Eyeing Earnings-Estimates Trends

1/10/2011


Profits for the S&P 500 Index are expected to be up 32% for the December quarter, which would mark five straight quarters of year-to-year growth after nine consecutive declines. Consensus estimates for the December quarter have risen over the past three months, as have those for the March quarter (12% growth projected) and the June quarter (11%).

S&P 1500 EARNINGS AND QUADRIX STATS
% of Stocks With
—— 3-Month Increases ——
Current
Average
Quadrix
---- Scores ----
EPS
Estimate
Quadrix
---- Scores ----
Sector (No. of Stocks)
Earns.
Ests.
Overall
Curr.
Year
(%)
Next
Year
(%)
Earns.
Ests.
Overall
Cons. Discret. (254)
54
61
58
56
54
47
Cons. Staples (75)
47
58
45
58
44
41
Energy (84)
53
57
49
48
70
63
Financials (258)
51
47
54
44
49
53
Health Care (163)
47
62
64
56
42
41
Industrials (216)
55
55
62
59
48
54
Materials (90)
42
53
44
47
41
41
Technology (269)
53
66
68
58
50
61
Telecom Services (19)
49
61
56
39
42
16
Utilities (72)
42
54
60
34
38
39
Note: Quadrix scores are percentile ranks, with 100 the best.

The December-quarter earnings season kicks off with Alcoa ($17; AA) on Jan. 10, though the peak reporting weeks come in the second half of January. Estimate-revision trends bode well for another quarter of mostly better-than-consensus earnings. Within seven of the market's sectors, analysts raised 2010 estimates for at least half of the companies in the S&P 1500 Index over the last three months. Stocks in the technology, industrial, and health-care sectors are seeing some of the greatest momentum.

The Quadrix® Earnings Estimates score considers more than 10 factors, including trends in consensus estimates and the number of analysts lifting versus lowering estimates. Measured by the number of 12-month periods in which top scorers outperformed the average stock, no other category score has been as effective as Earnings Estimates since its 2004 inception. But top Earnings Estimates scorers badly underperformed in the recovery from the March 2009 market lows — and have outperformed only modestly over the past year.

Strategies based on earnings estimates and share-price performance, which tend to be correlated, typically perform poorly at market turns. In the choppy but upward-trending market we anticipate in 2011, we'd expect Earnings Estimates and Performance scores to work better.

Listed in the table below are 10 A-rated stocks with superior earnings-estimate trends, including new recommendations Exxon Mobil ($75; XOM) and Hess ($78; HES). Both are members of the integrated oil group, which ranks among the best for estimate-revision trends. Outside of energy, earnings-estimate standouts include the two reviewed in the following paragraphs.

Research In Motion's ($59; RIMM) per-share earnings are projected to jump 44% in fiscal 2011 ending February. For fiscal 2012, the consensus projects a mere 5% advance. Since RIM reported strong November-quarter results last month, 49 of the 58 analysts covering the stock have raised estimates for fiscal 2012. RIM is a Buy and a Long-Term Buy.


During the downturn and painfully slow recovery, Ross Stores ($62; ROST) has tapped into consumers' desire for brand-name clothing at discount prices. For the January quarter, management sees per-share earnings at the high end of its earlier forecast of $1.15 to $1.20. Estimates for both fiscal 2011 ending January and fiscal 2012 are on the rise. Ross is a Focus List Buy and a Long-Term Buy.

EARNINGS-ESTIMATE CHAMPS
All 10 of the A-rated stocks below earn Quadrix Overall and Earnings Estimates scores above 90 and have seen profit estimates for this year and next year rise at least 2% over the last three months. All also rank above 20 in the other five Quadrix category scores. Stocks recommended for purchase are presented in bold.
-- Quadrix Scores --
----------- Current Fiscal Year -----------
-------------- Next Fiscal Year --------------
Company (Price; Ticker)
Fiscal
Year End
Earns.
Ests.
Overall
Est.
EPS
($)
%
Chg.
3-Mo.
Revision
(%)
Est.
P/E
Est.
EPS
(%)
%
Chg.
3-Mo.
Revision
(%)
Est.
P/E
Ameriprise Financial
($59; AMP)
Dec-11
98
97
4.47
52
10.4
13
5.34
19
8.1
11
Apple ($331; AAPL)
Sep-11
97
98
19.25
27
7.9
17
22.59
17
8.7
15
Exxon Mobil
($75; XOM)
Dec-11
96
95
5.87
46
2.6
13
6.52
11
3.2
11
Freeport-McMoRan
($119; FCX)
Dec-11
96
96
8.55
46
12.9
14
10.49
23
20.6
11
Google ($602; GOOG)
Dec-11
96
92
28.88
24
6.0
21
33.62
16
7.4
18
Hess ($78; HES)
Dec-11
98
99
5.17
127
9.5
15
5.93
15
9.4
13
Oracle ($31; ORCL)
May-11
99
96
2.08
25
5.1
15
2.30
11
5.0
14
Research In Motion
($59; RIMM)
Feb-11
99
100
6.31
44
5.2
9
6.63
5
6.6
9
Ross Stores
($62; ROST)
Jan-11
93
95
4.47
26
5.2
14
4.89
9
5.2
13
UnitedHealth Group
($37; UNH)
Dec-11
97
97
3.99
23
10.8
9
3.73
(7)
6.0
10

 


Current Hotline

Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com