As first-quarter earnings kick into high 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.
| Company | Consensus EPS | Reported EPS | Surprise |
|---|---|---|---|
| The Allstate Corporation (NYSE:ALL) | ($0.05) | $0.54 | 1,280% |
| Calix, Inc. (NYSE:CALX) | $0.02 | $0.06 | 200% |
| Yelp Inc (NYSE:YELP) | ($0.05) | ($0.06) | (20%) |
Source: Yahoo! Finance.
The Allstate Corporation (NYSE:ALL)
Not even an act of God can keep Allstate from turning a profit! Hurricane Sandy had a profound impact on numerous insurers, including Allstate, which saw its catastrophe losses balloon from $66 million to $1.06 billion. But as I’ve pointed out before, Allstate is in the business of underwriting very profitable policies, and even after its huge run, it could head even higher.
For the quarter, Allstate’s property-liability combined ratio (essentially a measure of how profitable it is for Allstate to underwrite policies) fell 400 basis points to 86.7%, demonstrating it was considerably more profitable, even with a natural disaster the size of Sandy, to underwrite policies. Allstate’s auto policies remained strong, Esurance continues to grow at an impressive rate (30.9%), and total premiums increased, resulting in higher operating profits and a 17% increase in book value for the full year.
Last, but certainly not least, Allstate boosted its quarterly payout from $0.22 to $0.25, signaling to investors a confidence that cash flow will remain strong and its underwriting will remain conservative. At nine times forward earnings, it’s an insurance name you shouldn’t ignore.
Calix, Inc. (NYSE:CALX)
As goes telecom spending, so goes Calix, a middleman between you and your cable service provider that provides software and hardware that regulate the amount of bandwidth you receive.
Last week, in our roundtable discussion highlighting our top stock to buy for February, I chose Cisco Systems, Inc. (NASDAQ:CSCO), because it’s a predominantly hardware-based developer that should see benefits from an increase in wireless and wireline infrastructure spending from AT&T Inc. (NYSE:T) and Sprint Nextel Corporation (NYSE:S). As evidence to this trend — and the reasoning behind my Cisco selection — I pointed to better-than-expected earnings from much of the fiber optics sector, including JDS Uniphase Corp (NASDAQ:JDSU). The same merits that I discussed with Cisco will carry over to Calix, which should see a trickle-down effect from cable service providers looking to broaden the scope of their networks.
