As first-quarter earnings hit a midpoint, 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|
|Alpha Natural Resources, Inc. (NYSE:ANR)||($0.55)||($0.19)||65%|
|Avon Products, Inc. (NYSE:AVP)||$0.27||$0.37||37%|
|Rackspace Hosting, Inc. (NYSE:RAX)||$0.22||$0.21||(5%)|
Alpha Natural Resources
Don’t call it a comeback just yet, but coal companies don’t appear to be in as bad a shape as was previously thought. Alpha Natural Resources, the largest U.S. producer of metallurgical coal used to strengthen steel, is the perfect example of this trend.
For the quarter, Alpha Natural reported a much smaller adjusted loss of $0.19 due to massive cost-cutting (including job losses totaling 9% of its workforce) as revenue fell by a not-so-pretty 25%. However, between the two forms of coal — thermal, used by utilities, and metallurgical, used to strengthen steel — metallurgical seems more likely to rebound the quickest given China’s huge infrastructure development plan announced in September and the rapid rebound in the domestic housing market.
One area where Alpha Natural Resources and rival Peabody Energy Corporation (NYSE:BTU) , which also handily crushed Wall Street’s estimates in the fourth quarter, are excelling in is the met-coal export department. According to Peabody, seaborne spot metallurgical prices are up 15%-20% from their lows of third-quarter 2012 and Chinese steel demand rose 9% in the fourth quarter. Both figures signify a strengthening export market to Asia and should be supportive of stable or rising met-coal prices, as well as increasing demand.
Domestically, a ramp-up in homebuilding, evidenced by reduced inventories in the housing market, should be good news for Alpha Natural Resources. Understandably, this won’t be a quick turnaround, but it appears to be on the right track.
There’s not nearly enough foundation in Avon’s product bag that it could use to cover up its lack of actual growth!
On the surface, yes, Avon absolutely crushed Wall Street’s expectations by $0.10. It also instilled confidence in investors that it’ll focus on its core beauty products business by looking at strategic alternatives for its Silpada jewelry business and removing itself from the South Korean and Vietnam markets by 2015 in order to save $400 million annually.