5 “Triple Play” Stocks to Buy Today

Third quarter earnings season is winding down, and the results have been decidedly weak once again. With approximately 95% of the S&P 500 Index members reporting, total Q3 earnings for the index are down 2.5% year-over-year. That marks the second straight quarter of negative earnings growth, otherwise known as an “earnings recession”.

A little more than 68% of S&P 500 members beat EPS expectations this quarter, which is pretty typical. 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.

As you might expect, revenue beats have been much harder to come by this earnings season. Just 42% of companies have delivered a positive top-line surprise, which is well below average.

Revenue growth has been even weaker than earnings growth too at -4.2%.

Finding Stocks That Make the “Triple Play”

While positive revenue and earnings surprises are great to 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.

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.

5 Triple Plays to Buy 

So which companies have delivered the coveted “Triple Play” this earnings season? I ran a screen in Research Wizard, and here are 5 of the top companies from the list:

1. Amazon (AMZN)
EPS Surprise: 270%
Revenue Surprise: 2%
4-Week Change in 2015 Consensus: 18%
4-Week Change in 2016 Consensus: 15%

2. Gibraltar Industries (ROCK)
EPS Surprise: 39%
Revenue Surprise: 8%
4-Week Change in 2015 Consensus: 14%
4-Week Change in 2016 Consensus: 12%

3. Heidrick & Struggles International (HSII)
EPS Surprise: 38%
Revenue Surprise: 4%
4-Week Change in 2015 Consensus: 12%
4-Week Change in 2016 Consensus: 17%

4. Cray (CRAY)
EPS Surprise: 363%
Revenue Surprise: 35%
4-Week Change in 2015 Consensus: 18%
4-Week Change in 2016 Consensus: 28%

5. LinkedIn (LNKD)
EPS Surprise: 81%
Revenue Surprise: 3%
4-Week Change in 2015 Consensus: 58%
4-Week Change in 2016 Consensus: 34%

The Bottom Line on Our “Triple Play” Stocks to Buy 

Third quarter earnings season may be a disappointment overall, but not for these five companies. Each delivered the coveted “triple play” 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 Income Plus Investor and Surprise Trader services.

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GIBRALTAR INDUS (ROCK): Free Stock Analysis Report

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