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4 Impressive Stocks Blowing Away Expectations - Investment Ideas

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With results in from over 70% of the S&P 500, it's safe to say that this has been the worst earnings season in a long time.

Approximately 66% of companies have delivered positive earnings surprises, which is only a bit below the four-quarter average around 69%. But the real story has been revenues. So far in Q1, less than 44% of companies have beaten expectations on the top-line. That's well below the 4-quarter average of 58%. And revenue is actually down more than 3% year-over-year. A strong dollar and low oil prices are largely to blame for this.

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 two ahead of consensus. But revenue is generally much less susceptible (although certainly not immune) to manipulation.

The Triple Play

While positive revenue and earnings surprises are great too see, 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 the second quarter have steadily declined for the S&P 500. Back at the beginning of the year, the consensus was calling for EPS growth of 1.1% for Q2. Today, that estimate has fallen to -6.2%.

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 blow out 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:

Gigamon ( GIMO )

EPS Surprise: 78%

Revenue Surprise: 10%

4-Week Change in 2015 Consensus: 198%

4-Week Change in 2016 Consensus: 224%

Gigamon provides intelligent visibility of network traffic for enterprises, data centers and service providers. The company delivered much better than expected first quarter results on April 23, prompting analysts to revise their estimates significantly higher for both 2015 and 2016. This sent the stock to a Zacks Rank #1 (Strong Buy).

HealthStream ( HSTM )

EPS Surprise: 120%

Revenue Surprise: 3%

4-Week Change in 2015 Consensus: 49%

4-Week Change in 2016 Consensus: 10%

HealthStream provides workforce, patient experience, and provider solutions for the healthcare industry. The company crushed Q1 expectations on both the top- and bottom-lines on April 20. This helped to send estimates soaring for both 2015 and 2016. HealthStream is now a Zacks Rank #1 (Strong Buy) stock.

Adeptus Health ( ADPT )

EPS Surprise: 9%

Revenue Surprise: 2%

4-Week Change in 2015 Consensus: 47%

4-Week Change in 2016 Consensus: 28%

Adeptus Health is the largest operator of freestanding emergency rooms in the U.S. The company delivered solid beats on both revenue and earnings when it reported its first quarter results on April 23. Management also provided bullish 2015 guidance that sent consensus estimates soaring for both this year and next. It is a Zacks Rank #1 (Strong Buy) stock.

CoreLogic ( CLGX )

EPS Surprise: 54%

Revenue Surprise: 3%

4-Week Change in 2015 Consensus: 22%

4-Week Change in 2016 Consensus: 14%

CoreLogic provides global property information, analytics and data-enabled services. Its first quarter report on April 22 blew away expectations and sent consensus estimates soaring for both 2015 and 2016. CoreLogic is a Zacks Rank #1 (Strong Buy) stock.

The Bottom Line

First quarter earnings season has been a disappointment so far - but not for these four 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.

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


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

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