Welcome to earnings season, a time when investors adjust positions based on company performance and projections. But some suspect that the impact of this quarter's earnings will take a back seat to bigger picture issues.
According to Citigroup, Europe's sovereign debt crisis will play a more important role to investors given its potential to drastically alter the global economy.
"U.S. options traders see almost no chance that earnings, dividends or buybacks will influence stock prices through the end of 2011, instead placing record bets that equities move in lockstep in reaction to Europe's debt crisis. The Chicago Board Options Exchange S&P 500 Implied Correlation Index jumped to a record 90.28 on Sept. 30. The correlation coefficient of S&P 500 companies with the index has surged to 0.85, its highest level ever." (via Bloomberg)
Record high correlation among stocks indexes is certainly a driving factor. The rumors, actions, and slightest whims of politicians across the globe have had startling effects on market swings and have contributed heavily to the market volatility plaguing the market.
Given the immeasurable consequences of a European collapse, it's easy to understand how many investors may brush off earnings as a negligible statistic. After all, a strong earnings report for the third quarter will hardly matter if the economy plunges into a global recession and, given heavy correlation, drags that stock down with it. So instead, all eyes are on European developments in the hopes of gleaning some clarity of the economic future.
Meanwhile, earnings are hardly dismissable. After all, if the economic collapse doesn't come to be, they can prove just as valuable as ever. So which companies reporting earnings should be on your radar?
To help you find ideas, we scanned the earnings results of thousands of companies and identified a list of about 200 that have a history of beating analyst earnings expectations over the last year.
To refine the quality of our list, we only focused on those "earnings surprise" companies that have seen significant insider buying over the last six months.
These companies have a track record of beating analyst earnings estimates, and insiders seem to think there's more good news on the way -- should these companies be on your earnings radar? (Click here to access free, interactive tools to analyze these ideas.)
List compiled by Eben Esterhuizen:
1. Cadence Design Systems (Nasdaq: CDNS ) : Develops electronic design automation software and hardware for customers worldwide. In Sep 2010: Reported EPS at 0.04 vs. estimate at 0.03 (surprise of 33.3%). In Dec. 2010: Reported EPS at 0.07 vs. estimate at 0.04 (surprise of 75%). In March 2011: Reported EPS at 0.09 vs. estimate at 0.08 (surprise of 12.5%). In June 2011: Reported 0.12 vs. estimate at 0.1 (surprise of 20%). [Average earnings surprise at 35.2%]. Over the last six months, insiders were net buyers of 55,000 shares, which represents about 0.02% of the company's 266.78M share float.
2. West Bancorp (Nasdaq: WTBA ) : Operates as a bank holding company for West Bank that provides community banking and trust services primarily in the Des Moines and Iowa City, and Iowa metropolitan areas. In Sept. 2010: Reported EPS at 0.17 vs. estimate at 0.12 (surprise of 41.7%). In Dec 2010: Reported EPS at 0.17 vs. estimate at 0.12 (surprise of 41.7%). In March 2011: Reported EPS at 0.19 vs. estimate at 0.14 (surprise of 35.7%). In June 2011: Reported 0.12 vs. estimate at 0.1 (surprise of 20%). [Average earnings surprise at 34.77%]. Over the last six months, insiders were net buyers of 3,717 shares, which represents about 0.02% of the company's 16.97M share float.
3. Winmark (Nasdaq: WINA ) : Operates as a franchisor of four retail store concepts that buy, sell, trade, and consign merchandise. In Dec. 2009: Reported EPS at 0.28 vs. estimate at 0.21 (surprise of 33.3%). In March 2010: Reported EPS at 0.42 vs. estimate at 0.35 (surprise of 20%). In June 2010: Reported EPS at 0.45 vs. estimate at 0.3 (surprise of 50%). In Sept. 2010: Reported 0.51 vs. estimate at 0.4 (surprise of 27.5%).[Average earnings surprise at 32.7%]. Over the last six months, insiders were net buyers of 2,620 shares, which represents about 0.12% of the company's 2.24M share float.
4. Neuralstem (NYSE: CUR ) : Focuses on the development and commercialization of treatments for central nervous system diseases based on transplanting human neural stem cells and small molecule drugs. In Sept. 2010: Reported EPS at -0.09 vs. estimate at -0.11 (surprise of 18.2%). In Dec. 2010: Reported EPS at -0.05 vs. estimate at -0.1 (surprise of 50%). In Mar 2011: Reported EPS at -0.07 vs. estimate at -0.1 (surprise of 30%). In June 2011: Reported -0.08 vs. estimate at -0.11 (surprise of 27.3%). [Average earnings surprise at 31.37%]. Over the last six months, insiders were net buyers of 10,000 shares, which represents about 0.02% of the company's 43.65M share float.
