Seeking Alpha
Research analyst, value, growth at reasonable price
Profile| Send Message|
( followers)  

There is a proportional relationship between rising stock prices and rising earnings. When companies beat their quarterly earnings estimates, their stocks typically rise. Over time, a company's earnings growth rate is about equal to its rise in stock prices. Companies who have positive earnings revisions often have positive earnings surprises. Positive surprises lead to higher stock prices. With that in mind, I've compiled a list of companies with positive earnings revisions for their current quarters or fiscal years.

Zumiez (NASDAQ:ZUMZ) is a $940.7 million small cap action sports apparel, footwear, and equipment company. Its earnings per share estimates have been revised from 0.52 - 0.54 to 0.57 - 0.58 for Q4 2011.

Zumiez is fairly valued with a forward PE ratio of 22.06, a PEG of 1.32, and a price to book ratio of 3.85. Its highlights include zero debt, operating cash flow of $59.01 million, and earnings per share of $1.09.

It's expected to grow earnings annually at 19.35% for the next five years. This could prove to be a serious market beating stock as sales and earnings increase for its various skating and snowboarding equipment and apparel.

Seagate Technology (NASDAQ:STX) is an $8.16 billion mid-cap Ireland-based manufacturer of hard disk drives. Its products are used in a variety of devices such as desktop & notebook computers, personal data backup systems, digital video recorders, and portable external storage systems. Its Q2 2012 earnings were upgraded from $2.81 billion to between $3.1 billion and $3.2 billion.

Seagate is looking undervalued with a forward PE ratio of 4.13, a PEG ratio of 0.14, and with the stock trading at 3.4 times book value per share. It has a profit margin of 4.53%, earnings per share of $1.10, and an operating cash flow of $1.18 billion.

Seagate has 22 positive earnings revisions for 2012 and 21 for 2013. It is expected to grow earnings annually at a vigorous 30.15%. If Seagate can meet or beat these expectations, its stock could be over $70 in five years (up from its current price of $19). It also pays a nice 3.7% dividend with its levered free cash flow of $376 million.

Macy's (NYSE:M) is a $14.56 billion large cap Ohio-based department store retailer. Its 2011 fiscal year earnings per share were revised from $2.70 - $2.75 to $2.73 - $2.78.

Macy's appears undervalued with a forward PE of 10.74 and a PEG of 1.06. The stock is trading at only 2.5 times book value per share. It has a profit margin of 4.54%, earnings per share of $2.73, and an operating cash flow of $1.79 billion.

Macy's has 9 upward earnings revisions for 2012 and 11 for 2013. It is expected to grow earnings annually at 11.65% for the next five years. Add in its dividend of 2.3%, and enjoy a market beating total annual yield of 13.95%.

AZZ Incorporated (NYSE:AZZ) is a $607 million small cap Texas-based manufacturer of electrical equipment for the power generation and industrial markets. It also provides various galvanizing services. Earnings per share estimates were revised from $2.19 - $3.10 to $3.00 to $3.15 for fiscal year ending 2012.

AZZ is currently undervalued with a forward PE ratio of 13.3 and with its stock trading at only 2.2 times book value per share. It has a profit margin of 8.59%, earnings per share of $3.03, and a healthy operating cash flow of $63.4 million.

AZZ has four upward earnings revisions for 2012 and two for 2013. It has grown earnings annually at 9.15% for the past five years and is expected to grow at 9% for the next five years. AZZ also pays a 2.1% dividend, which when combined with its earnings growth should lead it to beat the market over the next five years.

Body Central Corp. (OTCQB:BODY) is a $384 million small cap Florida-based retailer of young women's apparel and accessories. Its 2011 fiscal year earnings per share were revised from $1.19 - $1.22 to $1.21 - $1.22.

Body Central currently looks fairly valued with a forward PE ratio of 15.99, a PEG of 0.97, and a price to book ratio of 4.97. It has a profit margin of 5.77%, earnings per share of $1.02, and operating cash flow of $26.04 million. It also has $31.75 million in cash with zero debt.

Body Central is expected to grow earnings annually at a healthy 20% for the next five years. This company has the potential to double the market's performance over the next few years.

It currently operates 232 stores in 24 states. Body has plans to expand store count by 15% per year. This translates into 30 to 35 new stores per year. It looks like a promising young retailer with high growth potential.

Genesco (NYSE:GCO) is a $1.45 billion small cap Nashville-based retailer of footwear, headwear, and sports apparel and accessories. It operates under these names: Lids, Lids Locker Room, Journeys, Schuh, Johnston and Murphy, and Underground Station. Its 2012 fiscal year earnings per share were revised from $3.64 - $3.69 to $$3.74 - $3.79.

Genesco is currently undervalued with a forward PE of 13.71, a PEG of 0.99, and a price to book ratio of 2.15. It has a profit margin of 3.35%, earnings per share of $3.01, and operating cash flow of $91.27 million.

It has 8 upward earnings revisions for 2012 and another 8 for 2013. Genesco is expected to grow earnings annually at 16% for the next five years. This looks like another solid market outperformer for the near future.

Lululemon Athletica (NASDAQ:LULU) is an $8.63 billion mid cap Canada based manufacturer and distributor of athletic apparel. Its apparel is designed for activities such as yoga, running, and general fitness. LULU's 2011 4th quarter earnings per share were revised from 0.40 - 0.42 to 0.47 - 0.49.

LULU looks overvalued with a trailing PE ratio of 53.08 and a forward PE of 37.35. The stock is trading at 16.6 times book value per share. It does sport a nice double digit profit margin of 18.9%, earnings per share of $1.13, and operating cash flow of $145.6 million. It has $277 million in cash with zero debt.

It has 23 upward earnings revisions for 2012 and 22 for 2013. LULU has grown earnings at a vigorous 58.64% the past five years. Its annual earnings expectations call for 29.02% growth for the next five years.

These high expectations give the stock extra risk because the company will have to meet or beat expectations to maintain a rising stock price. If earnings fall short, the stock could tumble from its current state of rich valuation. I don't necessarily think that this will happen, but investors need to be aware that the risk is there.

PVH Corp. (NYSE:PVH) is a $5.2 billion mid-cap New York City based textile company. Some of its famous brand names include: Calvin Klein, Arrow, Izod, Eagle, Sean John, Kenneth Cole, DKNY, Tommy Hilfiger, and Michael Kors. Its earnings per share for fiscal year 2011 were revised from $5.23 - $5.25 to $5.28 - $5.30.

PVH is undervalued with a forward PE of 12.89, a PEG of 1.12, and a price to book ratio of 1.99. It has a profit margin of 5.02%, earnings per share of $3.87, and operating cash flow of $384.7 million.

PVH has 10 upward earnings revisions for 2012 and 5 for 2013. It has grown earnings annually at 12.83% for the last five years and is expected to grow at 12.9% for the next five years. It also pays a small dividend of 0.20%. This should be another market beating stock over the long term.

Conclusion

Interestingly, 6 out of 8 of these companies are either retailers or manufacturers of apparel. This shows our consistent appetite for clothing and accessories. This makes sense, since we all need clothing for our various activities.

Any of these companies are good companies to invest in. Most of them should beat the returns of the market over time. Pick the one(s) that you feel the most comfortable owning and understanding.

Source: 8 Companies With Positive Earnings Revisions Poised To Jump