It’s earnings season again, and for those who like trade the wild rides that usually happen during this time, the staff at have screened for companies with a history of upside surprises.

To create the list below we started by looking for stocks with a history of surprising the market with positive earnings reports, with an average earnings surprise of at least 5% over the last five quarterly reports. Clearly investors have a habit of underestimating these firms, but will the trend continue?

To find names that have the backing of "smart money" investors we then screened for bullish sentiment from institutional money mangers, with significant net institutional purchases over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to outperform into the future.

Finally, we continued our analysis by looking at the financial statements for encouraging sales trends.

Specifically, we focused on strong sales trends, comparing growth in revenue to growth in accounts receivable. Since accounts receivable is the portion of revenue not yet received, and there is no guarantee the money will ever be received, the smaller the portion of revenue made up of receivables the healthier the company's revenue.

The stocks in our list are seeing faster growth in revenue than accounts receivable year-over-year, as well as accounts receivable comprising a smaller portion of current assets over the same time period.

Analyst ratings sourced from Zacks Investment Research.
Click to Enlarge

The List

Do you think these stocks will outperform like hedge funds expect? Use this list as a starting point for your own analysis.

1. Carter's, Inc. (CRI): Designs, sources, and markets branded children's wear.

Market cap at $3.4B, most recent closing price at $57.37.

Net institutional purchases in the current quarter at 3.9M shares, which represents about 8.13% of the company's float of 47.98M shares. The two top holders of the stock are Berkshire Partners and Viking Global Investors.

Revenue grew by 13.62% during the most recent quarter ($689.25M vs. $606.63M y/y). Accounts receivable grew by 6.53% during the same time period ($168.05M vs. $157.75M y/y). Receivables, as a percentage of current assets, decreased from 20.17% to 17.55% during the most recent quarter (comparing 13 weeks ending 2012-12-29 to 13 weeks ending 2011-12-31).

In March 2012: Reported EPS at 0.56 vs. estimate at 0.43 (surprise of 30.2%). In June 2012: Reported EPS at 0.37 vs. estimate at 0.3 (surprise of 23.3%). In September 2012: Reported EPS at 1.02 vs. estimate at 0.89 (surprise of 14.6%). In December 2012: Reported 0.89 vs. estimate at 0.84 (surprise of 6%. [Average earnings surprise at 18.53%].

The company is expected to report earnings on April 25, 2013.

NEXT PAGE: 3 “Surprising” Stocks

Tickers Mentioned: CRI, DO, EBIX, ELLI, GNRC