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%.
Still, 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 four-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. Management can often “massage” earnings to come in a penny or two ahead of consensus, but revenue is generally much less susceptible (although certainly not immune) to manipulation.
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
- Significant positive earnings estimate revisions
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.
So, which companies have delivered the coveted “Triple Play” this earnings season? I ran a screen in Research Wizard, and here are four of the top companies from the list:
Gigamon Inc (NYSE:GIMO)
Gigamon Inc (NYSE:GIMO) provides intelligent visibility of network traffic for enterprises, data centers and service providers.
Gigamon delivered much-better-than-expected first-quarter results on April 23, prompting analysts to revise their estimates significantly higher for both 2015 and 2016. The positive revisions sent GIMO stock to a Zacks Rank #1 (Strong Buy).
- EPS Surprise: 78%
- Revenue Surprise: 10%
- 4-Week Change in 2015 Consensus: 198%
- 4-Week Change in 2016 Consensus: 224%
HealthStream, Inc. (NASDAQ:HSTM)
HealthStream, Inc. (NASDAQ:HSTM) provides workforce, patient experience and provider solutions for the healthcare industry. HealthStream crushed Q1 expectations on both the top and bottom lines on April 20, which helped to send estimates soaring for both 2015 and 2016.
HSTM is now a Zacks Rank #1 (Strong Buy) stock.
- EPS Surprise: 120%
- Revenue Surprise: 3%
- 4-Week Change in 2015 Consensus: 49%
- 4-Week Change in 2016 Consensus: 10%
Adeptus Health Inc (NYSE:ADPT)
Adeptus Health Inc (NYSE:ADPT) is the largest operator of freestanding emergency rooms in the U.S.
Adeptus Health delivered solid beats on both revenue and earnings when it reported its first quarter results on April 23. ADPT management also provided bullish 2015 guidance that sent consensus estimates soaring for both this year and next. ADPT is a Zacks Rank #1 (Strong Buy) stock.
- EPS Surprise: 9%
- Revenue Surprise: 2%
- 4-Week Change in 2015 Consensus: 47%
- 4-Week Change in 2016 Consensus: 28%
Corelogic Inc (NYSE:CLGX)
Corelogic Inc (NYSE:CLGX) provides global property information, analytics and data-enabled services.
Corelogic’s first quarter report on April 22 blew away expectations and sent consensus estimates soaring for both 2015 and 2016. CLGX is a Zacks Rank #1 (Strong Buy) stock.
- EPS Surprise: 54%
- Revenue Surprise: 3%
- 4-Week Change in 2015 Consensus: 22%
- 4-Week Change in 2016 Consensus: 14%
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