My long-time readers know that when push comes to shove, I consider upward revisions to be a powerful indicator of earnings surprises. Unfortunately, the reverse is true as well: Downward earnings revisions are not a good sign because they oftentimes precede upsetting quarterly results. Lately, analysts have been taking a more pessimistic stance on several S&P 500 companies—this has dragged down the consensus estimate for the index in the current quarter. I don’t want anyone to be caught unawares, so I’ve been running the numbers and have isolated 10 of these "slippery slope" stocks. Take a look:
Ten Slippery Slope Stocks
|Symbol||Company Name||Quantitative Grade||Fundamental Grade||Total Grade|
|ABX||Barrick Gold Corporation||F||D||F|
|NBL||Noble Energy, Inc.||F||D||F|
|OXY||Occidental Petroleum Corp.||F||D||D|
- Amazon.com, Inc.
(AMZN): In the past month, EPS estimates have plunged 74%. Analysts now see a 64.7% drop in earnings for this quarter. AMZN is a Sell.
- Barrick Gold Corporation (ABX): In the past three months, estimates have been revised down by 37%. Analysts now forecast a 16.2% drop in sales and a 67.6% plunge in earnings for this quarter. ABX is a Strong Sell.
- Apache Corporation
(APA): In the past three months, the consensus estimate has plummeted by 33%. Analysts now expect a 38.9% drop in earnings for this quarter. APA is a Strong Sell.
- BP p.l.c.
(BP): In the past 90 days, analysts have revised their estimates down by 35%. The consensus now calls for a 22.2% reduction in earnings. BP is a Strong Sell.
- ConocoPhillips (COP): In the past 60 days, estimates have fallen by 42%. Analysts now expect a 4.2% year-on-year drop in sales and a 40.7% decline in earnings for this quarter. COP is a Sell.
- Freeport-McMoRan, Inc. (FCX) In the past 90 days, analysts have slashed their estimates down by 47%. The consensus now calls for a 13.9% drop in sales and a 53.6% dive in earnings. FCX is a Strong Sell.
- Loews Corporation (L): In the past two months, estimates have fallen by 25%. Analysts now expect a 26.6% decline in earnings for this quarter. L is a Strong Sell.
- Noble Energy, Inc.
(NBL): In the past 90 days, the consensus estimate has plunged 43%. The consensus now calls for an 18% reduction in earnings. NBL is a Strong Sell.
- Occidental Petroleum Corp. (OXY): In the past three months, estimates have been reduced by 41%. Analysts now expect a 45.3% drop in earnings for this quarter. OXY is a Sell.
- Vale S.A. (VALE): In the past three months, estimates have been lowered by 33%. Analysts now expect a 30.9% drop in sales and a 67.7% plunge in earnings. VALE is a Strong Sell.
Fortunately, there are two easy ways to check out how your holdings are perceived by the analyst community. The first way is to use Portfolio Grader, which includes a letter grade for analyst earnings revisions. If you plug Amazon Inc. (AMZN) into my stock screening tool, you’ll see that it receives an F for earnings revisions.
There are also several financial news websites which provide the latest earnings estimates for free. I personally like looking at Yahoo! Finance’s analyst estimates page for each stock. Using AMZN as our example, you can see that the consensus estimate has been moving around—from $0.69 per share 90 days ago to $0.18 currently.
With these tools at your disposal, there’s no reason not to stay on top of your stocks this earnings season. Now that Alcoa Inc. (AA) has reported earnings, more and more earnings reports will be released each day. I encourage you to run all of your holdings through Portfolio Grader to ensure that you’re ready for what’s ahead.