If you’ve used my Portfolio Grader tool or have kept up with this blog, you know that I put a lot of weight on what analysts are saying about any given stock. And an effective way to judge how the analyst community feels about a stock is tracking their earnings estimates for the quarter.
Upward revisions are an important indicator of a company’s future success. You see, analysts are paid to estimate a company’s earnings outlook. If an analyst makes a wrong estimate that ends up costing investors money, that analyst could be out of a job. If a number of Wall Street analysts start to move their forecasts higher, it’s a good bet that the stock will outperform expectations and deliver market-beating returns to investors since positive revisions are never made lightly.
I know that during earnings season, I focus mainly on sales and earnings growth. But even though we’re in the lull between earnings, we’re seeing interesting analyst activity regarding some of the hottest names on Wall Street. While the market may have not reacted to these upgrades just yet, I want you to be prepared for what’s to come the next earnings season.
So without further ado, here are five companies that have the analyst community buzzing, and they should be on your radar as well.
- Best Buy Co., Inc. (BBY): In the past two months, estimates have been revised up 22%. Analysts now expect 175% year-on-year earnings growth this quarter. Meanwhile, the industry average is 30% annual earnings growth. BBY is a strong buy.
- ManpowerGroup Inc. (MAN): In the past month, the consensus estimate has been hiked up 19% to $1.08 per share. Analysts now expect 37% earnings growth. MAN is a buy.
- Netflix, Inc. (NFLX): In the past three months, the consensus estimate has climbed 9%. Analysts now forecast 22% sales growth and a whopping 269% earnings growth. NFLX is a strong buy.
- Tesla Motors, Inc. (TSLA): In the past three months, analysts have completely reversed their projections. Earlier, the consensus was that Tesla Motors would post a net loss of $0.03 per share. Now the consensus calls for earnings of $0.12 per share. This translates into 113% earnings growth! TSLA is a strong buy.
- Whirlpool Corp. (WHR): In the past three months, earnings estimates have risen 15%. Analysts now expect 47% earnings growth. WHR is a strong buy.
To put these earnings estimates into perspective, analysts forecast that the average S&P 500 company will grow earnings by 15.1% this quarter. This means that each of the five buys above are well-positioned to win big next earnings season, which kicks off on October 8. If you want to see how the analyst community feels about one of your holdings, feel free to run it through my Portfolio Grader screening tool. After hitting "submit," you’ll see that one of the components of the stock’s Fundamental Grade is "Analyst Earnings Revisions."