3 Companies on a Roll

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Dave Sterman

NEW YORK ( StreetAuthority) -- Depending on your area of focus, earnings season is either well underway or hasn't even started yet. Many large-cap stocks have weighed in, and almost half of the S&P 500 will have delivered quarterly results by the end of this week. Most mid-cap stocks have just begun to deliver results, and the vast majority of small and micro-cap stocks won't deliver results until February.

It's been an OK quarter thus far. According to research firm Bespoke Investment Group, the average company has topped earnings forecasts by roughly 0.5%. That's slightly lower than previous quarters, and could be seen as a possible harbinger of weakening profit growth to come.

Yet some companies continue to deliver really strong quarterly results. I've come across 17 companies that have exceeded consensus profit forecasts by at least 20%. I'll take another look at the estimate-beating crowd later in February as earnings season winds down, and perhaps even consider them as additions to my $100,000 Real-Money Portfolio . But the companies in the table below are surely worth further research.

Here's what's caught my eye...

Best in the industry

Near the bottom of the list, you'll find my favorite airline stock, Delta Airlines ( DAL). Back in July, I suggested shares might double in value.

They're up 30% since then, and from a recent $10.25, I still see this stock moving up to $15 before the year is out. That's because Delta's management is emerging as the most disciplined group this industry has seen in decades. It's watching expenses closely and tweaking flight schedules to maximize revenue.

Investors have rightly feared that rising oil prices would crimp profits for the major air carriers. Yet Delta, along with its peers, has been able to boost ticket prices just enough to account for the rising fuel costs. How much have rising ticket prices helped? Consider that Delta booked 2% fewer flights than a year ago and had to deal with a 25% year-over-year spike in fuel costs, yet earnings per share (EPS) were vastly higher than a year ago, when the carrier eked out a tiny profit.

Looking ahead, Delta appears set to deliver good results throughout 2012. If oil prices pull back or demand for air travel builds, then Delta would be set for a banner year. Even after this week's spike in the stock price, shares remain quite inexpensive at less than five times projected 2012 profits.

Greenbrier Cos. ( GBX)

While Delta focuses on the service end of the economy, this company is a healthy proxy for the industrial and agricultural segments. Greenbrier makes rail cars, and judging by current trends, demand is building at a solid pace.

A year ago, Greenbrier delivered 2,000 new freight cars. In the most recent quarter, this figure spiked to 3,000, and should remain at this level -- or higher -- throughout the current calendar year. Equally important, it's a low-margin business. So when the company delivered 10.1% gross margins in its fiscal first quarter ended November, 10 basis points ahead of forecasts, bottom-line profits were able to exceed forecasts as well.

After earning just 44 cents in fiscal (August) 2011, analysts expect to see EPS spike above $2 this year and approach $3 a share by fiscal 2013. Shares trade for less than eight times fiscal 2013 forecasts. Analysts at D.A. Davidson note the stock is cheap in terms of EBITDA (on an enterprise value basis) with a multiple of just 4.5. A move up to a target EBITDA multiple of six yields their $35 price target, more than 50% above current levels.

Textron ( TXT)

This is another company that may be a proxy for a slowly-improving U.S. economy.

This company is a "late-cycle" play, which means its results tend to really surge as the economy is clearly expanding. It's a hopeful sign that the company just blew past profit forecasts, earning 15 cents a share more than the consensus forecast.

At first blush, its 4% year-over-year sales growth isn't very impressive, but management notes that new orders are coming in at a solid pace, especially for the company's Bell helicopters and Cessna airplanes.

'm not as keen to recommend this stock, simply because it rose 15% on Wednesday, Jan. 25 (when earnings were released), and it has moved up more than 50% since last summer. Still, it's worth watching for a pullback below $20 as Textron's EPS power by 2013 or 2014 could be as much as $2.50 or even $3.

Risks to Consider: Most of these companies have significant exposure to Europe, and though the continent's woes have yet to create string headwinds, it's too soon to sound the "all clear."

Action to Take --> Success begets success, and these companies are likely to maintain profit momentum. Delta in particular continues to deliver solid quarterly results, seemingly ignoring forecasts that airline profits will soon turn south. Meanwhile, Greenbrier, and in my opinion to a lesser extent Textron, are both solid candidates to consider buying as well.

David Sterman does not personally hold positions in any securities mentioned in this article. StreetAuthority LLC does not hold positions in any securities mentioned in this article.

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  • This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.