Will these 5 stocks prone to earnings surprises repeat their success?

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By Mary-Lynn Cesar for Kapitall.

Now that we're in July, many companies are gearing up to report their second-quarter earnings over the next several weeks. The season, which USA Today writes is expected to see 6.6% profit growth for the S&P 500 ( SPX ) , unofficially kicks off on Tuesday, July 8th.

The technology sector is expected to see the biggest second-quarter gain with a 12.4% surge in profit, followed by 11.6% and 11.3% growth in the materials and energy sectors, respectively. Meanwhile, the financials sector is projected to be the biggest loser with a 1.8% decline. 


The increase in expected profit growth is primarily attributable to the growing number of CEOs expressing an optimistic outlook on the economy. Back in April,  Reuters reported that companies were issuing fewer and less severe downward revisions of estimates than in previous quarters. And if stocks do perform as well as expected or even better, their earnings are likely to send the market-which has already beat several records so far this year- even higher .

Given the positive expectations for second-quarter earnings, we decided to run an earnings-centric screen to create the following list of stocks. To begin, we assembled a group of stocks with a history of positive earnings surprises, meaning that the companies have had four consecutive quarters of estimate-beating earnings reports, with an average surprise of at least 5%

We then screened for stocks with  rising diluted normalized earnings per share ( EPS ) for the past three consecutive years , meaning that the companies have been steadily increasing their profits. EPS refers to the amount of profit allocated per outstanding share of common stock, and diluted normalized EPS is usually lower and more conservative than normalized EPS.

After that, we looked for stocks that are  rallying above their 20-day, 50-day, and 200-day moving averages ( MA ) . This indicates that these stocks have strong upward momentum. And finally, we narrowed that group down to stocks that are undervalued relative to earnings growth, with a  price/earnings to growth ( PEG ) ratio below 1 .

We were left with five stocks on our list. Do you think these stocks will beat estimates again with their second-quarter earnings? Use this list as a starting point for your own analysis, and let us know what you think in the comments. 

Click on the interactive chart to view data over time. 

1. Anika Therapeutics Inc. ( ANIK , Earnings , Analysts , Financials ): Develops, manufactures, and commercializes therapeutic products for tissue protection, healing, and repair. Market cap at $720.83M, most recent closing price at $48.52.

In Jun 2013: Reported EPS at 0.4 vs. estimate at 0.23 (surprise of 73.9%). In Sep 2013: Reported EPS at 0.33 vs. estimate at 0.16 (surprise of 106.3%). In Dec 2013: Reported EPS at 0.44 vs. estimate at 0.42 (surprise of 4.8%). In Mar 2014: Reported 0.97 vs. estimate at 0.25 (surprise of 288%. [Average earnings surprise at 118.25%].

The average analyst earnings estimate for the current quarter is $0.57. The company is expected to report its second-quarter earnings between July 28th to August 1st.

Diluted normalized EPS increased from 0.32 to 0.62 during the first time interval (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31). For the second time interval, diluted normalized EPS increased from 0.62 to 0.93 (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31). And for the last time interval, the EPS increased from 0.93 to 1.38 (12 months ending 2013-12-31 vs. 12 months ending 2012-12-31). 

The stock is rallying 3.68% above its 20-day SMA, 5.96% above its 50-day SMA, and 32.17% above its 200-day SMA.

PEG at 0.75.

2. Banco Macro S.A. ( BMA , Earnings , Analysts , Financials ): Provides banking products and services to individuals, entrepreneurs, companies, and corporate customers in Argentina. Market cap at $2.20B, most recent closing price at $36.98.

In Jun 2013: Reported EPS at 1.47 vs. estimate at 1.44 (surprise of 2.1%). In Sep 2013: Reported EPS at 1.69 vs. estimate at 1.43 (surprise of 18.2%). In Dec 2013: Reported EPS at 2.5 vs. estimate at 1.51 (surprise of 65.6%). In Mar 2014: Reported 2.03 vs. estimate at 1.68 (surprise of 20.8%. [Average earnings surprise at 26.67%].

The average analyst earnings estimate for the current quarter is $1.62. The company will report its second-quarter earnings on August 7th.

Diluted normalized EPS increased from 1.46 to 2.03 during the first time interval (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31). For the second time interval, diluted normalized EPS increased from 2.03 to 2.66 (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31). And for the last time interval, the EPS increased from 2.66 to 4.16 (12 months ending 2013-12-31 vs. 12 months ending 2012-12-31).

