Third quarter earnings season is winding down, and the results have been decidedly weak once again. With approximately 95% of the S&P 500 members reporting, total Q3 earnings for the index are down 2.5% year-over-year. That marks the second straight quarter of negative earnings growth, otherwise known as an “earnings recession”.
A little more than 68% of S&P 500 members beat EPS expectations this quarter, which is pretty typical. While earnings tend to garner most of the attention, I’m much more impressed by a company that beats on both the bottom line and the top line. That’s because earnings can often be “massaged” by management to come in a penny or two ahead of consensus. But revenue is generally much less susceptible (although certainly not immune) to manipulation.
As you might expect, revenue beats have been much harder to come by this earnings season. Just 42% of companies have delivered a positive top-line surprise, which is well below average. Revenue growth has been even weaker than earnings growth too at -4.2%.
The Triple Play
While positive revenue and earnings surprises are great to see, if management guidance is weak and/or if analysts revise their earnings estimates lower, a stock can still get punished. That has been the case for many stocks this earnings season.
Earnings and revenue beats simply are not enough. The true winners from earnings season are those who can deliver the coveted “Triple Play”:
And as the well-documented “post-earnings announcement drift” shows, these blow out quarters are often handsomely rewarded by the market for several weeks after a company reports.
5 Triple Plays
So which companies have delivered the coveted “Triple Play” this earnings season? I ran a screen in Research Wizard, and here are 5 of the top companies from the list:
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