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3 Earnings Reports That Caught My Attention Last Week

Monday - 3/4/2013, 4:46pm  ET

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.

Company

Consensus EPS

Reported EPS

Surprise

Akorn

$0.12

$0.13

8%

Clean Energy Fuels

($0.22)

($0.23)

(5%)

J.C. Penney

($0.18)

($1.95)

(983%)

Source: Yahoo! Finance.

Akorn
In January I took a closer look at the ups and downs of the generic drug sector and highlighted Akorn and Teva Pharmaceutical as my top two choices. My reasoning was primarily because they're a hybrid type of pharmaceutical company -- relying on their own branded drugs as well as generic drugs. Akorn certainly didn't make me look bad in the first reported quarter since I made that claim.

In the fourth quarter, Akorn reported a 68% increase in revenue to $71.5 million as adjusted EPS jumped to $0.13 from $0.11 in the previous year. Growth came from acquisitions, such as assets from Kilitch Drugs in India, which expanded its generic injectable line, as well as from selling more organic compounds. What's more, these results were on top of the downtime caused by Hurricane Sandy at its ophthalmic factory in New Jersey.

Akorn also noted in January that it anticipates bringing a combination of 39 branded and generic drugs to market between 2013 and 2015 with a total market value of approximately $3 billion, meaning we're just seeing the tip of the iceberg. Even with the margin pressures often associated with generics, Akorn only saw its gross margin dip by a measly 20 basis points to 58% for the year. As I've said before, Akorn is far from cheap, but this is the type of hybrid growth I'd consider paying a premium for.

Clean Energy Fuels
On paper, Clean Energy Fuels' story continues to make a lot of sense. As President Obama moves the U.S. toward energy independence, it would seem only logical that we'd turn our attention to the most abundant natural resource right at our feet: natural gas. However, Clean Energy Fuels' bottom-line results, as well as other factors, don't bode well for its shareholders.

For the quarter, Clean Energy Fuels reported a 15% increase in sales as it delivered 29% more gallons of compressed, liquefied, and renewable natural gas. Still, the company managed to lose $0.23 on an adjusted basis compared to just $0.21 during the year-ago period.

The two primary problems with Clean Energy's strategy are that it doesn't have the proper infrastructure in place (i.e., fueling stations) to promote widespread natural gas vehicle usage, and that many trucking fleets are still relatively new and not in need of spending millions to overhaul their fleet with natural gas engines. Take Marten Transport, a trucking company specializing in temperature-sensitive hauling, for example. Marten's year-end results in January show that its tractor and trailer fleet averaged just 2.0 and 2.2 years in age. This is a company that'll be utilizing its current fleet for years and, I believe, represents the norm in the trucking sector. Clean Energy will need to sit on its hands until the next major replacement cycle in the trucking sector occurs, which bodes poorly for any chance of near-term profitability.

J.C. Penney
I believe it bears repeating that this just might be the worst quarter in retail history. What J.C. Penney brought to the table was absolutely awful: a 28.4% decline in sales, a 31.7% same-stores sales decline, and a nearly 35% drop in Internet sales. Who has trouble increasing direct-to-consumer sales these days anyway?

The question also bears repeating: Is Penney's now too far gone to be saved? The company recently brought back its beloved sales, and CEO Ron Johnson has noted that it'll do what it can to let the customer dictate how it rolls out new initiatives in the future. However, sales figures were horrid this past quarter, and cumulative losses of nearly $1 billion for the year have me questioning whether the company can even survive another year of this.

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