Earnings Season’s Biggest ‘Beats’ So Far

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April 16, 2010

While about 60% of companies that have reported last quarter’s results so far in this young earnings season have topped estimates, a few of them are really important standout. Why’s that? Either their numbers bode well for the broad market, or for their industry (or both).

I’m no certain order, here are some of the biggest recent wins on the earnings front:

When will analysts learn?: The fact that auto insurer The Progressive Corporation (NYSE:PGR) earned $0.16 per share rather last quarter than the expected $0.13 isn’t what’s embarrassing to all Street’s forecasters. It’s that this is the third time in a row the company has topped estimates.

The combined ratio [the difference between payouts and premium income] crimped margins slightly in Q1, though that net difference was already back up to the 12 range by March.

Something to believe in: If it were just the expectation of a 6% to 8% increase in earnings in fiscal 2011 (ending on 03/31/11) - or even that and the projected 16% to 18% increase in revenues – software support company Infosys Technologies Ltd. (NASDAQ:INFY) may be dismissible as “just another blowgut tech name”. The thing is, that Infosys ball is already rolling.

Already topping the expect earnings per share of $0.58 with income of $0.61, Infosys Technologies further sweetened the pot by announcing a three year deal with Microsoft which is virtually guaranteed revenue.

High-end retail really is back: While the average consumer isn’t fully healed yet, it would be tough to deny that Talbot’s (NYSE:TLB) isn’t doing everything right that it possibly can. The proof of their pudding isn’t just the revenue growth seen in the first three months of 2010 …most retailers have made similar advances, as comparison to the first quarter of 2009 were easy comparables to top. No, the fact that Talbot’s was able to sell 10% more full-priced merchandise last quarter – and sell 21% less discounted merchandise – points to strengthening higher-end demand that’s right up Talbot’s alley.

And it wasn’t some sort of book-keeping or pricing trick either - the company truly managed to turn shoppers into more income…. a lot more. Analysts were only expecting earnings per share of $0.02, but Talbot’s embarrassed them by actually earning $0.13 per share.

The transportation ‘why’ means more than the ‘what’: J.B. Hunt Transport Services (NASDAQ:JBHT) saw its quarter profits improve by 22% on a revenue increase of 17%. (L10) Earnings per share of $0.29 cents topped analyst estimates of $0.27.

That, however, isn’t even the ‘take away’ investors need to keep in mind going forward.

The bulk of the new growth (and recovery) J.B. Hunt Transport Services is enjoying is being fueled by two specific factors. The first is the new demand for intermodal shipping [cartons that can be transferred from ship to train to truck with no need to unpack the cargo], which Hunt is well-equipped to handle. The second is simply that the recession put many of the continent’s shipping companies out of business. So, competition is light, and pricing power is fair again.

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