Top Ten Earnings Surprise Predictions On Track So Far
A week into the earnings season, the second quarter’s StarMine earnings surprise predictions continue to offer insight to investors.
With about a fifth of the companies in the S&P 500 having reported their second-quarter results as of the end of last week, at least two of the ten companies identified by the StarMine research team as being among those most likely to report earnings that either beat or fall well short of analysts’ estimates have delivered the positive surprises that we had anticipated.
Yahoo Inc. (YHOO.O), for instance, reported a significantly larger profit than analysts had expected, of 27 cents a share. West Fraser Timber Ltd. (WFT.TO), which had already had a Predicted Surprise of 35%, fared even better, announcing earnings of 96 Canadian cents a share, while analysts had predicted a mere 35 cents and even the SmartEstimate, which puts more weight on the most recent forecasts and those by the highest-ranked analysts, was only 47 cents a share.
All ten recommendations, selected based on the SmartEstimate and the Predicted Surprise, are summarized briefly below for your reference. Historically, our selections have demonstrated an accuracy rate of about 70%, giving investors an edge when it comes to positioning themselves ahead of these earnings announcements. In the first quarter of 2012, the StarMine research team had a 100% accuracy rate, as seen in this report card. When earnings season wraps up, we’ll report back on how the other companies fared – and give you a look at what these companies said about their outlook for the coming quarters.
Here is the list of North American companies that we believe are poised to deliver pleasant surprises or nasty shocks when they report their earnings for Q2 2012, along with some analyst views on the company:
TOP POSITIVE SURPRISE FORECASTS:
1. Yahoo! Inc. sold half of its controversial stake in Chinese portal Alibaba, and is focusing on its core competency – advertising. Yahoo! Beat estimates with earnings of 27 cents a share. It also announced a new CEO – Marrisa Mayer.
2. Mine Safety Appliances (MSA.N) is benefitting from the increased CapEx spending by natural resource companies on mining and exploration and saw record revenues in Q1.
3. US Airways (LCC.N) Sky-high jet fuel costs have been a major headache for all the airlines, but US Airways may well see its earnings take off as that headwind vanishes.
4. Netflix Inc. (NFLX.O) marketing efforts pay off, big time, and analysts are raising their earnings estimates.
5. West Fraser Timber Ltd. is making the most of the housing market inching back to life, and is poised to see higher lumber sales translate into stronger-than-expected earnings growth.
TOP NEGATIVE SURPRISE FORECASTS:
1. Chevron Corp. (CVX.N) The slump in crude oil prices may spell trouble for Chevron’s earnings, especially when combined with the company’s high capital spending.
2. Kar Auction Services (KAR.N) is struggling in a weak economy and low accident rates cause lower rates of car auctions by insurance companies.
3. Fortress Investment Group (FIG.N) may have capital to invest, but its earnings power is flagging amidst sub-par performance by some of its alternative investment vehicles.
4. Canadian Pacific Railway Ltd. (CP.N) is adversely affected by the workers union strike, and the new leadership shakeup.
5. Westport Innovations Inc. (WPRT.O) is suffering as lower oil prices have cut demand for its pricier natural gas truck engines.
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