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Screen Of The Week 01/25/2011: Find Stocks Poised For Positive Sales Surprises
It's been a while since I saw sales surprises outstrip EPS surprises. And I think this is a good sign. And since the tone has been set for the rest of the earnings season, companies that miss on the revenue side will likely not get their day in the sun this time. In 2009 and much of 2010, the bar was set pretty low. It seemed like once the market turned around, all a company had to do was not go out of business and their stocks went up. But after cutting costs and increasing profits, the market has started to demand a little more. You can only cut costs so much. Now, with the economy doing better, investors are raising the bar and demanding that companies start showing better-than-expected sales growth as well. These companies will be the standout performers this earnings season...and in the coming earnings seasons as well. Why? Because after cutting costs and increasing margins, the next step is growing sales. And as sales grow, those sales will be worth more than they were in the past when you factor in higher profit margins. And that means greater earnings as well, which of course should beget higher stock prices. So how do you find companies that'll positively surprise on sales? While there's no such thing as a sure thing in stocks, there are better probabilities. Of the 68% of companies that positively surprised on sales, 75% of those surprised in the previous quarter as well. Similarly, more than half of the companies that negatively surprised posted a negative sales surprise in the previous quarter. This all makes sense since companies that positively surprise in the past have a tendency of positively surprising in the future. Likewise, companies that negatively surprise in the past have a tendency to negatively surprise in the future. So in this week's screen, we'll be putting the odds in our favor for stocks reporting positive sales surprises (and earnings surprises too). Parameters * Last Sales Surprise > 0 * Last EPS Surprise > 0 * Q0 Sales Estimate Revisions – last 4 weeks > 0 * Q0 Earnings Estimate Revisions – last 4 weeks > 0 Just like positive surprises usually lead to more positive surprises, the same is true with earnings estimate revisions. Positive revisions usually lead to more positive revisions. * Next EPS Report Date > January 31, 2011 Here are 5 stocks that are due to report in the coming weeks that could be poised for a positive sales surprise: • AFL - Aflac Inc. • ATK - Alliant Techsystems Inc. • AWK - American Water Works Co., Inc. • NBL - Noble Energy, Inc. • PWER - Power-One, Inc. All of these stocks will soon be reporting. And with both positive earnings surprises and positive sales surprises last time out, coupled with upward earnings estimate revisions, the odds are in their favor for another positive surprise. Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software. Sign up now for your two week free trial and learn how. Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. Article Directory: http://www.articledashboard.com Kevin Matras is the Research Wizard Product Manager and weekly contributing Editor at Zacks Investment Research who creates and writes the Zacks Commentary Screen of the Week and Know Your Options. For more information, visit www.zacks.com. |
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