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You are here: Home / Financial News / Here’s why you should expect more ‘beats’ during this earnings season

Here’s why you should expect more ‘beats’ during this earnings season

October 10, 2018 By master


As we head into earnings season, buyers might be forgiven for his or her cynicism about “earnings beats,” the collection of breathless headlines about corporations reporting outcomes that are available forward of analysts’ expectations.

But there are additionally shares for which analysts have been elevating their worth targets, and it is perhaps worthwhile to take a better take a look at these corporations.

During second-quarter earnings season, 80% of S&P 500














SPX, -0.14%












corporations reported earnings per share that have been greater than consensus estimates, based on S&P Global Market Intelligence. That “beat rate” has steadily risen over the previous yr from 71% for second-quarter earnings season in 2017. Over the previous 5 full calendar years, the “beat rate” has averaged 66%.

Beating earnings estimates doesn’t imply a lot if corporations are within the behavior of decreasing their “guidance” or giving different hints heading into earnings season. Sell-side analysts do their half to assist arrange the “beats.” For instance, consensus third-quarter earnings estimates amongst analysts polled by FactSet declined for 136 of the S&P 500 member corporations between Sept. 10 and Oct. 9, whereas the estimates elevated for less than 77. Considering that U.S. economic growth has accelerated and that the unemployment rate has declined to a 49-year low, it’s truthful to query these numbers.

This is why buyers are higher off ignoring the “beats” and searching more durable at corporations’ success in growing their gross sales and income. An organization that “misses” estimates whereas nonetheless growing gross sales and earnings at a wholesome tempo, persistently, could also be a superb funding regardless of some briefly dangerous headlines.

Price targets

Turning again to the analysts, we thought it could be more fascinating to take a look at consensus worth targets, to see which shares have been producing larger enthusiasm amongst analysts, regardless of any cuts to quarterly earnings estimates. Among the S&P 500, the outcomes weren’t very thrilling, with worth targets growing by 10% or more for less than two corporations between Sept. 10 and Oct. 9. The consensus worth goal for Advanced Micro Devices














AMD, +2.95%












 elevated 24% and the goal for Eli Lilly














LLY, -0.01%












 rose by 12%.

So we expanded the inventory universe by wanting on the S&P Composite 1500 Index, which is made up of the S&P 500, the S&P 400 Mid-Cap Index














MID, -0.56%












 and the S&P 600 Small-Cap Index














SML, -0.41%












 

(In case you’re questioning, consensus EPS estimates can be found for 1,475 of the S&P 1500. Third-quarter consensus estimates have been minimize for 323 corporations over the previous month, whereas the estimates have been elevated for 181.)

Among the S&P 1500, 21 corporations with scores obtainable from a minimum of three analysts have had their consensus worth targets elevated by 10% or more over the previous month:

Company Ticker Industry Consensus worth goal – Sept. 10 Consensus – Oct. 9 Change in worth goal Total return – 2018 by way of Oct. Eight
Barnes & Noble Inc.














BKS, +2.56%











Specialty Stores $5.00 $7.25 45% 13%
Denbury Resources Inc.














DNR, +2.52%











Oil and Gas Production $Four.73 $5.96 26% 187%
Advanced Micro Devices Inc.














AMD, +2.95%











Semiconductors $20.15 $24.93 24% 157%
Momenta Pharmaceuticals Inc.














MNTA, +2.02%











Biotechnology $20.80 $25.60 23% 45%
Sonic Corp.














SONC, -0.02%











Restaurants $35.50 $42.91 21% 61%
Balchem Corp.














BCPC, -0.90%











Chemicals $92.00 $108.60 18% 30%
Casey’s General Stores Inc.














CASY, +0.51%











Food Retail $112.67 $128.70 14% 11%
XO Group Inc.














XOXO, +0.20%











Other Consumer Services $30.67 $34.67 13% 87%
Bottomline Technologies Inc.














EPAY, +0.01%











Software $60.83 $68.75 13% 96%
Vonage Holdings Corp.














VG, -0.21%











Specialty Telecommunications $15.50 $17.50 13% 37%
Manhattan Associates Inc.














MANH, -0.74%











Software $56.00 $63.00 13% 1%
Eli Lilly and Co.














LLY, -0.01%











Pharmaceuticals: Major $100.43 $112.46 12% 39%
Ensco PLC Class A














ESV, +7.05%











Contract Drilling $7.00 $7.80 11% 50%
Noble Corp. PLC














NE, +0.28%











Contract Drilling $5.42 $6.02 11% 59%
Fox Factory Holding Corp.














FOXF, -1.25%











Recreational Products $60.14 $66.71 11% 67%
Perficient Inc.














PRFT, +0.04%











Personnel Services $30.00 $33.25 11% 35%
Harmonic Inc.














HLIT, -2.80%











Telecommunications Equipment $6.17 $6.81 10% 36%
Masimo Corp.














