5 companies eat profit forecasts for breakfast
Investors are hungry for hot profit reports.(Photo: Getty Images/iStockphoto)
Despite some high-profile misses, The quarter is actually off to a better start than usual, although it's still early.
Big surprises are part of every earnings season. Investors can only hope they get more positive ones than negative.
Investors will eye companies with track records for regularly eating analysts' earnings estimates for breakfast to see if they can keep it up. There are five companies in the Standard & Poor's 500, including design software maker Autodesk (ADSK[1]), video-game maker Electronic Arts (EA) and oil explorer Transocean (RIG[2]), that have beaten earnings expectations the past four straight quarters by an average of 50% or more, according to a USA TODAY analysis from S&P Global Market Intelligence.
The quarter is actually off to a better start than usual, although it's still early. So far, 77% of companies that have reported have beaten expectations, which is higher than the 66% that normally do. It's been pretty common for companies to routinely beat expectations lately: 132 companies in the S&P 500 have beaten earnings estimates over the previous four straight quarters.
Investors could use some major beats now. Expectations for earnings growth in the first quarter are so low companies could have an easier time surpassing such a low bar. Analysts are calling for a nearly 8% decline in adjusted profit in the first quarter from companies in the S&P 500, according to S&P Global Market Intelligence. But slow global growth continues to dog companies, says Mike Thompson, chairman of S&P Investment Advisory Services. There is "a really anemic economic growth scenario, and the rest of the world is providing little in terms of growth," he says.
Some investors might wonder which companies have had a strong track record of topping expectations. Take Autodesk, which makes a variety of computer software to help designers of everything from buildings to movies. The company has not only topped expectations each of the past four quarters, but it has beaten them by a commanding 52% on average. Autodesk is undergoing several transitions, including charging customers for subscriptions and shifting computing to the cloud, which has changed how investors estimate the company's performance, says CFO Richard Herren.
But investors must remember streaks are often meant to be broken. Alphabet had beaten expectations for the previous three quarters, and Microsoft the previous four until missing in the first quarter. And steel producer Nucor (NUE[3]) topped expectations all four quarters of 2015 only to fall 33% short in the first quarter. "That's the problem with forecasts," Thompson says.
S&P 500 COMPANIES THAT BEAT EARNINGS ESTIMATES THE PAST FOUR QUARTERS BY 50% OR MORE ON AVERAGE
Company, Symbol, Average earnings beat past four quarters *
Prologis, PLD, 188%
Electronic Arts, EA, 187% **
Transocean, RIG, 63% **
Autodesk, ADSK, 52% **
Carnival, CCL, 52%
* based on adjusted earnings
** has not reported Q1 2016 yet
Source: S&P Global Market Intelligence, USA TODAY
Follow Matt Krantz on Twitter @mattkrantz
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