It isn't hard to find a company that beats analyst earnings estimates. Despite the routine implosions, most public companies do find a way to exceed expectations. However, only the truly special companies manage to land ahead of Wall Street's profit targets on a consistent basis.
We're now waist-deep into earnings season, and dozens of companies will be stepping up in the week ahead to deliver their latest quarterly results. Most will meet or ideally exceed analyst forecasts, but where will you find the real rock stars?
One of my market-thumping strategies is to find the companies that have beaten the prognosticators consistently through at least the past year. Call it a trend of a streak, but more often than not it means the company will find a way to best the estimates yet again.
Let's go over a few of the companies reporting quarterly results next week that meet my stringent sniff test. These five stocks have beaten Wall Street's income projections in each of the past four quarters. Let's check out the names, followed by the percentage of the positive surprise over the past year.
1 Quarter Ago
2 Quarters Ago
3 Quarters Ago
4 Quarters Ago
|Netflix (Nasdaq: NFLX )||70%||33%||23%||14%|
|iRobot (Nasdaq: IRBT )||200%||19%||92%||38%|
|Ancestry.com (Nasdaq: ACOM )||30%||18%||14%||10%|
|Starbucks (Nasdaq: SBUX )||3%||2%||3%||6%|
|Visa (NYSE: V )||6%||3%||2%||2%|
Source: Thomson Reuters.
Landing on top
Let's start at the top with Netflix.
This may seem like living proof that my bullish thesis on market beaters is flawed. After all, Netflix has shed more than two-thirds of its value over the past year, even though it has trounced Wall Street forecasts with ease.
However, there's plenty of pessimism baked into the market's estimates for the company. The market is also not impressed by the transition from DVD and streaming monthly plans priced in the double digits to the flat $7.99 a month pricing of its streaming service.
iRobot is makes robotic products for both consumers and the defense sector. Its home products can vacuum your carpet, mop your floor, and clean out your rain gutters. On the military front, iRobot's costlier automatons detect and dismantle roadside explosives as well as go on recon missions.
Ancestry.com is the leading genealogy website operator. The stock took a hit recently after NBC announced that it won't renew Who Do You Think You Are? -- a Friday night show that teams up with Ancestry.com to track a celebrity's ancestors -- for a fourth season.
However, Ancestry.com won investors back when it announced that it had passed the 2 million subscriber mark earlier this month. Clearly, there's a market out there for folks willing to pay for the tools to flesh out their family trees.
You already know Starbucks. The java heavy has been making splashes in the juice and energy-drink markets lately, but it remains a coffee company at heart.
Visa is the credit card marketer. Let's not mistake Visa for the credit card issuers that take on the risk of the folks being armed with plastic. Visa just makes sure merchants and consumers are happy as it collects a piece of the action.
Starbucks and Visa aren't dishing out the kind of surprises that the other three companies have, but they're both still more than worthy to be here. Even beating the pros consistently by a single-digit percentage margin is impressive over time.
Keeping the streak alive
Each of these five companies will have unique challenges to overcome and skeptics to silence when they report. However, the fact that all five of them have made mincemeat out of analyst estimates in the past is a strong indicator that the upside surprises will continue this quarter.
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