The stock market is increasingly looking like a boxing match. In one corner, you have a global bruiser named Greece looking to send stocks down to new lows. In the other corner, you have earnings season, which has been generally — and surprisingly — positive. In fact, quarterly results have been so encouraging, two-thirds of the 350 companies in the S&P 500 that have reported results thus far have topped estimates, translating into an average 6% upside surprise.

The earnings theme helped propel the market higher in October, but events in Europe have put a new scare in the market in early November. At this point, however, it’s best to tune out the noise and focus on the company-specific positives. This strategy paid off handsomely for those willing to brave the challenges of August and September, and it will likely pay off again for the patient investor.

The charm of earnings season is that it always presents new investment opportunities. So to in order to identify where investors should be focusing now, I’ve dug up a group of companies that are hitting the proverbial “hide off the ball.” Each of the companies in the table below topped (calendar) third-quarter consensus profit forecasts by at least 30%. To bring the list down to a manageable size, I focused on companies with a market value of at least $400 million and that are trading for less than 15 times projected 2012 forecasts (which were calculated prior to the recent earnings beat).

 
This current earnings season highlights the risk of shorting stocks. Chip maker AMD (NYSE: AMD) and electronics retailer HHGregg (NYSE: HGG) were heavily shorted (as of Oct. 14), and both delivered upside surprises. Shares of AMD rose nearly 10% last Friday, Oct. 28, while HHGregg shot up a hefty 20% when results were released on Nov. 2. Short-covering undoubtedly fueled part of these gains.

#-ad_banner-#Coinstar (Nasdaq: CSTR) has been another heavily-shorted name (the short position accounts for nine days of trading volume) that also delivered a painful blow to short sellers. They should have seen it coming. As I noted a few months ago, price increases instituted by Netflix (Nasdaq: NFLX) were likely to help Coinstar gain new customers. The stock ultimately rose 26% between my early August recommendation and late October, but it has fallen sharply in the last few trading sessions, and again looks like a bargain

Although Coinstar’s name reflects its legacy coin-counting machine business, investors are really focusing on its DVD business. The company’s low-price strategy (movies cost $1.20 per day), coupled with a very large retail footprint, helped the DVD segment post $390 million in sales in the third quarter, up from $305 million a year earlier. This figure should hit $500 million by the fourth quarter of 2012, according to analysts at DA Davidson.

Yet the stock has traded down since quarterly results were released, due to concerns that management still hasn’t laid out a strategy to enter the video-streaming market, preparing for the day when physical DVDs go the way of VHS tapes. But it’s not clear what the hurry is. The market is not going to shift abruptly and Coinstar isn’t missing the boat, especially as movie studios still restrict the number of titles that can be streamed. On the conference call with analysts, management noted an announcement regarding streaming services would be forthcoming soon, as the topic remains a “top priority.” Meanwhile, after the recent pullback, shares trade for just 11 times DA Davidson’s projected 2012 earnings-per-share (EPS) forecast of $4.05. With continued defections from Netflix helping Coinstar to maintain momentum, this looks like a bargain price.

Evercore Partners (NYSE: EVR)
A low-growth economy can create the perfect backdrop for mergers and acquisitions (M&A), as cash-rich companies buy their way into top-line expansion. You can already see the rising tide of deals in Evercore Partners’ third-quarter results. The advisory firm blew past estimates with quarterly revenue of $138 million being nearly 40% ahead of forecasts, thus triggering a 35% upside surprise on the bottom line.

With the exception of a slump in 2008, Evercore has been boosting sales at a robust clip during the past six years. Annual revenue topped $100 million for the first time in 2005 and is likely to top $500 million this year. “The consistent growth owes to the broad diversification, global hiring, and deepening sector strengths that EVR has developed in recent years,” note analysts at Goldman Sachs. And they see continued robust growth in 2012 as well, after Evercore snagged a series of high-profile bankers from rivals recently.

Evercore made a move earlier this year to boost its advisory role in the energy sector, which is seeing a high level of deal-making. “The (Houston-based) Energy office is already starting to pay significant dividends,” notes Merrill Lynch, citing the firm’s new role in the recently-proposed merger between Kinder Morgan Energy Partners (NYSE: KMB) and El Paso (NYSE: EP). Merrill sees shares rising from a recent $27 to $37, adding that the company is “the fastest-growing independent advisory firm in the world with demonstrated ability to take market share in recent quarters.” 

Risks to Consider:  All of these companies are delivering robust results in a so-so economy. But if the economic headwinds grow stronger in 2012, then further upside performance is a lot less likely to materialize.

Action to Take –> Success often begets success, especially as robust quarterly results start to become a sustainable trend. Coinstar and Evercore Partners are currently increasing market share, while taking action to boost shares further in coming quarters. Equally important, neither stock looks especially expensive, since they both trade for less than 14 times projected 2012 profits. Given this upward trend, I don’t think either of these stocks will remain low for too long.