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 in the swing of first-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 several companies that have the analyst community buzzing, and they should be on your radar as well.
- Copart Inc. (CPRT): Over the past 90 days, analysts have hiked up their EPS estimates from $0.45 to $0.50, an 11.1% increase. The consensus estimate is calling for 17.9% annual sales growth and 35.1% annual earnings growth. CPRT is an A-rated Strong Buy.
- DXC Technology Company (DXC): Over the past 90 days, the consensus EPS estimate has jumped from $2.04 to $2.23–a 9.3% increase. Right now, analysts are calling for a whopping 224% annual sales growth and 93.9% annual earnings growth. DXC is an A-rated Strong Buy.
- Hollysys Automation Technologies Ltd. (HOLI): Over the past ninety days, the consensus EPS estimate has jumped from $0.25 to $0.44–a 43.2% increase. The consensus estimate is for 30.4% annual sales growth and 100% annual earnings growth. HOLI is an A-rated Strong Buy.
- NVIDIA Inc. (NVDA): Over the past ninety days, the consensus EPS estimate has jumped from $0.97 to $1.45–a 49.5% increase. The consensus estimate is for 49.3% annual sales growth and 83.5% annual earnings growth. NVDA is an A-rated Strong Buy.
- Take-Two Interactive Software, Inc. (TTWO): Over the past 90 days, analysts have revised the consensus EPS estimate up from $0.57 to $0.63, a 10.5% increase. The current estimate is for 9.4% annual sales growth and a 7.4% drop in earnings, but given the company’s track record of earnings surprises, I expect that it’ll do even better. TTWO is an A-rated Strong Buy.
To put these earnings estimates into perspective, analysts forecast that the S&P 500 will post 24.2% year-over-year earnings growth for the current quarter. This means that each of these stocks are outperforming the majority of stocks in the market and are well-positioned to continue to beat the odds.
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.”