MASI, -0.22%











Medical Specialties $113.00 $124.80 10% 41%
Abercrombie & Fitch Co. Class A














ANF, -1.72%











Apparel/Footwear Retail $22.54 $24.88 10% 17%
FactSet Research Systems Inc.














FDS, +1.19%











Financial Publishing/Services $192.08 $211.92 10% 15%
Transocean Ltd.














RIG, +1.50%











Contract Drilling $12.84 $14.15 10% 31%
Source: FactSet

You can click on the tickers for more details about every firm, together with information, worth ratios, charts and financials.

Of course, a big improve in a consensus worth goal doesn’t imply every part is rosy. Barnes and Noble














BKS, +2.56%












 tops the listing. The inventory is up 13% this yr via Oct. Eight after sliding 36% in 2017. Its three-year return is a damaging 33%. Analysts expect the bookseller’s gross sales to say no Four% during calendar 2018 (the corporate’s fiscal 2018 ended on April 28), however for its EPS (adjusted for one-time gadgets) to extend to 38 cents in calendar 2018 from 25 cents in calendar 2017. Three analysts cowl the inventory, with one “buy” score and two impartial scores. The consensus worth goal implies upside of solely Three% over the subsequent 12 months from the closing worth of $7.02 on Oct. Eight.

Here’s a abstract of analysts’ scores and worth targets for the group, displaying that for most of the high-flying shares on the record, together with Advanced Micro Devices, analysts have been elevating their targets to catch as much as the market.

Company Ticker Share ‘purchase’ scores Share impartial scores Share ‘promote’ scores Closing worth – Oct. Eight Consensus worth goal Implied 12-month upside potential
Barnes & Noble Inc.














BKS, +2.56%











33% 67% zero% $7.02 $7.25 Three%
Denbury Resources Inc.














DNR, +2.52%











18% 73% 9% $6.35 $5.96 -6%
Advanced Micro Devices Inc.














AMD, +2.95%











39% 46% 15% $26.46 $24.93 -6%
Momenta Pharmaceuticals Inc.














MNTA, +2.02%











20% 60% 20% $20.26 $25.60 26%
Sonic Corp.














SONC, -0.02%











7% 93% zero% $43.38 $42.91 -1%
Balchem Corp.














BCPC, -0.90%











20% 80% zero% $105.03 $108.60 Three%
Casey’s General Stores Inc.














CASY, +0.51%











43% 57% zero% $123.58 $128.70 Four%
XO Group Inc.














XOXO, +0.20%











zero% 100% zero% $34.49 $34.67 1%
Bottomline Technologies Inc.














EPAY, +0.01%











60% 40% zero% $67.98 $68.75 1%
Vonage Holdings Corp.














VG, -0.21%











89% 11% zero% $13.96 $17.50 25%
Manhattan Associates Inc.














MANH, -0.74%











17% 83% zero% $50.05 $63.00 26%
Eli Lilly and Co.














LLY, -0.01%











53% 47% zero% $115.46 $112.46 -Three%
Ensco PLC Class A














ESV, +7.05%











46% 33% 21% $Eight.79 $7.80 -11%
Noble Corp. PLC














NE, +0.28%











24% 52% 24% $7.17 $6.02 -16%
Fox Factory Holding Corp.














FOXF, -1.25%











44% 56% zero% $65.06 $66.71 Three%
Perficient Inc.














PRFT, +0.04%











100% zero% zero% $25.82 $33.25 29%
Harmonic Inc.














HLIT, -2.80%











60% 40% zero% $5.71 $6.81 19%
Masimo Corp.














MASI, -0.22%











43% 57% zero% $119.50 $124.80 Four%
Abercrombie & Fitch Co. Class A














ANF, -1.72%











20% 47% 33% $19.78 $24.88 26%
FactSet Research Systems Inc.














FDS, +1.19%











zero% 78% 22% $219.68 $211.92 -Four%
Transocean Ltd.














RIG, +1.50%











56% 17% 27% $13.97 $14.15 1%
Source: FactSet

Most analysts set worth targets for the subsequent 12 months. That is just not very a lot time for critical long-term buyers, so it’s attainable that if you don’t look past the targets, you may overlook necessary alternatives for positive aspects over the subsequent 5 to 10 years.

Here are gross sales expectations for the group, for calendar 2018 and calendar 2019, based mostly on consensus estimates amongst analysts polled by FactSet:

Company Ticker Adjusted gross sales – 2017 ($mil) Estimated gross sales – 2018 ($mil) Estimated gross sales – 2019 ($mil) Expected change in gross sales – 2018 Expected change in gross sales – 2019
Barnes & Noble Inc.














BKS, +2.56%











$Three,739 $Three,600 $Three,528 -Four% -2%
Denbury Resources Inc.














DNR, +2.52%











$1,106 $1,409 $1,558 27% 11%
Advanced Micro Devices Inc.














AMD, +2.95%











$5,326 $6,702 $7,371 26% 10%
Momenta Pharmaceuticals Inc.














