You'll Want to Sell these 10 Stocks Before Earnings

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.

On the other hand, if analysts are slashing their EPS estimates for a certain company, that’s a big red flag.

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 first-quarter earnings season, we’re seeing interesting analyst activity regarding some of the biggest names on Wall Street. While the market may have not reacted to these downgrades 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 10 companies that have the analyst community nervous. If you own any of these stocks, I strongly recommend that you consider selling them into near-term strength.

  • Alcoa Inc. (AA): In the past 90 days, analysts have slashed their estimates from $0.09 to $0.02 EPS. Even worse, Alcoa Inc. is expected to see sales plunge 11.4% and earnings plummet 92.9% over a year ago. AA is a D-rated Sell.
  • Anadarko Petroleum Corp. (APC): In the past three months, the analyst community has lowered the consensus estimate from a loss of $0.67 per share to a loss of $1.08 per share. Anadarko has been hemorrhaging money for quite some time, and it looks like this quarter will be no exception. APC is an F-rated Strong Sell.
  • BP p.l.c. (BP): 90 days ago, analysts were calling for $0.27 earnings per share. Now, they’ve lowered their projections to a loss of $0.13 per share. BP is a D-rated Sell.
  • ConocoPhillips (COP): 90 days ago, the consensus estimate was for ConocoPhillips to post a loss of $0.22 per share. Now, the expectation is for the oil giant to post a loss of $0.85 per share. COP is an F-rated Strong Sell.
  • CSX Corp. (CSX): Over the past three months, analysts have lowered their expectations from $0.43 per share to $0.37 per share. As it stands, CSX Corp. is expected to see sales fall 11.4% and earnings drop 17.8% over a year ago. CSX is a D-rated Sell.
  • Gap Inc. (GPS): In just three months, the consensus estimate has fallen from $0.54 per share to $0.48 per share. Gap Inc. is now expected to see sales decline 2.2% and earnings to drop 14.3%. GPS is an F-rated Strong Sell.
  • Macy’s Inc. (M): Over the past three months, analysts have reduced the consensus EPS estimate from $0.51 to $0.39. Macy’s is now headed for a 30.4% year-on-year drop in earnings, and a 4.1% annual decline in sales. M is a D-rated Sell.
  • Monsanto Company (MON): In just 90 days, analysts have slashed the consensus EPS estimate from $3.01 to $2.48 per share. The expectation is that Monsanto will see earnings fall 14.2% and sales decline 7.4%. MON is a D-rated Sell.
  • Wal-Mart Stores Inc. (WMT): Over the past 90 days, analysts have reduced the consensus earnings estimate from $0.91 to $0.88 per share. Walmart is now headed for a 14.6% earnings decline and a 1.4% sales decline. WMT is a D-rated Sell.
  • Yahoo! Inc. (YHOO): Over the past 90 days, the consensus EPS estimate has been halved from $0.14 to $0.07. This means that Yahoo is expected to see earnings fall 53.3% and sales decline 12.2%. YHOO is a D-rated Sell.

Each of the stocks above are expected to lag behind its peers, and you couldn’t pay me to buy them before earnings season, which kicks off on April 11 with Alcoa Inc.’s 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."

Sincerely,

Louis Navellier

Louis Navellier

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