Have you been disappointed by the fourth-quarter earnings season? It is certainly shaping up to be a let-down, with companies missing or just hitting already muted expectations. But it is not a total loss. Earnings have been middle-of-the-road enough to keep the S&P on track, rallying upwards.
Eddy of Crossing Wall Street shares his earnings expectations for the remainder of the year. Although earnings for the S&P 500 are expected to rise throughout the year, "I think earnings may not be as strong as some people expect."
Specifically, analysts already expect a large jump in the fourth quarter of 2012. "Trailing fourth-quarter earnings are expected to rise from $101.08 to $105.37 during the final three months of the year. I just don't see what could cause a jump like that." Instead, he expects earnings to round out between $100 and $105 for a few quarters.
Business section: Investing ideas
Earnings have been watered down and generally disappointing, so we wanted to take a look at companies that have a shot of bucking the trend.
Below are companies with a strong history of beating analyst expectations. Past performance is no guarantee of future results, but it does provide us with a good starting point.
To improve the quality of our list, we also searched for companies with an increase in short covering. This means short-sellers, who profit when the value of a company drops, are becoming more bullish about the company's prospects.
Do you think analysts will continue to underestimate the earnings potential for these companies in 2012? (Click here to access free, interactive tools to analyze these ideas.)
1. Glu Mobile
2. Titan Machinery
3. ValueClick: Provides performance-based online advertising campaigns and programs primarily in the United States and the United Kingdom. In March 2011: Reported EPS at 0.21 vs. estimate at 0.18 (surprise of 16.7%). In June 2011: Reported EPS at 0.21 vs. estimate at 0.2 (surprise of 5%). In Sept. 2011: Reported EPS at 0.47 vs. estimate at 0.21 (surprise of 123.8%). In Dec. 2011: Reported 0.35 vs. estimate at 0.29 (surprise of 20.7%. [Average earnings surprise at 41.55%]. Shares shorted have decreased from 8.65M to 7.21M over the last month, a decrease which represents about 1.87% of the company's float of 77.15M shares.
4. Hi Tech Pharmacal
5. Cninsure: Provides insurance brokerage and agency services, and insurance claims adjusting services in the People's Republic of China. In Dec. 2010: Reported EPS at 0.37 vs. estimate at 0.34 (surprise of 8.8%). In March 2011: Reported EPS at 0.24 vs. estimate at 0.23 (surprise of 4.3%). In June 2011: Reported EPS at 0.33 vs. estimate at 0.29 (surprise of 13.8%). In Sept. 2011: Reported 0.33 vs. estimate at 0.18 (surprise of 83.3%. [Average earnings surprise at 27.55%]. Shares shorted have decreased from 2.82M to 2.44M over the last month, a decrease which represents about 1.44% of the company's float of 26.47M shares.
7. Rogers Corporation: Rogers Corporation manufactures and supplies a range of specialty materials and components worldwide. In Dec. 2010: Reported EPS at 0.65 vs. estimate at 0.39 (surprise of 66.7%). In March 2011: Reported EPS at 0.57 vs. estimate at 0.52 (surprise of 9.6%). In June 2011: Reported EPS at 0.73 vs. estimate at 0.69 (surprise of 5.8%). In Sept. 2011: Reported 0.85 vs. estimate at 0.79 (surprise of 7.6%. [Average earnings surprise at 22.42%]. Shares shorted have decreased from 988.90K to 826.92K over the last month, a decrease which represents about 1.02% of the company's float of 15.84M shares.
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 Rebecca Lipman does not own any of the shares mentioned above. EPS and short data sourced from Yahoo! Finance.
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