Earnings season is off to a generally solid start, though tucked into the broad group of estimate-beating companies are more than a few cautionary notes: A range of companies — many of which have exposure to Europe or China — are speaking of tougher times ahead.

That’s sure to be the subtext for Ford (NYSE: F), which reports Friday morning (April 27). The consensus forecast for first-quarter profits has been coming down in recent sessions to a recent $0.35 a share, and I think Ford will actually miss this lowered bar by a few cents. Presumably, investors are already braced for such an event.

The main focus of my $100,000 Real-Money Portfolio has never been about quarterly performance. I have consistently noted that the merits of Ford, Alcoa (NYSE: AA), Citigroup (NYSE: C), Cree (Nasdaq: CREE) and others is where these companies will be in 2013 and 2014, and not in the first quarter of 2012. It’s virtually impossible to know when investors will start to focus on brighter 2013 and 2014 outlooks for these companies, but I’ve been building this portfolio with a view that it’s better to be early than late.



That said, quarterly reports provide a chance to validate whether the long-term investment thesis remains intact. A half-dozen companies in my portfolio will report results next week, so I want to give you a sense of what to focus upon for each one.

1. Calgon Carbon (NYSE: CCC)
Reports: May 1
Expected EPS: $0.12
Expected y-o-y sales growth: 6%

This maker of air and water-filtration equipment has many growth opportunities ahead of it, as I laid out six weeks ago. But those opportunities are only now developing and didn’t hit the profit and loss statement in the first quarter. Indeed, I bought into this stock after a recent so-so quarter that pushed this stock down from $17 in early February to an area that appears solid downside support.

If you’re new to this stock, then check out what I wrote in March and then please give a close listen to the company’s conference call. The myriad growth drivers in front of Calgon Carbon are just starting to take shape, and management may spell out the timing of an eventual expected ramp up in business. My take: those opportunities will yield sales growth in the low teens in 2013 and at perhaps twice that rate by 2014.

2. Marathon Oil (NYSE: MRO)
Reports: May 2
Expected EPS: $0.87
Expected y-o-y sales growth: -8%

I moved quickly to add this company to my portfolio in late February when it increasingly appeared as if oil prices were moving to new highs and natural gas prices had at least stabilized. Since then, the threat of a looming oil spike has passed, and gas prices have plumbed new depths, so I subsequently trimmed my position by roughly half in early April.

Make no mistake, of all of the major domestic energy companies this remains my top pick, thanks to its deep exposure to both oil and gas — as well as its low valuation. Most investors continue to underestimate Marathon Oil’s production potential in the Eagle Ford shale. Assuming oil prices stay around $100 for the next few years and natural gas prices finally move up (even modestly to around $2.50 per thousand cubic feet), then Marathon’s rising production should turn it into a profit gusher. That won’t be in evidence as you assess first-quarter results, but management commentary should prove quite insightful as to Marathon’s long-term production plans.

3. MDC Partners (Nasdaq: MDCA)
Reports: May 2
Expected EPS: $-0.49
Expected y-o-y sales growth: 16%

Don’t let that projected quarterly loss spook you. It’s the result of a series of one-time charges and a large amount of depreciation. Cash flow remains positive for this fast-rising ad agency. There’s not a lot of risk of any ugly quarter here. Management already issued fairly strong 2012 guidance, just before I added this company to my portfolio.

For MDC, it’s all about execution. The company has aggressively built up a $1 billion (in sales) tech-focused advertising agency platform. The key, especially after a string of recent acquisitions, is to getting all of the parts moving in tandem to more deeply penetrate client accounts. Expectations remain low: MDC continues to trade at a sharp discount (by several metrics) to rivals Interpublic (NYSE: IPG) and Omnicom (NYSE: OMC), but improved execution should steadily narrow that gap. This is not an easy business model to understand, which is why I again encourage you to listen to the company’s conference call.

4. Ligand Pharma (Nasdaq: LGND)
Reports: May 2
Expected EPS: $-0.02
Expected y-o-y sales growth: -NM%

This has been a vexing pick for me. Soon after I recommended it in early February, shares began a steady upward move into late March. And then management did the unthinkable: Ligand entered into an arrangement with an investment bank to issue up to $30 million in fresh stock and sell it to the public whenever the mood strikes. Bankers love to pitch these deals — and investors hate them. Ligand single-handedly managed to blunt the stock’s gains with this program. The subsequent pullback in the stock is due to more sales of shares by the company than buying by other investors.

 
A rapid gain for my portfolio has now evaporated, and I should have trusted my gut and sold this stock the minute the 8-K filing about the share-sale program hit the wires in late March. If there is a silver lining, then it is that management is likely less inclined to issue fresh shares now that the stock has come down. But investors now understand that any future rally will be blunted by the same factor, so I plan to sell into strength whenever it returns.

To be sure, Ligand’s portfolio of drug investments remains appealing and could deliver material upside. The current quarter will really serve as an update on the progress of the various investments, and should hold few positive or negative surprises.

5. Echelon (Nasdaq: ELON)
Reports: May 9
Expected EPS: $-0.29
Expected y-o-y sales growth: 8%

This maker of smart-grid equipment remains far too cheap, as I spelled out in this article.

It will never see the $80 level it saw more than a decade ago, or even the $30 level it saw in 2007. But just a return to the $10 level it was trading at a year ago yields a double — and that’s still where I think this stock will be the next time Echelon enters into one of its periodic phases of new contract momentum.

To be sure, this company possesses a solid base of technology. Slow spending by utilities has been the key culprit. That’s why I’m heartened that Echelon is aggressively pursuing relationships in Brazil and China, which currently appear more committed to making major investments in energy enhancement initiatives.

Don’t expect great results from Echelon this quarter. Instead, it’s the discussion on the status and development of those international relationships that investors will be watching.

Action to Take–> I may not look to immediately comment on these quarterly reports as they roll in, as the company’s press releases and subsequent media coverage often tell the tale. I’ll only follow up when a major shift in the investment thesis — either positive or negative — needs to be analyzed. Stay tuned.

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