Deutsche Bank Expects Q4 Earnings Surprises: 10 Companies to Watch

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(Written by Alexander Crawford. Earnings data sourced from Yahoo! Finance.)

Earnings season unofficially kicked off on Monday, and although most analysts expect a decrease in Q4 EPS from the third quarter, strategist at Deutsche Bank Binky Chadha says this won’t happen, according to Business Insider.

Consensus Q4 EPS is at $23.80 this year, compared to $25.10 in the third quarter. But Chadha thinks Q4 will come in flat with Q3, and here’s why (via Business Insider):

1. Consensus expects a seasonally adjusted decline from Q3 to Q4, which would be the first since Q4 08. Q4 this year was “seasonally strong.”
2. “Positive EPS revisions should follow positive macro data surprises, as has been the case historically.” Deutsche Bank’s US MAPI (macro data surprise index) turned positive in October, and Europe’s recently turned positive.
3. “Analysts cut EPS much more than guidance was lowered.”
4. Current Q4 EPS consensus of $23.80 is implying a 30% quarter-over-quarter drop in foreign earnings, steeper even than Q4 2008 (-15%).

Business Section: Investing Ideas

This analyst’s reasoning could be interesting to keep in mind given the general bearishness of other analysts as this earnings season begins.

For a look into the companies, we ran a screen on next week’s reporting companies for those with a history of consistent quarterly earnings surprises over the last year (beating analyst expectations for several quarters in a row).

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List sorted by average earnings surprise.

1. Advanced Micro Devices, Inc. (AMD): Operates as a semiconductor company in the United States, Japan, China, and Europe. Market cap of $3.90B. Earnings to be released on 01/19. In Dec 2010: Reported EPS at 0.14 vs. estimate at 0.11 (surprise of 27.3%). In Mar 2011: Reported EPS at 0.08 vs. estimate at 0.05 (surprise of 60%). In Jun 2011: Reported EPS at 0.09 vs. estimate at 0.08 (surprise of 12.5%). In Sep 2011: Reported 0.15 vs. estimate at 0.1 (surprise of 50%). [Average earnings surprise at 37.45%].

2. Unitedhealth Group, Inc. (UNH): Provides healthcare services in the United States. Market cap of $56.20B. Earnings to be released on 01/19. In Dec 2010: Reported EPS at 1.05 vs. estimate at 0.84 (surprise of 25%). In Mar 2011: Reported EPS at 1.22 vs. estimate at 0.89 (surprise of 37.1%). In Jun 2011: Reported EPS at 1.16 vs. estimate at 0.94 (surprise of 23.4%). In Sep 2011: Reported 1.17 vs. estimate at 1.12 (surprise of 4.5%). [Average earnings surprise at 22.5%].

3. Webster Financial Corp. (WBS): Operates as the holding company for the Webster Bank that provides various banking and financial products and services in southern New England and eastern New York State. Market cap of $1.83B. Earnings to be released on 01/19. In Dec 2010: Reported EPS at 0.3 vs. estimate at 0.2 (surprise of 50%). In Mar 2011: Reported EPS at 0.36 vs. estimate at 0.29 (surprise of 24.1%). In Jun 2011: Reported EPS at 0.36 vs. estimate at 0.35 (surprise of 2.9%). In Sep 2011: Reported 0.45 vs. estimate at 0.4 (surprise of 12.5%). [Average earnings surprise at 22.38%].

4. Capital One Financial Corp. (COF): Operates as the bank holding company for the Capital One Bank (USA), National Association and Capital One, National Association, which provide various financial products and services in the United States, Canada, and the United Kingdom. Market cap of $21.26B. Earnings to be released on 01/19. In Dec 2010: Reported EPS at 1.52 vs. estimate at 1.36 (surprise of 11.8%). In Mar 2011: Reported EPS at 2.21 vs. estimate at 1.55 (surprise of 42.6%). In Jun 2011: Reported EPS at 1.97 vs. estimate at 1.71 (surprise of 15.2%). In Sep 2011: Reported 1.77 vs. estimate at 1.68 (surprise of 5.4%). [Average earnings surprise at 18.75%].

