Here are 10 companies that have produced results above expectations during the reporting season. Long-term investors would do well to consider nine of them for their portfolio. In some cases, you may have missed the initial share price rise, but quality companies generally continue to deliver.
Domino's Pizza Enterprises (ASX: DMP)
Management has been accelerating Domino's online presence and nearly 60% of total sales are online in Australia. Japan (287 stores), Australia and New Zealand (610 stores) more than make up for the underperforming Europe (390 stores). The result may well be the standout for the yet-to-be completed reporting season.
Downer EDI (ASX: DOW)
Engineering services group Downer EDI showed the benefits of diversification and brokers have hailed work-in-hand growth, cost reductions, cash flow generation and a strong balance sheet. It is seen as a definite standout from peers Leighton Holdings (ASX: LEI) and Boart Longyear (ASX: BLY). The vast majority of brokers rate Downer as a buy.
Boral Limited (ASX: BLD)
Building materials company Boral showed improvements in every sector in the first half with cement, building products and the U.S. business ahead of expectations. While the share price was already on the rise, due to positive momentum for housing-related stocks, the combination of cost cutting and cash generation will lend ongoing support.
Flexigroup (ASX: FXL)
The reaction to financial service company Flexigroup's interim result was uniformly positive. Broker Deutsche Bank stated that the report extended its run of double-digit earnings-per-share growth to five years.
A significant uplift in interest free cards was a major positive, while full year profit guidance of $84-86 million remains on track. The share price has remained at attractive entry levels since the result.
Rio Tinto (ASX: RIO)
Higher iron ore shipments and cost reductions assisted Rio Tinto in beating consensus earnings forecasts by 6%. The vast majority of brokers rate Rio Tinto as a buy on valuation grounds and the prospect of some capital management initiatives during FY2015.
The full year result impressed for many reasons including improving cash flows, a lower net debt position and reduced capital expenditure. Finally, there was a 15% jump in dividend that represents a payout of 35%, the highest since 2005.
Ardent Leisure (ASX: AAD)
Despite a solid share price run in 2013, Ardent Leisure caught the market by surprise with strong earnings momentum, causing several upgrades to earnings. Broker Macquarie Equities likes the performance of the Main Event family entertainment centers, which provides exposure to a U.S. recovery and translation benefits from a lower Aussie dollar. The Gold Coast theme parks are also expected to benefit from increasing local and international visitors.
Stockland Corporation Ltd (ASX: SGP)
Although producing an in-line result, Stockland garnered some very positive commentary due to setting solid foundations for FY2015. After two years of negative earnings revisions, it has now entered an upgrade cycle, according to broker Credit Suisse. Other brokers were impressed with clear evidence of a recovery in operating profit margins for residential, retirement living and a resilient retail portfolio.
Computershare Limited (ASX: CPU)
Registry and investor services firm Computershare has been a consistent performer with earnings per share growing 140% over the last eight years. It exceeded market forecasts by controlling costs, reducing debt and generating good cash flows. A rise in interest rates or an increase in mergers and acquisitions would put further icing on the cake.
REA Group Limited (ASX: REA)
An improving real estate market provided impetus for REA Group's jewel in the crown website, realestate.com.au, which is 61% owned by News Corp (ASX: NWS). The international expansion opportunities for its other websites are a significant driver going forward. Its result confirmed that REA Group is one of the market's premier growth companies. While raising price targets and upgrading earnings forecasts, the majority of brokers were cautious about the current valuation.
News Corp (ASX: NWS)
Strong results from Fox Sports and book publishing as well as company-wide cost-cutting, resulted in News Corp exceeding market expectations. However, doubts remain over structural changes for the print media and risks such as U.K. litigation.
Foolish takeaway
In my opinion, Domino's and Flexigroup are the standout investments of the above-mentioned stocks. I like Domino's for its technological superiority and growth opportunities, while Flexigroup has a consistent track record, transparent accounts and a currently low valuation.
In my opinion, nine of these stocks would sit comfortably in a quality long-term portfolio. I would not invest in News Corp. due to ongoing structural changes that have afflicted the print media sector.
