Earnings Crushers: Unveiling Q4’s 3 Top Stock Superstars
As of March 1, virtually all S&P 500 companies had already reported earnings. Approximately 73% beat the earnings estimates, leaving investors with plenty of top stock superstars to choose from that blew through Wall Street’s expectations. Identifying the best earnings winners from this profitable bunch will be important for investors.
The good news is that these companies’ earnings on an aggregated basis increased by 4% over Q4 2022. That would be the second consecutive quarter of earnings growth. The bad news is that the five-year average for index companies beating the consensus is 77%, 400 basis points higher than in Q4 2023, while 68% of companies beat revenue estimates on average over the past five years, 400 basis points higher than Q4 2023.
The company with the biggest positive earnings surprise in the fourth quarter was Illumina (NASDAQ:ILMN), beating the earnings-per-share (EPS) estimate by 652%. Who else beat by more than 20% in the past quarter? Here are three worth owning for the long haul.
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Corteva (CTVA)
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Corteva (NYSE:CTVA) reported Q4 2023 results on Jan. 31. Its operating EPS was 15 cents, 150% higher than the analyst estimate of 6 cents. Its revenue of $3.71 billion beat the analyst estimate by $120 million.
For 2023, the agricultural chemical and seed company generated non-GAAP organic revenue of $16.99 billion, 3% lower than in 2022, with EPS of $2.69, 1% higher than a year earlier. Revenues were up in North America and EMEA (Europe, Middle East, and Africa), offset by declines in Latin America and Asia Pacific.
Free cash flow (FCF) in 2023 was $1.21 billion, four times more than in 2022, but 45% lower than in 2021. At the midpoint of its guidance, FCF is expected to be $1.75 billion in 2024, 45% higher than in 2023. On the top line, it expects $17.55 billion in revenue in 2024, 3.3% higher than in 2023.
Since it announced earnings at the beginning of February, its shares are up 21% but still down from its December 2022 five-year high of $67. It’s not expensive based on its historical valuation, trading 19.5x the company’s 2024 EPS estimate of $2.80. Its fair value put its on the list of earnings winners that, if held for the long term, could pay off in 2024.
Huntington Ingalls Industries (HII)
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Huntington Ingalls Industries (NYSE:HII) is America’s largest military shipbuilder. Based in Virginia, it has been in business for more than 135 years. The company reported Q4 2023 results on Feb. 1. Its EPS was $6.90, 62% higher than the analyst estimate of $4.31. Its revenue of $3.18 billion beat the analyst estimate by $400 million.
It had a strong year in 2023, with a 7.3% increase in revenue to $11.45 billion. Regarding profits, its operating income was $781 million, 38.2% higher than a year earlier. Its guidance for 2024 is $11.68 billion (2% higher) with a FCF of $650 million, down slightly from 2023. Over the next five years, its cumulative FCF through 2028 is expected to be $3.6 billion.
While Huntington isn’t a growth company in the traditional sense, it continues to gain plenty of new business. In 2023, it added $12.5 billion in new contract awards, bringing its total backlog to $48 billion. At current annual revenue generation, that’s about four years of revenues.
Over the past 10 years, Huntington has had an annualized total return of 12.05%, 148 basis points higher than its aerospace and defense industry peers. With a strong history and indicators pointing towards a stronger future, HII is one of the earnings winners to invest in now.
Target (TGT)
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Target (NYSE:TGT) reported Q4 2023 results on March 5. Its EPS was $2.98, 24% higher than the analyst estimate of $2.41. Its revenue of $31.9 billion beat the analyst estimate by $70 million.
From a growth perspective, Target is the most interesting company on this list. While the company’s fourth-quarter and full-year results were both reasonably good, what CEO Brian Cornell had to say about 2024 and beyond moved its shares 13% higher since it announced its results on March 5 before the markets opened.
One of the things Target has done in recent years to better utilize its store network was to create its stores-as-hubs strategy, which combines the customer in-store and online experience, with same-day fulfillment. It plans to continue investing in this strategy over the next decade.
As far as its growth strategy, it plans to open more than 300 stores over the next 10 years, many of them the larger variety, over 120,000 square feet, contributing $15 billion in annual revenue once they’re all opened. At the same time, it plans to remodel up to 2,000 of its existing stores to make them more attractive to shoppers.
Despite Target’s big move from its November 52-week low just above $100, it’s well down from its five-year high above $260 in 2021. The actions announced during earnings are meant to get TGT stock back there. Shareholders ought to be encouraged that it’s going on offense, and it looks like it could be another one of the earnings winners of 2024.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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