The stock is rallying 9.11% above its 20-day SMA, 17.90% above its 50-day SMA, and 42.35% above its 200-day SMA.

PEG at 0.54.

3. Copa Holdings SA ( CPA , Earnings , Analysts , Financials ): Provides airline passenger and cargo services. Market cap at $6.36B, most recent closing price at $144.05.

In Jun 2013: Reported EPS at 1.92 vs. estimate at 1.71 (surprise of 12.3%). In Sep 2013: Reported EPS at 2.62 vs. estimate at 2.59 (surprise of 1.2%). In Dec 2013: Reported EPS at 3.21 vs. estimate at 2.57 (surprise of 24.9%). In Mar 2014: Reported 3.46 vs. estimate at 3.11 (surprise of 11.3%. [Average earnings surprise at 12.42%].

The average analyst earnings estimate for the current quarter is $2.10. The company is expected to report its second-quarter earnings between August 4th and August 8th.

Diluted normalized EPS increased from 5.88 to 6.98 during the first time interval (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31). For the second time interval, diluted normalized EPS increased from 6.98 to 7.35 (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31). And for the last time interval, the EPS increased from 7.35 to 9.63 (12 months ending 2013-12-31 vs. 12 months ending 2012-12-31).

The stock is rallying 1.54% above its 20-day SMA, 3.81% above its 50-day SMA, and 1.67% above its 200-day SMA.

PEG at 0.58.

4. Lithia Motors Inc. ( LAD , Earnings , Analysts , Financials ): Operates as an automotive franchisee and retailer of new and used vehicles. Market cap at $2.48B, most recent closing price at $94.37.

In Jun 2013: Reported EPS at 1.05 vs. estimate at 0.9 (surprise of 16.7%). In Sep 2013: Reported EPS at 1.13 vs. estimate at 1.1 (surprise of 2.7%). In Dec 2013: Reported EPS at 0.98 vs. estimate at 0.91 (surprise of 7.7%). In Mar 2014: Reported 1.03 vs. estimate at 0.95 (surprise of 8.4%. [Average earnings surprise at 8.88%].

The average analyst earnings estimate for the current quarter is $2.10. The company is expected to report its second-quarter earnings between August 4th and August 8th.

Diluted normalized EPS increased from 1.22 to 1.98 during the first time interval (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31). For the second time interval, diluted normalized EPS increased from 1.98 to 3.05 (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31). And for the last time interval, the EPS increased from 3.05 to 4.08 (12 months ending 2013-12-31 vs. 12 months ending 2012-12-31).

The stock is rallying 9.57% above its 20-day SMA, 19.60% above its 50-day SMA, and 37.78% above its 200-day SMA.

PEG at 0.85.

5. Syntel, Inc. ( SYNT , Earnings , Analysts , Financials ): Provides information technology ( IT ) and knowledge process outsourcing (KPO) services worldwide. Market cap at $3.69B, most recent closing price at $87.72.

In Jun 2013: Reported EPS at 1.14 vs. estimate at 1.06 (surprise of 7.5%). In Sep 2013: Reported EPS at 1.42 vs. estimate at 1.24 (surprise of 14.5%). In Dec 2013: Reported EPS at 1.58 vs. estimate at 1.31 (surprise of 20.6%). In Mar 2014: Reported 1.39 vs. estimate at 1.25 (surprise of 11.2%. [Average earnings surprise at 13.45%].

The average analyst earnings estimate for the current quarter is $1.22. The company will report its second-quarter earnings on July 7th.

Diluted normalized EPS increased from 2.73 to 2.94 during the first time interval (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31). For the second time interval, diluted normalized EPS increased from 2.94 to 4.44 (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31). And for the last time interval, the EPS increased from 4.44 to 5.24 (12 months ending 2013-12-31 vs. 12 months ending 2012-12-31).

The stock is rallying 5.24% above its 20-day SMA, 7.27% above its 50-day SMA, and 1.75% above its 200-day SMA.

PEG at 0.93.

(List compiled by Mary-Lynn Cesar. Earnings data sourced from NASDAQ. EPS and EPS estimate data sourced from Yahoo! Finance. All other data sourced from finviz.)

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.



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 , Stocks

Referenced Stocks: EPS , MA , PEG , IT

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