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 fourth-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 four companies that have the analyst community buzzing, and they should be on your radar as well.
- Applied Materials Inc. (AMAT) is a technology play with robust sales and earnings growth, and a 1.2% dividend yield to boot. Over the past 90 days, analysts have hiked up their consensus EPS estimates by nearly 14% to $0.66 per share. Applied Materials is expected to post a whopping 153.8% annual earnings growth and 44.9% sales growth. AMAT earns an A in Portfolio Grader, making it a Strong Buy. Look for Applied Material’s fiscal first quarter report in mid-February.
- Banco Santander Brasil (BSBR) is one of the only banking stocks that I recommend right now, and for good reason. For the most recent quarter, analysts have increased their earnings projections by 55% to $0.14 per share. This represents 180% bottom-line growth over a year ago. Banco Santander Brasil is also expected to post 21% annual sales growth, so I’d keep an eye out for its fourth-quarter report in late January. In the meantime, BSBR is an A-rated Strong Buy.
- Northrop Grumman (NOC) is stronger than ever. Over the past 90 days, the consensus EPS estimate has risen 5% to $2.49 per share. While earnings are expected to be unchanged from a year ago, sales are expected to rise 4.1% to $5.93 billion. These are very respectable results for the defense industry. NOC is an "AA" stock, in that it receives top marks in both Portfolio Grader and Dividend Grader. NOC has a solid 1.5% dividend yield. And we won’t have to wait long for Northrop Grumman’s fourth-quarter report, which is scheduled for January 26.
- NVIDIA Corp. (NVDA): In the past three months, the consensus EPS estimate has risen from $0.56 to $0.83. Analysts are now estimating 137.1% annual earnings growth and 50.2% sales growth. Then again, NVDA has posted earnings surprises for the past several quarters running, so it’ll likely do even better. NVDA is one of my top stocks in my Blue Chip Growth newsletter, and it earns an A-rating in Portfolio Grader. NVIDIA is expected to release fourth-quarter results on or around February 9.
To put these earnings estimates into perspective, analysts forecast that year-over-year earnings for the S&P 500 will rise by just 3.0% this quarter. This means that each of the four buys above are outperforming the majority of stocks in the market and are well-positioned to continue to beat the odds in the fourth quarter, which will start on January 24 with Alcoa Inc.’s (AA) earnings report.
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."