Third-quarterearnings season was an unmitigated disaster.
With theeconomy stumbling along due to weakness in Europe and
China, and margins reaching a multi-year cyclical high, more than a
few companies disappointed the Street with
weaker-than-expectedearnings or guidance.
This list includes bellwethers like
McDonald's Corp. (
Caterpillar Inc. (
and even seemingly invincible technology juggernauts like
Apple Inc. (Nasdaq: AAPL)
Google Inc. (Nasdaq: GOOG)
, all delivering results short of expectations that sentshares and
estimates tumbling lower.
These disappointing results mirrored a larger trend. Total
S&P 500 earnings for the quarter were down 2.2% from last year,
the first year-over-year decline in more than three years. Total
revenue is also down 3.6%, with just 38% of companies reporting
revenue surprises. Although analysts are still calling for 3.5%
earnings growth in the fourth-quarter and 7% earnings growth in
2013, it's clear the private sector is facing some serious
challenges in the face of slow economic growth.
But despite these obvious headwinds, there was a select handful
of stocks that crushed earnings estimates, raised guidance and are
now expected to double earnings in 2013. These are companies that
appear to be operating in a vacuum and look highly immune to the
macroeconomic challenges that have weighed on their peers.
But because abullish growth projection can be quickly priced
into assets, I added a valuation filter in my search to find stocks
with the highest probability of delivering big returns next
Here are three stocks that stood out. Each of them is expected
to double earnings in 2013...
1. Coffee Holdings Co. Inc. (
2013EPS growth projection: 104%
PEG Ratio: 0.40
Coffee Holdings is a tiny company with amarket cap of just $39
million. But this tiny company is incredibly profitable. It
recently reported third-quarter earnings of 19 cents a share
-- an incredible 1,800% ahead of expectations of 1 cent per
share. This bullish report had a big effect on earnings estimates,
sending the current-year estimate up 22% to 50 cents a share. In
2013, earnings are expected to be 104% higher than this year,
climbing to $1.02 a share.
But in spite of these bullish projections, Coffee Holdings looks
extremely undervalued. The stock currently trades with a
) ratio of just 0.40, a sharp discount to the S&P 500's 1.3. If
shares traded with the same valuation as the S&P 500, despite
Coffee Holdings' bullish growth projection, then shares could jump
Coffee Holding's average dailyvolume of 308,000 shares provides
plenty of liquidity and its 2%dividend yield offers an attractive
stream of income to complement potential growth.
2. BRF Brasil Foods SA (Nasdaq: BRFS)
2013 EPS growth projection: 175%
PEG Ratio: 1.29
Brasil Foods is a poultry, pork and beef producer out of Brazil
with amarket cap of $15 billion. This established food company
isn't exactly a high-tech flyer, but operating in the high-growth
emerging market provides support for long-term gains.
As it stands, analysts are calling for full-year earnings of
$1.07 a share in 2013, a 175% increase from projected full-year
earnings of 37 cents a share this year. This has Brasil Foods
trading with a highly discounted PEG ratio compared to its peers.
If Brasil Foods closed half the gap between its PEG and its peers
PEG, then shares could climb to $22 -- a 20% increase from current
3. Carrizo Oil & Gas (Nasdaq: CRZO)
2013 EPS growth projection: 130%
PEG Ratio: 0.21
Carrizo Oil & Gas is a crude oil, natural gas exploration
and production company with operations in the United States and
United Kingdom with a market cap of $715 million. Carrizo is fresh
off the heels of a solid third-quarterearnings surprise of 16%, but
with the market worried about growth, shares have plummeted 26% so
far in November. Even though estimates have fallen a bit,
next-year's earnings of $3.14 a share is still an incredibly
bullish growth projection of 130%, which sets the foundation for a
sweet value play in energy. Carrizo's PEG ratio of 0.21 is a huge
discount to the industry average of 1.38. If Carrizo returned to
even half the valuation of its industry peers, then shares would be
in position to jump more than 200%.
Risks to Consider:
Bullish growth projections can quickly be absorbed by the
market and show up in higherasset prices and valuations. These
full-year 2013 growth projections are also more than 12 months
away, which means economic volatility and uncertainty could affect
Action to Take -->
These three stocks could double their earnings in 2013. And with
tons of value relative to their peers, this is a great time to cash
in on stocks with big growth projections that are flying under the
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