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4 Impressive Stocks Blowing Away Expectations

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Positive revenue and earnings surprises are great, but if management guidance is weak and/or if analysts revise their earnings estimates lower, a stock can still get punished. That has been the case for many stocks this earnings season.

We have passed the half-way mark for fourth quarter earnings season. So far, the results have been mixed.

Nearly 72% of companies in the S&P 500 have delivered positive earnings surprises, which is above the 4-quarter average of 69.7%. But growth has been a bit subpar as earnings are up 6.7% from the same quarter last year compared to the 4-quarter average of 7.2%.

While earnings tend to garner most of the attention, I'm much more impressed by a company that beats on both the bottom line and the top line. That's because earnings can often be "massaged" by management to come in a penny or 2 ahead of consensus. But revenue is generally much less susceptible (although certainly not immune) to manipulation.

So far in Q4, just 52.9% of companies have beaten expectations on the top-line. That's well below the 4-quarter average of 57.6%. And growth has been almost non-existent at 0.2%. A strong dollar is partly to blame for this.

The Triple Play

Positive revenue and earnings surprises are great, but if management guidance is weak and/or if analysts revise their earnings estimates lower, a stock can still get punished. That has been the case for many stocks this earnings season.

Overall, estimates for S&P 500 total earnings in the first and second quarters of 2015 have steadily declined over the last few months. Back in early October, the consensus was calling for 10.8% total earnings growth for Q1. That number has fallen to -1.8%. The energy sector is heavily to blame for this as oil prices have tumbled.

Earnings and revenue beats simply are not enough. The true winners from earnings season are those who can deliver the coveted "Triple Play":

  • A positive earnings surprise
  • A positive revenue surprise, and
  • Significant positive earnings estimate revisions

And as the well-documented "post-earnings announcement drift" shows, these blowout quarters are often handsomely rewarded by the market for several weeks after a company reports.

4 Triple Plays

So which companies have delivered the coveted "Triple Play" this earnings season? I ran a screen in Research Wizard, and here are 4 of the top companies from the list:

Super Micro Computer (SMCI -Snapshot Report)

EPS Surprise: 42%

Revenue Surprise: 7%

4-Week Change in 2015 Consensus: 17%

4-Week Change in 2016 Consensus: 20%

Super Micro Computer blew away expectations when it reported its fiscal 2015 second quarter results on Jan. 20. The company crushed it on both the top- and bottom-lines and provided Q3 guidance well above consensus at the time. This prompted analysts to revise their estimates significantly higher for both 2015 and 2016, sending the stock to a Zacks Rank #1 (Strong Buy) stock.

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Cirrus Logic (CRUS - Snapshot Report)

EPS Surprise: 46%

Revenue Surprise: 8%

4-Week Change in 2015 Consensus: 23%

4-Week Change in 2016 Consensus: 20%

Cirrus Logic delivered stellar fiscal 2015 third quarter results on Jan. 28. Strength in portable audio drove revenue and earnings well above consensus, and bullish Q4 guidance drove estimates significantly higher for both 2015 and 2016. It is a Zacks Rank #1 (Strong Buy) stock.

Skyworks Solutions (SWKS - Analyst Report)

EPS Surprise: 5%

Revenue Surprise: 4%

4-Week Change in 2015 Consensus: 12%

4-Week Change in 2016 Consensus: 8%

On Jan. 22, Skyworks Solutions reported fiscal 2015 first quarter results well above expectations. Revenues surged 59% year-over-year to $806 million, well ahead of the consensus of $774 million. And EPS of $1.15 beat the consensus of $1.10. Management also provided Q2 guidance well above consensus at the time, prompting significant positive estimate revisions for both 2015 and 2016. It is a Zacks Rank #1 (Strong Buy) stock.

Abiomed (ABMD - Analyst Report)

EPS Surprise: 900%

Revenue Surprise: 16%

4-Week Change in 2015 Consensus: 219%

4-Week Change in 2016 Consensus: 39%

Abiomed delivered remarkable results for its fiscal 2015 third quarter on Jan. 27. Revenue increased 34% year-over-year to a record $62.0 million while the gross margin expanded a stellar 460 basis points to 84.1% and the operating margin more than doubled to 22%. And to top it off, management raised its full year revenue guidance and greatly increased its operating margin guidance. Analysts raised their estimates significantly higher for both fiscal 2015 and fiscal 2016 following the report. This sent the stock to a Zacks Rank #1 (Strong Buy).

The Bottom Line

Fourth quarter earnings season has been mixed so far. While plenty of companies have delivered earnings beat, revenue surprises have been harder to come by and earnings estimates have fallen for many. However, these 4 companies each delivered the coveted "triple play" this earnings season and are well-positioned to run higher over the coming weeks.

Todd Bunton, CFA is a Stock Strategist for Zacks Investment Research and Editor of the Surprise Trader and Income Plus Investor services.

This article originally appeared at Zacks.com. Reprinted with permission.Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. Neither Zacks Investment Research, Inc., Physician's Money Digest, nor the information providers have any liability, contingent or otherwise, for the accuracy, completeness, timeliness, or correct sequencing of the information or for any decision made or action taken by you in reliance upon information or "Zacks.com," "PhysiciansMoneyDigest.com," or "HCPLive.com" or for interruption of any data, information or any other aspect of "Zacks.com," "PhysiciansMoneyDigest.com," or "HCPLive.com." The past performance of a mutual fund, stock or investment strategy cannot guarantee its future performance.


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