MNTA, +2.02%











$139 $62 $85 -56% 39%
Sonic Corp.














SONC, -0.02%











$459 $418 $410 -9% -2%
Balchem Corp.














BCPC, -0.90%











$595 $658 $711 11% Eight%
Casey’s General Stores Inc.














CASY, +0.51%











$Eight,100 $9,386 $10,419 16% 11%
XO Group Inc.














XOXO, +0.20%











$161 $168 $183 5% 9%
Bottomline Technologies Inc.














EPAY, +0.01%











$372 $411 $450 11% 9%
Vonage Holdings Corp.














VG, -0.21%











$1,zero02 $1,zero50 $1,157 5% 10%
Manhattan Associates Inc.














MANH, -0.74%











$575 $554 $546 -Four% -2%
Eli Lilly and Co.














LLY, -0.01%











$22,863 $24,358 $24,605 7% 1%
Ensco PLC Class A














ESV, +7.05%











$1,843 $1,704 $1,774 -Eight% Four%
Noble Corp. PLC














NE, +0.28%











$1,201 $1,zero39 $1,106 -13% 6%
Fox Factory Holding Corp.














FOXF, -1.25%











$476 $612 $675 29% 10%
Perficient Inc.














PRFT, +0.04%











$485 $498 $527 Three% 6%
Harmonic Inc.














HLIT, -2.80%











$357 $402 $448 12% 12%
Masimo Corp.














MASI, -0.22%











$798 $851 $900 7% 6%
Abercrombie & Fitch Co. Class A














ANF, -1.72%











$Three,478 $Three,560 $Three,614 2% 2%
FactSet Research Systems Inc.














FDS, +1.19%











$1,264 $1,380 $1,466 9% 6%
Transocean Ltd.














RIG, +1.50%











$2,877 $2,936 $Three,zero44 2% Four%
Source: FactSet

Here are EPS expectations for the group, once more for calendar 2018 and calendar 2019, based mostly on consensus estimates amongst analysts polled by FactSet:

Company Ticker Adjusted EPS – 2017 Consensus EPS estimate – 2018 Consensus EPS estimate -2019 Expected change in earnings – 2018 Expected change in earnings – 2019
Barnes & Noble Inc.














BKS, +2.56%











$zero.25 $zero.38 $zero.47 51% 22%
Denbury Resources Inc.














DNR, +2.52%











$zero.15 $zero.49 $zero.83 233% 68%
Advanced Micro Devices Inc.














AMD, +2.95%











$zero.16 $zero.47 $zero.67 187% 43%
Momenta Pharmaceuticals Inc.














MNTA, +2.02%











-$1.21 -$2.13 -$1.00 N/A N/A
Sonic Corp.














SONC, -0.02%











$1.33 $1.54 $1.70 16% 10%
Balchem Corp.














BCPC, -0.90%











$2.51 $2.77 $Three.05 11% 10%
Casey’s General Stores Inc.














CASY, +0.51%











$Three.99 $Four.37 $Four.94 10% 13%
XO Group Inc.














XOXO, +0.20%











$zero.28 $zero.66 $zero.75 136% 14%
Bottomline Technologies Inc.














EPAY, +0.01%











$1.13 $1.36 $1.57 20% 15%
Vonage Holdings Corp.














VG, -0.21%











$zero.28 $zero.36 $zero.35 29% -Four%
Manhattan Associates Inc.














MANH, -0.74%











$1.87 $1.59 $1.35 -15% -15%
Eli Lilly and Company














LLY, -0.01%











$Four.28 $5.47 $5.76 28% 5%
Ensco PLC Class A














ESV, +7.05%











-$zero.46 -$1.32 -$1.10 N/A N/A
Noble Corp. PLC














NE, +0.28%











-$1.15 -$1.85 -$1.73 N/A N/A
Fox Factory Holding Corp.














FOXF, -1.25%











$1.59 $2.09 $2.36 32% 13%
Perficient Inc.














PRFT, +0.04%











$1.23 $1.50 $1.65 22% 10%
Harmonic Inc.














HLIT, -2.80%











-$zero.34 $zero.10 $zero.22 N/A 127%
Masimo Corp.














MASI, -0.22%











$2.55 $2.91 $Three.06 14% 5%
Abercrombie & Fitch Co. Class A














ANF, -1.72%











$zero.59 $zero.82 $zero.96 39% 17%
FactSet Research Systems Inc.














FDS, +1.19%











$7.72 $Eight.88 $9.89 15% 11%
Transocean Ltd.














RIG, +1.50%











-$zero.28 -$zero.85 -$zero.57 N/A N/A
Source: FactSet

As all the time, if you see any shares listed right here that you may be eager about shopping for, you had higher do loads of analysis by yourself, so as to type your personal opinion about an organization’s technique and its prospects for fulfillment over the subsequent 5 to 10 years.

Don’t miss: Trump’s trade deal bodes well for these companies — and their investors

Create an e mail alert for Philip van Doorn’s Deep Dive columns here.



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