The Surprise Factor
Equity strategist Joseph J. Abbott of earnings tracker IBES Inc. says these companies could be candidates to post an earnings surprise this reporting season, based on recent quarterly results and analysts’ revisions for the latest quarter. The SUE (standardized unexpected earnings) scores listed are numerical indications of the magnitude of companies’ recent earnings surprises. Also listed are analysts’ mean earnings estimates for the latest quarter and the three-month percentage change in that forecast. Significant SUE scores tend to go to companies that beat estimates clustered in a narrow range. In other words, a company with a high SUE score has been pleasantly surprising the majority of analysts lately, while low scorers have been unpleasantly surprising. The sampling includes Abbott’s top picks in each category, ranked by percentage change in earnings estimates.
Positive Surprise Candidates
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4th-qtr. 3rd-qtr. 1st-qtr. 3-mo. SUE SUE mean % chg. in Company Ticker score score EPS est.* estimate Georgia Pacific GP 8.1 1.2 $0.93 518.7% Applied Materials AMAT 3.0 2.8 0.25 153.5 Charles Schwab SCH 2.5 2.0 0.33 51.8 Lucent Technologies LU 1.3 1.0 0.29 42.9 America Online AOL 3.5 2.4 0.09 25.7 Navistar International NAV 1.1 14.8 1.30 22.6 Corning GLW 1.6 3.0 0.33 14.9 Centex CTX 3.6 2.7 0.96 14.0 Providian Financial PVN 3.1 1.2 0.71 12.0 Adobe Systems ADBE 7.4 3.2 0.63 10.3 Intel INTC 4.7 3.9 1.10 9.9 Apple Computer AAPL 1.3 4.1 0.57 8.4 Ball BLL 1.6 1.6 0.36 6.1 Kroger KR 2.1 2.5 0.51 5.9 BMC Software BMCS 3.9 2.2 0.45 5.9 Amgen AMGN 3.7 2.1 0.44 5.5 Microsoft MSFT 15.7 8.0 0.63 5.2 Home Depot HD 1.8 2.3 0.28 4.1 Paychex PAYX 2.4 1.0 0.22 3.8 Airtouch Comm. ATI 1.4 1.7 0.33 3.6 TJX TJX 4.3 9.6 0.32 3.5 Lowes LOW 2.8 3.1 0.33 3.3 B.F. Goodrich GR 9.7 1.6 0.84 2.4 Compuware CPWR 2.4 3.2 0.29 2.1 Motorola MOT 1.1 5.7 0.24 1.9 VF VFC 1.9 1.1 0.68 1.1 Tyco TYC 1.3 2.5 0.65 1.0 United Technologies UTX 1.9 1.1 1.21 0.9 Gap GPS 3.5 3.0 0.27 0.9 Hartford Financial HIG 1.3 1.9 0.92 0.7 Tellabs TLAB 2.8 3.6 0.49 0.4 Computer Associates CA 1.8 2.6 0.81 0.3 Wal-Mart Stores WMT 3.8 1.9 0.42 0.1
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Negative Surprise Candidates
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4th-qtr. 3rd-qtr. 1st-qtr. 3-mo. SUE SUE mean % chg. in Company Ticker score score EPS est.* estimate USX-Marathon MRO -2.6 -1.9 -0.06 -118.0% Hilton Hotels HLT -1.0 -1.5 0.16 -45.6 Williams Cos. WMB -10.9 -3.4 0.22 -36.9 CSX CSX -1.2 -1.4 0.35 -29.6 Columbia HCA COL -4.7 -1.2 0.32 -20.5 Dover DOV -5.5 -6.1 0.33 -19.2 Union Planters UPC -9.6 -21.4 0.76 -13.3 Provident PVT -1.4 -1.1 0.54 -6.9 Harrahs Entertainment HET -4.7 -2.9 0.28 -5.5 U.S. Bancorp USB -7.9 -1.2 0.52 -4.6
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*Operating after-tax earnings per share
Source: IBES Inc.
