With fourth-quarter corporate earnings season kicking into high gear, we highlight ten companies that seem poised to deliver big disappointments or positive surprises.
About 150 of companies in the S&P 500 had reported their fourth-quarter results as of the end of last week, and one of the ten companies that the StarMine research team selected as being the most likely to report big positive or negative surprises were among them. Advanced Micro Devices (AMD.N), better known as AMD, reported a big “miss” on its earnings, as we had forecast. However, that earnings disappointment was a result of some one-time charges, and once those were excluded, the actual loss was 16 cents a share, better than expected. The other nine companies report earnings in February and early March.
Of the 156 companies that had reported their third-quarter results as of yesterday, 68%beat analysts’ estimates while only 20% announced numbers that fell short of analysts’ expectations. As we do each quarter, on the eve of the fourth quarter we selected ten companies that we expect to fall into one or the other of these two camps, based on the SmartEstimate and Predicted Surprise data for each. We have summarized that data and the facts behind it for each of the ten companies below, for your reference. Historically, our selections have demonstrated an accuracy rate of about 70%, giving investors an edge when it comes to positioning themselves ahead of these earnings announcements. (In the second quarter of 2012, the StarMine research team had an 80% accuracy rate, as detailed in this report card.)
When the fourth-quarter earnings season wraps up, we’ll report back on how the other companies fared – and give you a look at what these companies said about their outlook for the coming quarters.
Here is the list of North American companies that we believe are poised to deliver surprises of one kind or another – pleasant or not so upbeat — when they report their earnings for Q4 2012, along with some analyst views on the company:
TOP POSITIVE SURPRISE FORECASTS:
1. Canfor Corporation (CFP.TO) is a beneficiary of the housing recovery in the United States, and the recovery in lumber prices.
2. Cinemark Holdings (CNK.N) is seeing stronger than expected box office revenues and strength in the Latin American market, where it is a leader.
3. Smithfield Foods Inc. (SFD.N) enjoyed strong pricing as hog supplies dwindled,enabling it to offset the higher grain prices.The company also refinanced its debt at a lower rate.
4. Hollyfrontier Corp (HFC.N) took advantage of the disparity between WTI and Brent crude oil prices, and has seen some upside from the fracking boom in North America.
5. DirecTV (DTV.O) has done well inpenetrating the robust Latin American markets, while also offsetting higher content acquisition costs via rate increases.
TOP NEGATIVE SURPRISE FORECASTS:
1. Advanced Micro Devices (AMD.N) announced earnings that fell short of estimates and and a weak outlook for 2013, but excluding one time items the company’s loss was a narrower-than-expected 16 cents a share, above the consensus.
2. Huntsman Corp (HUN.N) is suffering from weak demand and low prices for titanium dioxide while struggling with increasing inventories.
3. Avis Budget Group (CAR.N) may take a hit from weakness in the European market and its truck rental business. The acquisition of Zipcar will likely add to its already-large debt load.
4. Spirit Airlines (SAVE.O) was affected by Hurricane Sandy, cancelling more than 130 flights (of its 200 or so daily flights). Moreover, fees for carry-on luggage and bottled water are alienating customers.
5. JC Penney (JCP.N) isn’t showing any signs that CEO Ron Johnson’s efforts to turn the company around are working.
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