In a recent report, analysts at Bank of America laid out their expectations for Q1 earnings season. Analysts see extremely low consensus expectations for the quarter setting the stage for a “modest beat” overall. The report includes a list of companies Bank of America analysts believe are most likely to beat earnings expectations.
Low Expectations
Consensus S&P 500 Q1 bottom-up earnings per share estimates have fallen by 8 percent in the past three months to $27.05. Analysts note that expectations leading up to this quarter’s earnings season have fallen more than expectations prior to any other quarter since 2012.
In addition, Q1 is the first quarter since 2009 in which analysts predict a year-over-year decline in overall earnings for the S&P 500.
Analysts are calling for a 4.0 percent year-over-year overall decline in earnings in Q1, but predict that positive earnings growth trends will resume by the second half of the year.
Factors
The two biggest factors weighing on the U.S. economy in the first quarter were slumping oil prices and a strong dollar. Q1 earnings expectations for the energy sector have fallen about 50 percent over the past three months.
Stocks with high foreign sales numbers have also seen a 13 percent reduction in Q1 earnings estimates in the past three months due to increasing forex headwinds.
Potential Beats
Bank of America analysts believe that the “rock-bottom expectations” could be a positive for stocks going into earnings season. With expectations so low, it might be quite difficult for companies to disappoint investors.
Bank of America lists the following stocks among those most likely to beat earnings expectations in Q1:
- Priceline Group Inc PCLN 0.3%
- Twenty-First Century Fox Inc Class A FOXA 0.06%
- The Coca-Cola Co KO 0.41%
- Phillips 66 PSX 0.68%
- UnitedHealth Group Inc. UNH 0.38%
- Lockheed Martin Corporation LMT 0.52%
- Intuit Inc INTU 0.99%
- Apple Inc. AAPL 0.43%
- Eastman Chemical Company EMN 0.56%
- Edison International EIX 0.66%
Read this article and all my other articles for free on Benzinga by clicking here
Want to learn more about the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
