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 second-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 six companies that have the analyst community buzzing, and they should be on your radar as well.
- Apple, Inc. (AAPL): In the past three months, the consensus EPS estimate has risen from $1.67 to $1.76. Analysts are now estimating 29.8% sales growth and 37.5% earnings growth. By comparison, the rest of the industry is headed towards 0.4% bottom-line growth. AAPL is an A-rated Strong Buy.
- Dollar General Corporation (DG): In the past 60 days analysts have revised the consensus earnings estimate from $0.93 per share to $0.94 per share. Meanwhile, Dollar General is expected to post 8.7% sales growth and 13.3% earnings growth. DG is a B-rated Buy.
- Foot Locker, Inc. (FL): In the past 60 days the consensus EPS estimate has increased from $0.68 to $0.69. Analysts are also looking for 7.8% earnings growth for the second quarter. FL is a B-rated Buy.
- Home Depot, Inc. (HD): In the past 60 days analysts have revised their consensus EPS estimate higher from $1.70 to $1.71. This translates to a 12.5% earnings growth. Analysts are also looking for 3.7% sales growth. And with the recent increase in building permits, HD is sure to benefit. HD is an A-rated Strong Buy.
- Hospira, Inc. (HSP): In the past 90 days the consensus EPS estimate has risen from $0.59 to $0.80 per share, representing a nearly 36% upward revision. Hospira is now expected to post 26.3% sales growth and 11.1% earnings growth. HSP is a B-rated Buy.
- Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA): In the past 90 days consensus EPS for ULTA has increased from $1.09 per share to $1.12 per share. This translates to 19.1% earnings growth and 18.4% sales growth. ULTA is an A-rated Strong Buy.
To put these earnings estimates into perspective, analysts forecast that year-over-year earnings growth for the S&P 500 will decline by 4.7% this quarter. This means that each of the six buys above are outperforming the majority of stocks in the market and are well-positioned to continue to beat the odds in the second quarter, which kicks off on July 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.”