Profits are down at S&P 500 companies at large. But a few are putting up monster profit gains that seem to have no bounds.
Eight companies in the S&P 500, including tech play Fortinet, glucose monitoring maker Dexcom and burrito maker Chipotle Mexican Grill, are posting profit growth that's practically bursting off the income statement, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
How so? These companies saw their adjusted earnings per share rise 20% or much more in the first quarter and in the last four quarters on average. Additionally, these companies' profits rose by a larger percentage in each of the past three quarters by a larger amount than the previous quarter. In other words, their profits are growing rapidly and the growth rate is accelerating — two attributes investors look for in winners.
They're a stark contrast with the rest of the S&P 500.
"The (projected) earnings decline for first quarter of 2023 for the S&P 500 is -2.5%. If -2.5% is the actual decline for the quarter, it will mark the second straight quarter that the index has reported a decrease in earnings," said John Butters, earnings analyst at FactSet.
S&P 500 Earnings Season So Far
At this point, more than 90% of the companies in the S&P 500 have reported their first-quarter profits. And things look solid on their face.
More than three-quarters of the S&P 500 reported higher-than-expected quarterly profit and 75% reported higher-than-expected revenue. But it's all about low expectations going into the quarter. S&P 500 companies actually reported a 2.5% drop in adjusted earnings.
But that didn't stop some S&P 500 companies profit from blowing the doors off.
Fortinet Is A Fortress Of Profit
Well-managed computer security firm Fortinet is leading the charge when it comes to profit growth.
The company's first quarter profit growth of 80.9% was just the latest in a string of huge earnings gains. The company's profit rose 78.9% in the fourth quarter, 66.7% in the third and 26.3% in the second. All told, the company's average earnings growth in the past four quarters is 63.2%, tops among any of the fast and accelerating growers. No wonder shares are up nearly 38% this year.
Other Big Profit Gainers
Don't make the mistake, though, to think tech is the only sector with big growth. DexCom, the glucose monitoring company, notched massive 112.5% earnings growth in the first quarter. And that's just the latest in a string of speeding up profit growth. The company's adjusted profit has risen by an average 57% in the past four quarters.
And then there's also the well-managed Chipotle Mexican Grill. The company is thriving. It's earnings exploded 84.2% in the first quarter, up from 48.6% in the fourth quarter of 2022 and 35.5% in the third. Again, not surprisingly, shares are up 47.3% this year.
The S&P 500 might be going sideways. But you can still find some amazing profit growth stories in the index.
Huge Profit Monsters
EPS grew at least 20% in first quarter and past four quarters while growth is accelerating
| Company | Ticker | First-quarter EPS growth | Avg. EPS gr. past four quarters | Sector |
|---|---|---|---|---|
| Fortinet | 80.9% | 63.2% | Information Technology | |
| DexCom | 112.5% | 57.0% | Health Care | |
| Chipotle Mexican Grill | 84.2% | 48.2% | Consumer Discretionary | |
| Comerica | 74.5% | 37.4% | Financials | |
| Xylem | 53.2% | 31.2% | Industrials | |
| Globe Life | 48.8% | 28.3% | Financials | |
| Allegion | 47.7% | 25.2% | Industrials | |
| Molson Coors Beverage | 86.2% | 24.4% | Consumer Staples |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @mattkrantz