5. Community Trust Bancorp Inc. (CTBI): Operates as the holding company for Community Trust Bank, Inc. Market cap of $461.82M. Earnings to be released on 01/18. In Dec 2010: Reported EPS at 0.6 vs. estimate at 0.49 (surprise of 22.4%). In Mar 2011: Reported EPS at 0.61 vs. estimate at 0.53 (surprise of 15.1%). In Jun 2011: Reported EPS at 0.58 vs. estimate at 0.57 (surprise of 1.8%). In Sep 2011: Reported 0.7 vs. estimate at 0.59 (surprise of 18.6%). [Average earnings surprise at 14.48%].

6. Intuitive Surgical, Inc. (ISRG): Designs, manufactures, and markets da Vinci surgical systems for various surgical procedures, including urologic, gynecologic, cardiothoracic, general, and head and neck surgeries. Market cap of $17.60B. Earnings to be released on 01/19. In Dec 2010: Reported EPS at 3.02 vs. estimate at 2.25 (surprise of 34.2%). In Mar 2011: Reported EPS at 2.59 vs. estimate at 2.49 (surprise of 4%). In Jun 2011: Reported EPS at 2.91 vs. estimate at 2.71 (surprise of 7.4%). In Sep 2011: Reported 3.05 vs. estimate at 2.76 (surprise of 10.5%). [Average earnings surprise at 14.03%].

7. Freeport-McMoRan Copper & Gold Inc. (FCX): Engages in the exploration, mining, and production of mineral resources. Market cap of $37.01B. Earnings to be released on 01/19. In Dec 2010: Reported EPS at 1.63 vs. estimate at 1.51 (surprise of 7.9%). In Mar 2011: Reported EPS at 1.58 vs. estimate at 1.26 (surprise of 25.4%). In Jun 2011: Reported EPS at 1.49 vs. estimate at 1.33 (surprise of 12%). In Sep 2011: Reported 1.1 vs. estimate at 1.02 (surprise of 7.8%). [Average earnings surprise at 13.28%].

8. Synaptics Inc. (SYNA): Develops and supplies custom-designed human interface solutions that enable people to interact with various mobile computing, communications, entertainment, and other electronic devices. Market cap of $1.03B. Earnings to be released on 01/19. In Dec 2010: Reported EPS at 0.72 vs. estimate at 0.68 (surprise of 5.9%). In Mar 2011: Reported EPS at 0.55 vs. estimate at 0.48 (surprise of 14.6%). In Jun 2011: Reported EPS at 0.57 vs. estimate at 0.54 (surprise of 5.6%). In Sep 2011: Reported 0.57 vs. estimate at 0.47 (surprise of 21.3%). [Average earnings surprise at 11.85%].

9. SLM Corporation (SLM): Provides education finance in the United States. Market cap of $7.03B. Earnings to be released on 01/18. In Dec 2010: Reported EPS at 0.75 vs. estimate at 0.71 (surprise of 5.6%). In Mar 2011: Reported EPS at 0.48 vs. estimate at 0.4 (surprise of 20%). In Jun 2011: Reported EPS at 0.48 vs. estimate at 0.42 (surprise of 14.3%). In Sep 2011: Reported 0.36 vs. estimate at 0.34 (surprise of 5.9%). [Average earnings surprise at 11.45%].

10. Intel Corporation (INTC): Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap of $129.67B. Earnings to be released on 01/19. In Dec 2010: Reported EPS at 0.59 vs. estimate at 0.53 (surprise of 11.3%). In Mar 2011: Reported EPS at 0.56 vs. estimate at 0.46 (surprise of 21.7%). In Jun 2011: Reported EPS at 0.54 vs. estimate at 0.51 (surprise of 5.9%). In Sep 2011: Reported 0.65 vs. estimate at 0.61 (surprise of 6.6%). [Average earnings surprise at 11.38%].



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Economy , Stocks


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