With all the flurry of earnings downgrades over the past few months, particularly in the mining services sector, investors could be forgiven for not expecting to hear the words 'profits are up' too often at the upcoming reporting season.
So it is pleasing to see three smaller companies who have all provided the market with upgraded earnings expectations today.
Austal (ASX: ASB) is a ship builder with niche skills in combat ships and high-speed ferries. The company, which has a market capitalisation of $300 million, has upgraded its net profit after tax guidance to a range of $35 to $40 million. It's a significant upgrade, as previous guidance was in the range of $23 to $26 million. The upgrade does needs to be kept in perspective though, as it appears to be largely due to a change in the accounting treatment of tax credits.
The release also highlighted that operational improvements and efficiencies across the business had been sustained throughout the year, with the CEO commenting that "he was pleased the company had continued to deliver on the operational improvements which have driven improved EBITDA in the second half of the financial year."
Capitol Health (ASX: CAJ) is a provider of medical diagnostic imaging services throughout Victoria. The company has today announced guidance of growth in profit before tax of 80% to $5.3 million and that it will increase its dividend by 20%. The company has provided investors with incredible returns over the past 12 months with the share price rising 416%. Importantly, Managing Director Mr John Conidi commented that he "expects the strong growth to continue in the coming year."
Scott Corporation (ASX: SCC) is a freight company and leading specialist transporter of bulk solids, bulk liquids and hazardous materials. Thanks to a "focus on cost management, and improved trading conditions in certain contracts" management has upgraded profit expectations for the financial year ending June 2013. With a market capitalisation of just $30 million, the profit upgrade from $3.6 million to around $4.3 million is significant.
Foolish takeaway
The upgrades discussed above show that niche businesses and smaller companies can be a great hunting ground for businesses that can swim against the tide and grow profits no matter what the broader economy is doing.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
