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 I usually focus on sales and earnings growth when these reports come out. But now that we’re on the cusp of third-quarter earnings season, 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 for the impending earnings season.
To get to the point, here are five companies that have the analyst community buzzing, and they should be on your radar as well.
- Chipotle Mexican Grill, Inc. (CMG): In the past three months, the consensus EPS estimate has risen from $3.44 to $3.80. Analysts are now estimating 27.9% sales growth and 42.9% earnings growth. By comparison the rest of the industry is headed towards 16.4% bottom-line growth. CMG is an A-rated Buy.
- LyondellBasell Industries NV (LYB): In the past 60 days analysts have revised the consensus earnings estimate from $2.04 per share to $2.22 per share. This translates to 47% bottom-line growth. Meanwhile, LyondellBasell is expected to post 6.4% sales growth. LYB is an A-rated Buy.
- NVIDIA Corporation (NVDA): In the past 60 days the consensus EPS estimate has jumped from $0.24 to $0.28—a 17% increase. Analysts are also looking for 14% sales growth for the third quarter. NVDA is a B-rated Buy.
- Skechers U.S.A. Inc. (SKX): In the past 60 days analysts have revised their consensus EPS estimate higher from $0.80 to $0.90 per share—a 12.5% increase. This translates to 69.8% earnings growth, well above the 25.8% industry average. Analysts are also looking for 21.7% sales growth. SKX is an A-rated Buy.
- Skyworks Solutions Inc. (SWKS): In the past 60 days the consensus EPS estimate has risen from $0.87 to $1.01 per share, representing a 16% upward revision. Skyworks Solutions is now expected to post 42.2% sales growth and 57.8% earnings growth. SWKS is an A-rated Buy.
To put these earnings estimates into perspective, analysts forecast that the average S&P 500 company will grow earnings by 6.5% this quarter. This means that each of the five buys above are well-positioned to win this earnings season, which kicks off on October 8 with Alcoa Inc.‘s (AA) earnings report after the close.
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."