By Philip van Doorn
Investors love to see steady increases in sales and profit estimates, but these have been declining for most sectors
Over the long haul, stock prices are pushed higher by steady increases in estimates for companies' sales and earnings. But this process has been reversed recently for many sectors and scores of companies -- since June 30, consensus 12-month sales estimates have been cut for 172 companies in the S&P 500.
Still, there are always exceptions, and some of those are listed below, followed by a round up of estimate changes by sector and a list of 20 companies in the S&P 500 that have suffered the largest recent cuts in sales estimates.
Let's begin by accentuating the positive.
Biggest sales estimate increases among the S&P 500
When looking at individual companies, it can be more helpful to begin with changes in revenue projections, rather than earnings, because of the accounting vagaries that can distort any company's profit.
Here are the 20 companies in the S&P 500 with the largest increases in consensus 12-month sales estimates since June 30:
Company Ticker Change in rolling 12-month sales estimate since June 30 Change in rolling 12-month EPS estimate since June 30 Price change since June 30 2022 price change P/E P/E as of June 30 Take-Two Interactive Software Inc. TTWO 66% 10% -4% -34% 19.0 21.6 Albemarle Corp. ALB 35% 73% 36% 22% 12.6 15.9 Enphase Energy Inc. ENPH 16% 22% 56% 66% 63.6 49.8 Tesla Inc. TSLA 13% 16% 34% -15% 55.9 48.4 Exxon Mobil Corp. XOM 11% 16% 6% 49% 8.0 8.7 Hess Corp. HES 11% 2% 10% 58% 10.9 10.1
Carnival Corp. CCL 10% N/A 12% -52% N/A N/A Kinder Morgan Inc. Class P KMI 10% 3% 5% 10% 14.3 14.2 Halliburton Co. HAL 9% 13% -14% 18% 10.5 13.8 EOG Resources Inc. EOG 9% 1% 7% 33% 7.5 7.1 Lamb Weston Holdings Inc. LW 9% 8% 9% 23% 25.1 24.9 Cardinal Health Inc. CAH 8% 0% 29% 31% 12.4 9.6 Camden Property Trust CPT 8% 14% -9% -31% 41.4 52.1 Royal Caribbean Group RCL 8% N/A 34% -39% 64.4 N/A Prologis Inc. PLD 8% 4% -8% -36% 27.6 31.1 Norwegian Cruise Line Holdings Ltd. NCLH 8% N/A 31% -30% N/A N/A Atmos Energy Corp. ATO 8% 2% 0% 8% 18.9 19.3 VICI Properties Inc. VICI 8% 3% 7% 6% 15.3 14.7 Comerica Inc. CMA 8% 16% 6% -11% 7.8 8.5 Schlumberger NV SLB 7% 15% 5% 25% 14.5 15.8 Source: FactSet
Click on the tickers for more about each company, including news coverage, financials and charts. Then read Tomi Kilgore's detailed guide to the wealth of information available for free on MarketWatch quote pages.
Take-Two Interactive Software Inc. (TTWO) tops the list. The company owns Rockstar Games, which develops the Grand Theft Auto series of videogames, along with several other popular gaming franchises. Jefferies analyst Andrew Uerkwitz cited the company's "unprecedented wave of content" when raising his target price for the shares by 66% to $200 on Sept. 9. Anticipation is building for the release of GTA VI, although Take-Two has made no specific announcement, other than to say that it has allocated more resources to that game, while thanking staff members who have supported GTA V and its expansions since its release in 2013.
Uerkwitz rates Take-Two a "buy" and wrote in a note to clients that he would "happily wait patiently" for the new game's release. When GTA VI is announced, the analyst expects "a rerating in the valuation and consistent stock appreciation as excitement and anticipation builds."
Tesla Inc. (TSLA) ranks fourth the list, with its new factories in Texas and Germany expected to feed continued production increases, along with a boost to demand from renewed electric-vehicle tax subsidies in the Inflation Reduction Act an the expected availability of its Cyber Truck in 2023.
For Exxon Mobil Corp. (XOM), earnings estimates have continued to increase, despite the pull back in the price of West Texas crude oil WBS. 1.
Lower on the list is Comerica Inc. (CMA), the Dallas-based bank that has already seen a large increase in its net interest income. The bank tops a list of lenders expected to take best advantage of the rising-interest-rate environment.
Companies with "N/A" for the current forward price-to-earnings ratio are those expected to show negative EPS over the next 12 months.
Forward P/E is the most commonly used price valuation for stocks. This is a company's current share price divided by the consensus 12-month earnings-per-share estimate among analysts working for brokerage firms. If the rolling 12-month earnings estimates increase steadily, higher stock prices are supported over time. Investors are used to these numbers going up quarter-to-quarter as companies file financial statements.
P/E ratios are down, but maybe not down enough
There is pressure on stocks because of the Federal Reserve's tightening of monetary policy in an effort to bring inflation under control. This has pushed interest rates higher, making bonds a viable choice for many investors who had shied away from them for years.
During his press conference on Sept. 21 following the Federal Open Market Committee's announcement of its decision to increase the federal-funds rate by another 0.75 percentage points, Federal Reserve Chairman Jerome Powell said "no one knows" if the central bank's moves will lead to a recession.
But Wall Street analysts' estimates for sales and earnings -- based on companies' reported results and forecasts and the analysts' own projections -- have been declining for scores of companies.
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September 24, 2022 09:08 ET (13:08 GMT)
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