Corporate profits in the S&P 500 are coming in strong. So strong, in fact, that some keep blowing away even the analysts' expectations.
Ten companies in the S&P 500 — including Caesars Entertainment, T-Mobile US and Royal Caribbean Cruises — topped analysts' adjusted profit forecasts in the past four straight quarters by 10% or more, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That includes the just completed first quarter. What's more, they've blown by estimates in the past four quarters by an average of 20% or more.
These surprises are much greater than most S&P 500 companies are producing. "With the last major week and 87% of (first-quarter) S&P 500 earnings now in, EPS tracks 5% better than analysts expected at $53.07," says Bank of America.
So where are these huge surprises coming from?
Earnings Surprises? Vegas Baby!
If you're looking for a huge profit surprise, what happens in Vegas stays there. Caesars Entertainment, operator of some legendary properties in Sin City, is consistently topping views.
In the first quarter alone, the company reported a quarterly adjusted profit of 14 cents a share, topping views by a whopping 1,300%. But that's just the latest surprise. The company topped profit expectations by an average of 474% over the past four quarters and never by less than a definitive 10%. Given the huge profit beats, it's a bit surprising the stock is only up 4.8% this year.
Some stocks that are flaunting big profit surprises, though, are rallying. Shares of Royal Caribbean are up more than 54% just this year. Better-than-expected profit is a major part of the reason. The company topped forecasts by a wide margin in May when it reported a first-quarter loss of just 23 cents a share. That was miles better than the loss of 69 cents analysts had expected. And Royal Caribbean has topped expectations by more than 50% on average in the past four quarters.
Warren Buffett's Big Surprise
Warren Buffett, whose Berkshire Hathaway is a big owner of T-Mobile, is likely pleased with his holding.
T-Mobile US has topped earnings forecasts by an average of 218% in the past four quarters. Just in the most recent first quarter, the wireless carrier exceeded profit estimates by nearly 17%. And that's actually lower than it's been in the past. The company beat profit forecasts by more than 350% in the third quarter of 2022. Shares are up nearly 2% this year.
Earnings season can be a time of great uncertainty for S&P 500 investors. But at some companies, the surprise is on the upside.
Biggest Profit Surprises In S&P 500
All these companies topped EPS estimates in each of past four quarters by an average of 20% or more
| Company | Ticker | Avg EPS surprise | Sector |
|---|---|---|---|
| Caesars Entertainment | 474.3% | Consumer Discretionary | |
| T-Mobile US | 218.7 | Communication Services | |
| Corteva | 67.9 | Materials | |
| Royal Caribbean Cruises | 52.9 | Consumer Discretionary | |
| Lamb Weston Holdings | 48.7 | Consumer Staples | |
| Arch Capital Group | 39.9 | Financials | |
| Gartner | 35.6 | Information Technology | |
| Axon Enterprise | 33.8 | Industrials | |
| Hologic | 26.5 | Health Care | |
| Archer-Daniels-Midland | 22.8 | Consumer Staples |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @mattkrantz
