It's always tough to predict which S&P 500 companies will beat earnings forecasts — and that rang true again in the first quarter. But analysts still think you can profit from those that crushed estimates.
Analysts are calling for upside in the shares of nine S&P 500 companies that blew away first-quarter profit forecasts by 50% or more, including communication service firm T-Mobile US, real estate firms Vornado Realty Trust and Prologis, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
It's a positive sign for S&P 500 investors who hoped first-quarter profit reporting season would give the struggling market a bit of support.
Sizing Up S&P 500 Earnings Season
At this point, more than 360 of the S&P 500 companies have reported results. And it's going well so far.
Of those companies, roughly 80% have topped analysts' expectations for profit in the quarter, says John Butters of FactSet. That's slightly above the 77% of S&P 500 companies that normally top profit expectations, he says.
And some of the beats are huge. Online short messaging service Twitter comes to mind. The company posted a first-quarter adjusted profit of 90 cents a share. That blew away analysts' forecasts for the period by roughly 3,000%. Not surprisingly, shares are up more than 13% this year. But that's a case of investors missing out. Now that Tesla's Elon Musk is buying the company, analysts only think the shares have 3.6% higher to go in the next 12 months. And that's just the tiny premium awarded to those who hold the shares until the deal is closed.
But other S&P 500 stocks offer more upside.
Looking At Big Surprises With More Gains
Consider the situation with T-Mobile US, a disrupter in the mobile telecom industry. The company on April 27 reported a first-quarter profit of $1.41 a share, topping expectations by more than 330%. That's the second-largest beat in earnings following Twitter's blowout. And yes, the stock is up 14% this year. That's also an impressive feat in a year the S&P 500 is off roughly 10%.
But analysts think there's still time to profit from this monster quarter, not to mention profit in the future. Analysts think T-Mobile US will be a 166.62 a share stock in 12 months. If they're right, that's more than 26% upside left.
Real estate, too, still offers surprising opportunity, analysts say. Investors are simply still too bearish, analysts say. Vornado Realty Trust, a big landlord in large cities like New York and Chicago, blew away first quarter profit forecasts when it reported on May 2, by more than 200%. Even so, the shares are down by nearly 9% this year to 38.12. Analysts, though, think this property firm's portfolio is more valuable than investors are giving it credit for. They're calling for the stock to be nearly 15% higher in 12 months at 43.73 a share.
It's a similar story at Prologis, the landlord for many e-commerce giants like Amazon.com. Shares are down nearly 10% this year to 152.39, despite its yield of 2.1%. Amazingly, shares are still off nearly 13% from their high even though first-quarter profit topped views by more than 165%. And analysts think the stock will be worth upward of 19% more in 12 months' time.
Are analysts reading too much into one quarter's blowout numbers? It's certainly possible. But for now, analysts think these are surprises that can keep giving.
Analysts' Favorite S&P 500 Surprises
Biggest first-quarter 2022 profit surprises for companies analysts think are still undervalued
| Company | Symbol | Stock YTD % ch. | First-quarter profit surprise | Upside to analysts' 12-month price target | Sector |
|---|---|---|---|---|---|
| 13.6% | 3,381.6% | 3.6% | Communication Services | ||
| T-Mobile US | 14.0 | 337.9 | 26.0 | Communication Services | |
| Vornado Realty | -8.9 | 222.1 | 14.7 | Real Estate | |
| Prologis | -9.5 | 165.5 | 19.1 | Real Estate | |
| Lamb Weston Holdings | 3.9 | 70.0 | 14.0 | Consumer Staples | |
| Match Group | -36.6 | 58.7 | 70.6 | Communication Services | |
| Bio-Rad Laboratories | -32.1 | 53.2 | 28.2 | Health Care | |
| Moderna | -39.0 | 52.6 | 49.1 | Health Care | |
| Molson Coors Beverage | 14.9 | 50.9 | 5.8 | Consumer Staples |
