it’s easy for some earnings reports to fall through the cracks.
Each week for the past year, I’ve taken a look at three companies that could be worth further research after either beating or missing their profit expectations. Today, we’ll take a gander at three more companies that reported earnings last week. They may have slid under your radar, but they deserve a look.
|Company||Consensus EPS||Reported EPS||Surprise|
|Rite Aid Corporation (NYSE:RAD)||$0.02||$0.13||750%|
|JinkoSolar Holding Co., Ltd. (NYSE:JKS)||($0.80)||($5.04)||(530%)|
|Ruby Tuesday, Inc. (NYSE:RT)||$0.10||$0.05||(50%)|
Rite Aid Corporation (NYSE:RAD)
I admit that I was completely stunned when Rite Aid reported a fourth-quarter profit of $0.13. Prior to this report, which put Rite Aid into the black for the year, the company hadn’t turned an annual profit since 2007. But, just as I suspected after diving into the report, it was mostly through one-time accounting boosts and big cost cuts that Rite Aid was able to achieve its profit.
For the quarter, revenue tumbled by nearly 9.7%, but that was without the benefit of a 53rd week, which the company had in the year before. Giving the company the benefit of the doubt here still doesn’t explain how comparable-store sales dipped (again!) by 2% from the previous year. According to management, sales declines were primarily attributable to generic drug weakness, which reduced margins in its pharmacies.
As for its profit, Rite Aid Corporation (NYSE:RAD) claimed a LIFO credit from “significant drug inflation,” which, when combined with its reduced expenses, was enough to push it toward a profit. Looking forward, investors seem quite pleased with Rite Aid’s potential as well. Even management projected a full-year profit of $0.04 to $0.20, which incited what I’d term the rampant buying of Rite Aid shares. But I’d advocate that not a thing has changed other than lower expenses.
In Rite Aid’s March sales report, same-store sales again declined 2% and were headed by a negative 566-basis-point impact from newly introduced generic medications. There is simply only so much profit Rite Aid Corporation (NYSE:RAD) can squeeze out before cost-cutting no longer provides any bottom-line benefits. Without the company having any tangible growth prospects, I’d still strongly suggest looking elsewhere in the drugstore sector.
JinkoSolar Holding Co., Ltd. (NYSE:JKS)
If you still don’t believe that U.S. solar manufacturers now have the upper hand when it comes to production cost, pricing, and overall demand, then let me introduce you to China’s latest disaster, JinkoSolar.
If a small miss represented the size of a bread box, and a big miss the size of a car, then JinkoSolar’s miss would be about equal to the size of Montana. Although JinkoSolar’s revenue dipped only 3% to $187.3 million, its loss-per-share more than doubled and missed expectations by a lot! Now here’s the truly phenomenal part: The stock actually soared on the news! This was due to JinkoSolar Holding Co., Ltd. (NYSE:JKS)’s 270MW to 300MW shipment forecast in the first quarter, which was higher than the 252.3MW it shipped in the fourth quarter.
Unfortunately for JinkoSolar investors, this gets the company nowhere near profitable. It did land a $58 million loan agreement with China Development Bank to fund solar power plant projects in China, but it does nothing but put a Band-Aid over a gaping hole that’s bleeding cash. Furthermore, JinkoSolar Holding Co., Ltd. (NYSE:JKS) ended the quarter with $67.4 million in cash compared to a lofty $387.1 million in debt. That may not sound like much, but considering that it lost better than $11 per share in 2012, I’m not all that excited about its future prospects.
The real winner of JinkoSolar’s suffering has been U.S.-based First Solar, Inc. (NASDAQ:FSLR) , which last week boosted its forecast for 2013 through 2015 well beyond Street estimates. First Solar has benefited from large domestic projects, as well as domestic duty protections, which make Chinese solar panels (like JinkoSolar Holding Co., Ltd. (NYSE:JKS)’s) comparably priced to First Solar’s usually more efficient panels. This has moved pricing and demand back to U.S. solar manufacturers and put the entire Chinese solar industry on shaky ground.