5 Earning Season Winners

Earnings season continues to remain mixed as investors contemplate hits and misses of the second quarter. I have to admit, it can be overwhelming to sort through so many reports and pick out the winners. The headlines are only concerned about the highlights of earnings reports. But a smart investor knows that earnings reports are just a snapshot of a much bigger picture. So, a disappointing quarterly report doesn’t define if a stock is poor investment and a single strong report doesn’t determine if a stock is worth a buy rating.

That’s why it’s important to take all metrics into account when looking for cream-of-the-crop investments, especially during volatile times. So, I’ve decided to do the work for you and filter through the massive amount of reports with the help of my Portfolio Grader tool. The following stocks have not only reported strong quarterly reports but are also rated as Strong Buys in Portfolio Grader.

Strong buying pressure and solid fundamental scores are really what make these stocks great buys. Take CVS Health Corp. (CVS), for example. The company released second-quarter bottom-line results that exceeded expectations. Compared with the year ago quarter, net revenues climbed 7.4% to $37.16 billion, and same-store sales ticked up 0.5%. CVS Health Corp.’s net revenues missed the $37.18 billion consensus estimate by a hair.

Over the same period, net earnings climbed 1.6% to $1.27 billion, or $1.12 per share. Adjusted earnings, which exclude acquisition costs, rose 8% to $1.22 per share. Analysts were looking for $1.20 EPS, so CVS Health Corp. posted a 1.7% earnings surprise.

Looking ahead to FY 2015, the company narrowed its adjusted earnings forecast to a range of $5.11 to $5.18 per share. Previously, CVS Health Corp. was targeting earnings between $5.08 and $5.19 per share. The revised guidance is still in line with the Street view of $5.16 earnings per share.

Reynolds American Inc. (RAI) is another stock with strong fundamental and quantitative ratings that rallied after the tobacco company beat Q2 earnings expectations. Notably, domestic cigarette sales increased 5.6%, aided by the recent addition of the Newport brand. Compared with the year ago quarter, sales increased 11% to $2.40 billion. This missed the $2.44 billion consensus estimate by a hair. Over the same period, adjusted earnings climbed 14.6% to $1.02 per share. Analysts were looking for $0.97 EPS, so Reynolds American posted a healthy 5.2% earnings surprise.

Looking ahead to FY 2015, Reynolds American now expects adjusted earnings between $1.90 and $2.00 per share. This is higher than its previous range of $1.83 to $1.90 per share. Reynolds American’s board also approved a 7.5% dividend increase, and a two-for-one stock split. Shareholders of record on August 17 will receive one additional share of RAI for each share they own. The stock split will go into effect on August 31.

So, while it’s true that this current earnings season has been lukewarm, there have also been some great winners.

I’m a big picture guy, and while earnings reports are important for stock temperature checks, micro-focusing on snapshot without additional information is just not smart strategy. That’s why I recommend checking the historical fundamental and quantitative performance of stocks and the best way to do that is on my Portfolio Grader website.


Louis Navellier

Louis Navellier

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