As first-quarter earnings begin to wind down, 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.
Smith & Wesson
Source: Yahoo! Finance.
Earnings time for Ciena, a telecom network equipment provider, is typically when its shareholders retire to their foxholes, don their hard hats, and prepare for the worst. In short, Ciena's not had the best track record of delivering on its promises of growth. Its just released first-quarter results, however, speak otherwise.
In a quarter where Wall Street had expected Ciena to lose $0.13 per share, it reported a nearly 9% rise in revenue to $453.1 million and a profit of $0.12! At first I was amazed that shareholders weren't rioting in the streets, but then I realized that a bullish trend was signaled months ago among networking companies when AT&T and Sprint-Nextel both signaled their intentions to beef up infrastructure and 4G LTE network spending.
Ciena's outperformance should have also been a dead giveaway after fiber-optic products maker JDS Uniphase crushed the Street's estimates in late January with its second-quarter results. JDS and Ciena go together like peanut butter and jelly and rarely does one do well (or poorly for that matter) without the other following. With JDS expanding its operating margin by 210 basis just from its sequential first-quarter, investors should have been expecting a beat here. For future reference, keep an eye on these two peas-in-a-pod if you want to know the true health of the telecom network equipment industry.
Smith & Wesson
In the case of Smith & Wesson, there was absolutely no doubt that it was going to fire past Wall Street's expectations. For the quarter, the gun manufacturer reported a profit of $0.26 per share - or more than triple the $0.08 reported in the year-ago period - as revenue rose 39% to $136.2 million. The logic behind the move in Smith & Wesson and its biggest rival, Sturm, Ruger is pretty clear-cut: Consumers are concerned that the tragic deaths at Newtown, Conn., will lead to stricter gun control enforcement by the Obama administration - and they're probably right.
Ultimately, it was Smith & Wesson's guidance that was expected to do the talking given the projected beat; and shareholders took every opportunity to sell the news. Although the company boosted its full-year revenue guidance to $575 million to $580 million, an expected 40% increase over 2012, investors had hoped for an even rosier forecast with the potential for stricter gun controls on the way.
Sturm, Ruger crushed the Street's estimates in similar fashion, yet analysts are expecting EPS to fall noticeably in 2014 for both gun manufacturers. The amazing run in gun makers just might be coming to an end sooner than anyone had anticipated.
With Sarepta being a clinical-stage biotech, few investors were expecting much from the company when it reported its fourth-quarter earnings results on Thursday. With no products currently approved by the FDA, shareholders were merely looking for confirmation that its Duchenne muscular dystrophy drug, Eteplirsen, was on track, and that its expenses were under control. What we got was a massively wider loss than expected and the projection for $85 million to $115 million in losses compared to expectations of just $45 million in losses.
Before you go jumping out of your first floor window, relax, because there's a good explanation for everything. The majority of Sarepta's $2.36 per-share loss came from a $51.8 million charge related to the value of stock warrants because of Sarepta's monstrous rise last year. That's hardly anything I'd be concerned about.
The cash situation isn't a concern, either, even with higher expenses in the form of research and development costs. Sarepta ended the year with $187 million in cash - more than enough to get it through this year - and appears focused on gaining an accelerated review and approval for Eteplirsen. Based on its efficacy in trials, there really is no logical reason why the FDA shouldn't streamline this application and why Eteplirsen won't be helping DMD patients within perhaps the next year. For those of you biotech savvy investors who've stuck with Sarepta thus far, don't be scared away one bit by this earnings report.
Sometimes an earnings beat or miss isn't as cut-and-dried as it appears. I've given my two cents on what's next for each of these companies -- now it's your turn to sound off. Share your thoughts in the comments section below and consider adding these stocks to your free and personalized Watchlist.
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The article 3 Earnings Reports That Caught My Attention Last Week originally appeared on Fool.com.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Sturm, Ruger. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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