Looking for reasons to celebrate during the otherwise disappointing fourth-quarter profit season? A few standout S&P 500 companies just gave you some big ones.
Eleven companies in the S&P 500, including Corteva, Lamb Weston and T-Mobile US, blew away analysts' fourth-quarter profit forecasts by 30% or more, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Such massive positive surprises are a big win in this reporting season — now halfway over — which has mostly been a bust. Shares of the 11 companies to trounce earnings forecasts are up an average 13.2% this year — topping the S&P 500's 7.7% rise.
"At the midpoint of the fourth-quarter earnings season, the performance of S&P 500 companies continues to be subpar," says John Butters, analyst at FactSet. "While the percentage of S&P 500 companies reporting positive earnings surprises remained flat over the past week, the magnitude of these earnings surprises decreased during this time, mainly due to negative EPS surprises reported by a number of large technology companies."
Where Are The Big S&P 500 Surprises
S&P 500 companies normally top earnings estimates each quarter. But the problem in the fourth quarter is that they're beating by a disappointingly small amount.
So far, S&P 500 companies only topped earnings estimates by a tiny 0.6%, Butters says. That's well below the 8.6% companies beat earnings by on average over the past five years.
"If 0.6% is the actual surprise percentage for the quarter, it will mark the lowest surprise percentage reported by the index since 2008," Butters said.
And disappointing surprises go a far way to explain why S&P 500 companies' profits are down 5.3% from the same period a year ago. "If 5.3% is the actual decline for the quarter, it will mark the first time the index has reported a year-over-year decrease in earnings since the third quarter of 2020," he said.
So which S&P 500 companies are bucking the trend and blowing out the numbers?
S&P 500 Companies Crushing The Estimates
Seed and herbicide company Corteva is the banner performer in the S&P 500 for the fourth quarter. The company reported an adjusted profit of 16 cents a share, topping analysts' forecasts by more than 150%.
Amazingly the company's shares are only up 4.6% this year to 61.49, even after the remarkable profit beat reported on Feb. 1. And the company's 100% growth over the same year-ago period wasn't a complete fluke either. Analysts think Corteva's bottom line will rise another nearly 7.5% in 2023 and 20.6% in 2024.
Looking for some potatoes to go with your $7 a dozen eggs for breakfast? Such pent-up demand explains why Lamb Weston, a processor of frozen potatoes, on Dec. 16 reported profit of $1.28 a share, outstripping estimates by more than 72%.
Shares of the company are up 10% this year to 98.31, as investors brace for even more growth. The company's bottom line is seen growing as far as the eye can see, including 24% this fiscal year, 16% in 2024 and 3% in 2025.
T-Mobile US Does It Again
Analysts, again, were caught flat-footed by T-Mobile US' stellar results reported on Feb. 1. The wireless carrier reported an adjusted fourth-quarter profit of $1.59 a share, trouncing views by nearly 50%. The shares of one of Warren Buffett's favorite stocks are up more than 3% this year.
T-Mobile US, though, has made topping earnings forecasts into a routine event. T-Mobile US beat earnings views for every quarter since the first quarter of 2016.
Make no mistake, this fourth quarter's earnings season gave S&P 500 investors plenty reason to despair. But that didn't stop a small group of companies from finding a way to outperform.
Top S&P 500 Fourth-Quarter Earnings Surprises
| Company | Ticker | Fourth-quarter earnings surprise | Sector |
|---|---|---|---|
| Corteva | 153.2% | Materials | |
| Lamb Weston Holdings | 72.4 | Consumer Staples | |
| T-Mobile US | 49.7 | Communication Services | |
| Clorox | 49.4 | Consumer Staples | |
| Match Group | 43.0 | Communication Services | |
| Seagate Technology | 38.3 | Information Technology | |
| Weyerhaeuser | 36.5 | Real Estate | |
| Camden Property | 35.6 | Real Estate | |
| NVR | 34.9 | Consumer Discretionary | |
| Wells Fargo | 32.6 | Financials | |
| Rockwell Automation | 31.5 | Industrials |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
