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 five companies that have the analyst community buzzing, and they should be on your radar as well.
- ABIOMED Inc. (ABMD): In the past three months, the consensus EPS estimate has risen from $1.84 to $1.88. Analysts are now estimating 43.6% sales growth and 77.8% earnings growth. By comparison, the rest of the industry is headed towards a 39% year-on-year drop in earnings. ABMD is a B-rated Buy .
- Apple, Inc. (AAPL): In the past three months, the consensus EPS estimate has risen from $1.84 to $1.88. Analysts are now estimating 21.1% sales growth and 32.4% earnings growth. By comparison, the rest of the industry is headed towards 2.0% bottom-line growth. AAPL is a B-rated Buy .
- Avago Technologies Ltd. (AVGO): In the past two months, the consensus EPS estimate has risen from $2.31 to $2.38. Analysts are now estimating 15.0% sales growth and 19.6% earnings growth.. AVGO is an A-rated Strong Buy .
- Horizon Pharma PLC (HZNP): In the past 90 days, the consensus EPS estimate for HZNP has increased from $0.37 per share to $0.39 per share. This translates to 62.5% earnings growth and 143.7% sales growth. ULTA is an A-rated Strong Buy .
- Ulta Salon, Cosmetics & Fragrance Inc. (ULTA): In the past 90 days, the consensus EPS estimate for ULTA has increased from $1.03 per share to $1.05 per share. This translates to 15.4% earnings growth and 18.2% 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 4.5% this quarter. This means that each of the five buys above are outperforming the majority of stocks in the market and are well-positioned to continue to beat the odds in the third quarter, 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."