Earnings season unofficially kicked off on Monday, and although most analysts expect a decrease in Q4 EPS from the third quarter, strategist at Deutsche Bank Binky Chadha says this won't happen, according to Business Insider.
Consensus Q4 EPS is at $23.80 this year, compared to $25.10 in the third quarter. But Chadha thinks Q4 will come in flat with Q3, and here's why (via Business Insider):
- Consensus expects a seasonally adjusted decline from Q3 to Q4, which would be the first since Q4 08. Q4 this year was "seasonally strong."
- "Positive EPS revisions should follow positive macro data surprises, as has been the case historically." Deutsche Bank's U.S. MAPI (macro data surprise index) turned positive in October, and Europe's recently turned positive.
- "Analysts cut EPS much more than guidance was lowered."
- Current Q4 EPS consensus of $23.80 is implying a 30% quarter-over-quarter drop in foreign earnings, steeper even than Q4 2008 (-15%).
Business section: Investing ideas
This analyst's reasoning could be interesting to keep in mind given the general bearishness of other analysts as this earnings season begins.
For a look into the companies, we ran a screen on next week's reporting companies for those with a history of consistent quarterly earnings surprises over the last year (beating analyst expectations for several quarters in a row).
Do you think these stocks will surprise the market once more?
List sorted by average earnings surprise. (Click here to access free, interactive tools to analyze these ideas.)
1. Advanced Micro Devices
2. Unitedhealth Group: Provides health care services in the United States. Market cap of $56.20B. Earnings to be released on 01/19. In Dec. 2010: Reported EPS at 1.05 vs. estimate at 0.84 (surprise of 25%). In March 2011: Reported EPS at 1.22 vs. estimate at 0.89 (surprise of 37.1%). In June 2011: Reported EPS at 1.16 vs. estimate at 0.94 (surprise of 23.4%). In Sept. 2011: Reported 1.17 vs. estimate at 1.12 (surprise of 4.5%). [Average earnings surprise at 22.5%].
3. Webster Financial: 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. Market cap of $1.83B. Earnings to be released on 01/19. 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 EPS at 0.36 vs. estimate at 0.35 (surprise of 2.9%). In Sept. 2011: Reported 0.45 vs. estimate at 0.4 (surprise of 12.5%). [Average earnings surprise at 22.38%].
4. Capital One Financial
5. Community Trust Bancorp: Operates as the holding company for Community Trust Bank, Market cap of $461.82M. Earnings to be released on 01/18. In Dec. 2010: Reported EPS at 0.6 vs. estimate at 0.49 (surprise of 22.4%). In March 2011: Reported EPS at 0.61 vs. estimate at 0.53 (surprise of 15.1%). In June 2011: Reported EPS at 0.58 vs. estimate at 0.57 (surprise of 1.8%). In Sept. 2011: Reported 0.7 vs. estimate at 0.59 (surprise of 18.6%). [Average earnings surprise at 14.48%].
6. Intuitive Surgical
7. Freeport-McMoRan Copper & Gold
8. Synaptics: Develops and supplies custom-designed human interface solutions that enable people to interact with various mobile computing, communications, entertainment, and other electronic devices. Market cap of $1.03B. Earnings to be released on 01/19. In Dec. 2010: Reported EPS at 0.72 vs. estimate at 0.68 (surprise of 5.9%). In March 2011: Reported EPS at 0.55 vs. estimate at 0.48 (surprise of 14.6%). In June 2011: Reported EPS at 0.57 vs. estimate at 0.54 (surprise of 5.6%). In Sept. 2011: Reported 0.57 vs. estimate at 0.47 (surprise of 21.3%). [Average earnings surprise at 11.85%].
9. SLM: Provides education finance in the United States. Market cap of $7.03B. Earnings to be released on 01/18. In Dec. 2010: Reported EPS at 0.75 vs. estimate at 0.71 (surprise of 5.6%). In March 2011: Reported EPS at 0.48 vs. estimate at 0.4 (surprise of 20%). In June 2011: Reported EPS at 0.48 vs. estimate at 0.42 (surprise of 14.3%). In Sept. 2011: Reported 0.36 vs. estimate at 0.34 (surprise of 5.9%). [Average earnings surprise at 11.45%].
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 Alexander Crawford does not own any of the shares mentioned above. Earnings data sourced from Yahoo! Finance.
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