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Five Stocks That Shocked The Market

Posted: Jul 31, 2008 08:20 AM by Matthew McCall

Tickers in this Article: AMGN, X, SAP, BUCY, MTD

Many pundits and prognosticators predicted that with the economy in a slump, corporate earnings would follow suit. About half of the S&P 500 companies have reported second quarter earnings now, and the predictions have turned out to wrong. In general the numbers have been better than expected, and there have been many pleasant earnings surprises in a variety of sectors. Let's have a look at the top surprisers to watch. (To learn what you should do when a company you're following beats estimates, check out Surprising Earnings Results.)

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The Winners
U.S. Steel (NYSE:X)
There was an almost 24% drop in the stock price of U.S. Steel in July until Friday July 25's close. Concern that the global economy is slowing gave many investors good reason to believe the upcoming earnings report was going to be disappointing. The exact opposite was the result as U.S. Steel reported record revenue and earnings on the July 29. The company's net income was $5.65 per share for the second quarter, more than double a year earlier. This was well above the analyst estimate of $3.91 per share, according to Thomson Financial. The combination of increased demand and higher prices helped the steel producer achieve the record quarter. Shares of the largest U.S.-based steel maker surged about 15% on the news and reaffirmed the strong global economic picture.

SAP (NYSE:SAP)
Europe was a place to hide when the U.S. stock market suffered during the past few years. In 2008 that has not been the case and many of the European bourses are underperforming their U.S. counterparts. However, German software firm SAP has been able to shake off the weakness in Europe and reported solid earnings during the last week of July. Second quarter sales rose 18%, but earnings fell due to a one-time acquisition charge. Without the one-time charge, earnings rose 8% from last year. While the numbers were better than expectations, the announcement that SAP plans to report yearly earnings at the upper end of the range was the catalyst that sent the stock higher by 8% on Tuesday. (Find out more on international investing in Investing Beyond Your Borders.)

Bucyrus International (Nasdaq:BUCY)
Bucyrus provides mining equipment to companies around the world, and when combined with the comments from U.S. Steel, it appears the commodity and mining sectors are poised for more growth in the second half of 2008. With the demand for mining equipment surging, Bucyrus was able to more than double its net income for the second quarter. The company reported 83 cents per share versus 40 cents a year earlier. The stock skyrocketed 15% on the news, one day after closing at a fresh two-month low. This is an example of a stock that many thought was at the end of its hyper-growth stage, but they were proved wrong when Bucyrus reported better than expected numbers.

Mettler-Toledo International (NYSE:MTD)
When you think of excitement you probably are not thinking about technical instrument stocks, but that's exactly what Mettler-Toledo does. The company makes weighing instruments, pH meters, drug purification systems, labeling systems, and scanners to name a few. Based in Switzerland, the company does more than 50% of its sales outside of Europe, with concentration now on fast growing markets in Asia and Latin America. In July the company reported a quarterly increase of 29% in earnings from a year earlier. The company must be doing something right to grow earnings by nearly 30% in this type of environment. The company raised its 2008 earnings per share guidance to $5.53-$5.63 per share from $5.43-$5.53. MTD is the type of company your friends have never heard of, but in investing, that is a good thing. (Read more on the art of predictions in Great Expectations: Forecasting Sales Growth.)

Amgen (Nasdaq:AMGN)
Amgen reported a drop in profit of 8% for its second quarter 2008, but countered that with a bullish outlook. Its Q2 income fell to 87 cents per share from 90 cents one year earlier and revenue only rose 1%. The reason for the 5% surge in stock price on July 29, the day after the earnings announcement, was the better-than-expected guidance for the remainder of 2008. The company now sees both revenue and net income higher than its previous expectations. Earnings per share expectations sit between $4.25-4.45 up from the previous $4.00-4.30. AMGN is now sitting at a 52-week high on the news and has been one of the leaders of the top-performing biotech sector.

More to Come
With hundreds of companies still scheduled to report earnings in the coming weeks, be on the outlook for strong results and positive outlook. You may have to wait for a pullback in the stock after the earnings announcement, but the patience will pay off. And just a word of advice, do not try and predict the numbers and buy ahead of the report - that is pure gambling.

By Matthew McCall

Matthew McCall is the president of Penn Financial Group, LLC, a registered investment advisor. He also publishes two newsletters, The ETF Bulletin and The PFG Letter as well as other educational material. As a registered investment advisor, he manages clients' investments based on their specific goals and objectives.

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