After wrapping up an incredibly strong first quarter of earnings reports, we've dived headfirst into the second quarter, with many reports coming in better than expected thus far. With so many companies reporting during the weeks that comprise earnings season each quarter, it's easy for some earnings reports to fall through the cracks.
Each week this 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. If they slid under your radar, they deserve a look:
| Company | Consensus EPS | Reported EPS | Surprise |
|---|---|---|---|
| Cott (NYSE: COT ) | $0.02 | $0.07 | 250% |
| Talisman Energy (NYSE: TLM ) | $0.21 | $0.16 | (24%) |
| Onyx Pharmaceuticals (Nasdaq: ONXX ) | ($0.63) | ($0.68) | (8%) |
Source: Yahoo! Finance.
Cott
With a lot of hype surrounding growth in beverage makers at the moment, I figured now would be a good time to revisit Cott, which easily trounced Wall Street's estimates by 250%. But are these results really as strong as the 250% beat would indicate? It's tough to say.
One strong move Cott is making is exiting the traditionally low-margin water business in favor of promoting its soft-drink and juice beverage lines. On the flip side, the rising costs of sweeteners, resin, fruit, and fruit concentrates is pinching margins. Back in January, I suggested that Cott pull a page out of Monster Beverage's (Nasdaq: MNST ) book and boost its prices. Consumers are beginning to trade up to higher-price-point discretionary items, and there's no reason to think that Cott can't capitalize on the trend.
In short, it wasn't as masterful a quarter as investors would have liked to believe, but at just 10 times forward earnings, I would much rather take a chance on Cott's turnaround than own Monster at 28.5 times forward earnings.
Talisman Energy
Where do you turn when the world's growth engine appears to be slowing? Why not take a look at Vietnam, a country that has grown GDP at an annual rate of no less than 4% since 2010? Although investing in Vietnam isn't easy, as there are few publicly traded companies, Talisman Energy could be your solution.
Talisman, which has operations throughout North America and Asia, reversed a year-ago loss in its recently ended quarter and noted the both cash flow and production improved over the year-ago period. A weak natural-gas market in North America weighed on earnings but was easily countered by record production coming from its Southeast Asia operations. As Vietnam is an energy-centric economy that focuses on resources, Talisman is likely to find great success there. Sporting a dividend yield of 2.3% and valued at just 11 times forward earnings, Talisman could be quite a deal here, despite its recent quarterly earnings shortfall.
Onyx Pharmaceuticals
As with all biotechnology companies, we take earnings results with a grain of salt, because it's all about a pipeline's potential -- not necessarily what it did for shareholders yesterday. Onyx's results, while shy of Wall Street's expectations, are definitely worth getting excited about.
Nexavar, an anticancer drug developed in collaboration with Bayer, continues to show growth, with revenue rising 7% during the quarter. The company also ended the quarter with a strong $622 million in cash. But the big news is the upcoming Oncologic Drugs Advisory Committee meeting on June 20 to discuss carfilzomib, the company's experimental drug aimed at treating relapsed and refractory multiple myeloma, a multibillion dollar market.
If the ODAC likes what it sees from Onyx's phase 3 studies, then I'd give it a good likelihood that GlaxoSmithKline (NYSE: GSK ) , which is teetering on the patent cliff, or even Bayer itself will be there to snatch up Onyx. Remember, in its lawsuit settlement with Bayer, it was determined that even if Onyx is sold, it will continue to receive royalties from Nexavar sales. That may as well be icing on the cake for any potential suitor not named Bayer. Needless to say, I'm on buyout watch.
Foolish roundup
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.
- Add Cott to My Watchlist.
- Add Talisman Energy to My Watchlist.
- Add Onyx Pharmaceuticals to My Watchlist.
If you'd like the inside track on three more companies that could wind up in the earnings beat column, then I suggest you get a copy of our latest special report, "3 American Companies Set to Dominate the World." Did I mention the best part? This report is completely free, so don't miss out!
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