Earnings season is here again and we’re already seeing some of the unpredictability that gets under the skin of investors.
While there are no sure things, companies with a history of outperforming expectations are more likely to continue being successful.
A stock that beats Wall Street estimates quarter after quarter is not only proving its future potential, but also showing that it can manage expectations.
Below are three companies that know how to handle earnings season… and have a great Zacks Rank:
Cisco Systems (CSCO)
If you’re looking for a technology powerhouse that knows what to do during earnings season, look no further than networking giant Cisco Systems (CSCO).
The company has an enviable record of beating the Zacks Consensus Estimate that stretches back years with no misses.
As with most large caps that have a long history of success, the beats aren’t huge. However, they are consistent, which is what investors love to see during an unpredictable earnings season.
Most recently, it reported earnings per share of 78 cents in its fiscal third quarter, which topped our estimate by a little over 1% and improved more than 18% from last year.
Revenue of $12.96 billion also beat expectations and improved 6% year over year.
Earnings estimates for this fiscal year (ending this month) and next fiscal year (ending July 2020) are up slightly from three months ago but have been largely unchanged since then.
Most importantly though, the Zacks Consensus Estimate for next is year is $3.43, which suggests an 11.4% improvement from this year’s outlook of $3.08.
Shares are up approximately 35% so far this year, which puts it right in line with the highly-ranked Computer – Networking industry. The space is in the top 15% of the Zacks Industry Rank… largely because Cisco is a member.
The company has big plans moving forward and it’s not afraid to make an acquisition to get there. In its third quarter, CSCO closed acquisitions of semiconductor company Luxtera and network infrastructure analytics company Singularity Networks.
Earlier this month, it announced an intention to buy Acacia Communications, a designer and manufacturer of high-speed, optical interconnect technologies.
CSCO will report again on August 21. Its earnings season success looks to continue with a positive Earnings ESP of 1.6% for the quarter. Analysts see 82 cents, which would be about 17% better than the previous year.
Enterprise Products Partners (EPD)
The pipeline that investors care most about is the one that stretches from the market through their portfolios and into their pockets.
Enter Enterprise Products Partners (EPD). As a leading provider of midstream energy services, this company has approximately 50,000 miles of pipelines spread across the country.
Of course, these pipelines connect the major U.S. shale plays and transport gas, liquids and refined products.
However, EPD can also transport money to investors. It’s part of the Oil & Gas – Production Pipeline – MLB space, which is in the top 32% of the Zacks Industry Rank with the 83rd spot out of 256 industries. The space is up 23.8% so far this year.
But EPD has jumped more than 27% in that time and has put together six straight quarters of better-than-expected earnings.
In the first quarter, it earned 57 cents per share, which beat our expectation by more than 21% thanks to higher transportation volume in three of its four segments.
The company now enjoys a four-quarter average surprise of more than 17%. And it doesn’t look like that will end soon, as it has a positive Earnings ESP of 3.6% for the quarter coming before the bell on July 31.
The Zacks Consensus Estimate for this year has climbed about 7% in the past three months, while next year is up around 4.3% in that time.
But EPD has a lot more upside potential from here. It has stable fee-based revenues and the potential for above-average growth in distributable cash flows due to midstream projects under construction.
Arch Capital Group (ACGL)
Arch Capital Group (ACGL) has beaten the Zacks Consensus Estimate for six consecutive quarters… but that’s only part of the story.
Except for an extremely rare miss in October 2017, this insurance company has a penchant for beating expectations that runs back several years.
And it looks all set to do it again when it reports after the bell on July 29. It has a positive Earnings ESP for the quarter of more than 2.8%.
ACGL has been benefitting from improving premiums and net investment income, which was on full display in its first quarter report from late April.
Earnings per share of 67 cents eclipsed the Zacks Consensus Estimate by more than 8%. The four-quarter average surprise is now nearly 15%.
Operating revenue of $1.5 billion topped our estimate by 15% and improved from last year by 12.1%. Gross premiums written advanced 13% to $2.1 billion.
Earnings estimates continue to advance heading into the next quarterly report. The Zacks Consensus Estimate for this year is up 6.3% over the past 90 days to $2.70. Nearly half of that improvement – or 2.7% -- came in the past 30 days.
Analysts see $2.90 for next year, which is up 4.3% in the past 3 months and 1.8% in 30 days. It also suggests year-over-year improvement of 7.4%.
These stocks were found using the EPS Growth, Revisions & Positive Surprises premium screen, which search for Zacks Rank #1 (Strong Buy) stocks with a history of positive surprises that look posed to continue outperforming.
Click here to take a look at the parameters of this screen and the stocks that have passed the test.
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