5. Hercules Offshore (Nasdaq: HERO ) : Provides shallow-water drilling and marine services to the oil and natural gas exploration and production industry in the U. In Sept. 2010: Reported EPS at -0.13 vs. estimate at -0.15 (surprise of 13.3%). In Dec 2010: Reported EPS at -0.03 vs. estimate at -0.11 (surprise of 72.7%). In March 2011: Reported EPS at -0.12 vs. estimate at -0.13 (surprise of 7.7%). In June 2011: Reported -0.11 vs. estimate at -0.16 (surprise of 31.2%). [Average earnings surprise at 31.22%]. Over the last six months, insiders were net buyers of 32,000 shares, which represents about 0.03% of the company's 112.97M share float.
6. Lincoln Educational Services (Nasdaq: LINC ) : Provides career-oriented post-secondary education services in the United States. In Sept. 2010: Reported EPS at 0.76 vs. estimate at 0.62 (surprise of 22.6%). In Dec 2010: Reported EPS at 1.2 vs. estimate at 0.89 (surprise of 34.8%). In March 2011: Reported EPS at 0.46 vs. estimate at 0.36 (surprise of 27.8%). In June 2011: Reported 0.22 vs. estimate at 0.16 (surprise of 37.5%). [Average earnings surprise at 30.67%]. Over the last six months, insiders were net buyers of 291,384 shares, which represents about 1.37% of the company's 21.23M share float.
7. Dell (Nasdaq: DELL ) : Provides integrated technology solutions in the information technology (IT) industry worldwide. In Oct. 2010: Reported EPS at 0.45 vs. estimate at 0.33 (surprise of 36.4%). In Jan. 2011: Reported EPS at 0.53 vs. estimate at 0.37 (surprise of 43.2%). In April 2011: Reported EPS at 0.55 vs. estimate at 0.44 (surprise of 25%). In Jul 2011: Reported 0.54 vs. estimate at 0.49 (surprise of 10.2%). [Average earnings surprise at 28.7%]. Over the last six months, insiders were net buyers of 17,230,709 shares, which represents about 1.11% of the company's 1.55B share float.
8. Webster Financial (NYSE: 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. In Sept. 2010: Reported EPS at 0.22 vs. estimate at 0.17 (surprise of 29.4%). In Dec 2010: Reported EPS at 0.3 vs. estimate at 0.2 (surprise of 50%). In March 2011: Reported EPS at 0.36 vs. estimate at 0.29 (surprise of 24.1%). In June 2011: Reported 0.36 vs. estimate at 0.35 (surprise of 2.9%). [Average earnings surprise at 26.6%]. Over the last six months, insiders were net buyers of 2,054,850 shares, which represents about 2.85% of the company's 72.09M share float.
9. National Penn Bancshares (Nasdaq: NPBC ) : Operates as the bank holding company for National Penn Bank that provides commercial banking products and services to residents and businesses primarily in eastern and central Pennsylvania. In Sept. 2010: Reported EPS at 0.08 vs. estimate at 0.07 (surprise of 14.3%). In Dec. 2010: Reported EPS at 0.1 vs. estimate at 0.07 (surprise of 42.9%). In Mar 2011: Reported EPS at 0.1 vs. estimate at 0.09 (surprise of 11.1%). In June 2011: Reported 0.15 vs. estimate at 0.11 (surprise of 36.4%). [Average earnings surprise at 26.17%]. Over the last six months, insiders were net buyers of 49,777 shares, which represents about 0.05% of the company's 97.96M share float.
10. Carter's (NYSE: CRI ) : Designs, sources, and markets branded children's wear. In Sept. 2010: Reported EPS at 0.83 vs. estimate at 0.74 (surprise of 12.2%). In Dec. 2010: Reported EPS at 0.6 vs. estimate at 0.57 (surprise of 5.3%). In March 2011: Reported EPS at 0.55 vs. estimate at 0.5 (surprise of 10%). In June 2011: Reported 0.23 vs. estimate at 0.13 (surprise of 76.9%). [Average earnings surprise at 26.1%]. Over the last six months, insiders were net buyers of 1,763,600 shares, which represents about 3.61% of the company's 48.80M share float.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above.
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