(Written by Alexander Crawford, list compiled by Eben Esterhuizen. EPS and price data sourced from Yahoo! Finance.)
October 11 kicks off earnings season for the third quarter, with Alcoa leading the roster. Given the heightened volatility of these last couple of months, many investors don’t know what to expect, but one report from UBS (via Business Insider) suggests we shouldn’t fear the worst.
Earnings season (the quarterly time of year when companies announce their profits from the latest quarter) usually isn’t met with so much uncertainty, but this summer saw a lot to cause concern.
The US was given a credit downgrade for the first time in history after the whole debt ceiling fiasco, the stock market plunged, and so did consumer confidence. Economic activity was likely affected by these events in the third quarter.
But according to a report from UBS, economic activity didn’t disappear. UBS analysed 19 companies that have announced quarterly earnings since August 1. (via Business Insider)
“The median company beat consensus by 3% on EPS and 2% on revenue. If we compare consensus EPS for the forward quarter (ends Nov.) as of August 25 with the current figure, it fell just 1% for the 15 firms that did not report today. (Estimates will likely rise for most of the 4 firms reporting today.) These revisions reflect guidance as of mid-to-late September and suggest that, while business conditions are tough, demand is not now collapsing as it did in Q4 2008. This is reassuring but no guarantee we will avoid a double-dip.”
For a look at companies that are reporting their Q2 earnings next week, we ran a screen based on the theoretical assumption that if P/E is equal to a constant K, growth in EPS estimates should be matched by proportionate growth in price. When they don’t match up, a mispricing may have occurred, possibly indicated an undervalued opportunity.
Do you think these stocks will announce earnings surprises? Use this list as a starting-off point for your own analysis.
analyse These Ideas (Tools Will Open In A New Window)
1. Littelfuse Inc. (LFUS): Designs, manufactures, and sells circuit protection devices for use in the automotive, electronic, and electrical markets in the Americas, Europe, and the Asia-Pacific. Earnings scheduled to be released on 10/03/11. The EPS estimate for the company’s current year increased from 4.18 to 4.22 over the last 30 days, an increase of 0.96%. This increase came during a time when the stock price changed by -10.15% (from 47.37 to 42.56 over the last 30 days).
2. Medical Properties Trust Inc. (MPW): Operates as a real estate investment trust (REIT) in the United States. Earnings scheduled to be released on 10/07/11. The EPS estimate for the company’s current year increased from 0.73 to 0.74 over the last 30 days, an increase of 1.37%. This increase came during a time when the stock price changed by -8.85% (from 10.62 to 9.68 over the last 30 days).
3. Constellation Brands Inc. (STZ): Produces and markets alcoholic beverages primarily in the United States, Canada, and New Zealand. Earnings scheduled to be released on 10/06/11. The EPS estimate for the company’s current year increased from 1.97 to 1.98 over the last 30 days, an increase of 0.51%. This increase came during a time when the stock price changed by -5.69% (from 19.87 to 18.74 over the last 30 days).
Interactive Chart: Press Play to see how analyst ratings have changed for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
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