Surprise! Surprise!

Big Brother. In an era characterized by fears of terrorism and identity theft by hackers, one would imagine that a company that gives Big Brother his eyes would thrive. But Big Brother’s pockets are as shallow as the next man’s. With continued security-related budget cuts looming, analysts have grown pessimistic about the earnings potential of Verint Systems (NSDQ: VRNT).

A maker of workforce optimization software and security intelligence solutions, Verint’s software powers video surveillance systems, communication monitoring programs and systems that optimize the performance and response times of emergency workers. The company also produces software with more mundane applications, such as boosting call center productivity.

Analysts worried that budget cuts by corporations and government security agencies would crimp Verint’s earnings. The Street grossly underestimated the firm’s earnings potential in the fourth quarter and full-year 2010. Analysts forecast that Verint’s earnings per share would come in at 35 cents on just $181 million in revenue. But the company posted a big upside surprise, beating estimates by 20 cents on the back of $186.9 million in quarterly revenue.

The unexpected boost in earnings was driven by a 17 percent jump in revenue generated by the company’s workforce optimization segment–which accounts for more than half of Verint’s sales. A 22 percent revenue gain from the company’s video intelligence operations served as an additional tailwind. Revenues in all three of the company’s major geographies–the US, Europe and Asia Pacific–grew by more than 10 percent compared to the previous year.

Investors liked what they saw. Verint’s shares received a bump of more than 2.5 percent after the company announced results.

Who’s Buying What

Tiny Powerhouse. It’s been a rough two years for the pharmaceutical industry. The full ramifications of President Obama’s health care reform on the sector remains unclear. Meanwhile, a wave of patent expirations has plagued the industry. But Bethesda, Md.-based biopharmaceutical outfit Micromet (NSDQ: MITI) has managed to buck the trend.

Shares of Micromet jumped more than 10 percent after Jason Kantor, an analyst with RBC Capital Markets, upgraded the company to “outperform” from “sector perform.”

In his report, Kantor noted Micromet’s attractive valuation and upside potential stemming from the firm’s MT-103 compound. Designed to activate cancer-fighting antibodies, MT-103 is currently undergoing clinical trials to establish its effectiveness in treating acute lymphoblastic leukemia.

Clinical data released on the potential new drug has been positive thus far, and the compound is expected to enter late-stage studies in 2012.

Continued success in trials and an eventual approval of MT-103 by the Food and Drug Administration would be a home run for Micromet, which developed the drug independently.

Not only would Micromet own the rights to a successful drug, but its antibody technologies also would be in high demand–setting the stage for lucrative licensing deals with other pharmaceutical companies.

Nor is Micromet a pauper playing the lottery. Unlike many other development-stage pharmaceutical companies, Micromet is well capitalized with more than $220 million on its balance sheet.

The Checkup

Beyond Brazil. There’s more to South America than carnival and Brazilian barbecue. Directing investors to lesser-known opportunities on the continent, editor Benjamin Shepherd in the March 2010 issue’s Worth a Look section highlighted several solid companies beyond the borders of resource-rich Brazil.

Shepherd’s recommendation of Compania de Minas Buenaventura (NYSE: BVN) was largely predicated on rising demand for gold in 2010. The bet paid off. Global economic and political uncertainty boosted investment demand for the yellow metal last year.  As a result, the firm’s shares have gained more than 30 percent since recommendation.

Despite low debt and solid earnings growth, Buenaventura’s stock has come under pressure as investors question whether the price of gold can continue to climb indefinitely. With gold accounting for 58 percent of the company’s revenue and no hedges on the books, that’s a pressing concern for Buenaventura. As a result, short interest in the stock has soared in recent months.

However, those pressures should start to diminish as Buenaventura diversifies its metals mix, cushioning the miner against any declines in gold prices. The company remains one of the lowest-cost producers in the industry and an attractive play on the metals and mining space.

Shares of Chilean air carrier Lan Airlines (NYSE: LFL) climbed more than 50 percent since Shepherd recommended the firm. Lan’s shares took off after the company announced in August that it would merge with Brazil’s TAM Airlines. However, the stock retreated after Chilean authorities said they would review the deal on anti-trust grounds.