Looking back at Q1, the StarMine research team identified ten companies likely to report a big earnings surprise, relative to analysts’ consensus estimates — five positive and five negative. The results are in. The reports, which used StarMine SmartEstimate and Predicted Surprise data, were 80% accurate.
In the case of these ten selections — each of which was the subject of an article on AlphaNow in the days leading up to their earnings announcement – eight went in the direction of the prediction and two went in the opposite direction. The success rate of is above our historical average of just over 70%.
Let’s look at our two misses. Although Barrick Gold (ABX.N) beat estimates, gold prices have continued to fall, putting further pressure on earnings. Barrick Gold still has a negative Predicted Surprise, as analysts have continued to lower their earnings expectations for the second quarter. FLIR systems reported earnings in line with the consensus (we do not give ourselves credit for this). In the earnings call, they pointed to a large order that was delayed, however, that order was just pushed to the next quarter. That likely caused the in-line earnings as opposed to an earnings beat.
History has demonstrated that being able to correctly predict the direction of future earnings revisions and whether a company is likely to report a positive or negative earnings surprise is one way that investor can gauge the probability of an upward or downward move in its share price. Therefore, AlphaNow will continue to draw on analysis by the StarMine research team in the coming quarters to highlight companies that are likely to outperform or to disappoint, beginning with a series of ten company-specific reports on likely hits and misses for the second quarter of 2013.
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