Most S&P 500 companies easily beat earnings estimates every quarter. So you'll want to take note of the handful that can't seem to measure up.
Just four stocks in the S&P 500, including real estate company Camden Property Trust, energy firm Baker Hughes and consumer staples firm Monster Beverage, missed Wall Street analysts' forecasts for profit in each of the past four quarter, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Keeping an eye out for potential land mines in third quarter earnings season, heating up now, could be a key to avoiding more big losses.
"Investors are nervous about third-quarter earnings season, as evidenced by recent market volatility," said Jack Ablin, of Cresset Capital Management. "Over the past month, companies including FedEx, Nike and Carnival offered disappointing results or guidance and were summarily punished."
But others keep doing it.
Gearing Up For A Rough Quarter For S&P 500 Profit
Only 10% of the companies in the S&P 500 reported their third-quarter earnings say far, says FactSet's John Butters. And so far, it's not pretty.
Earnings growth is only landing at 1.6% during the quarter. That's the lowest growth rate since the third quarter of 2020 and below what analysts called for when the reporting season started.
But here's the most alarming part. Big earnings beats that S&P 500 investors count on each month aren't appearing. Only 69% of S&P 500 companies reported profit that exceeded targets, Butters says. And they're only beating estimates by 0.1%, miles behind the 8.7% they usually top forecasts by.
That's a troubling trend S&P 500 investors would like to avoid. And for that reason, it makes sense to know which companies chronically miss.
Big Misses In The S&P 500
Among routine earnings forecast misses, the biggest violator is Camden Property Trust. The Houston-based owner and manager of multifamily apartments misses like no other company in the S&P 500.
Adjusted earnings from the company undershot earnings estimates by an average of 29% in the past four quarters. And the worst miss of all, using adjusted profit, just happened. The real estate firm on July 28 reported an adjusted second-quarter profit of just 22 cents a share, missing the consensus estimate from S&P Global Market Intelligence by 60%.
And it wasn't just an isolated incident. The company's adjusted profit per share missed estimates by 14% in the first quarter by 14%, following a nearly 16% whiff in the fourth quarter of 2021 and 26% strike out in the third quarter.
Investors are likely nervously waiting for what's next. The company is due to report third-quarter results on Oct. 27. Analysts think the company will make 28 cents a share on an adjusted basis, down roughly 3% from the same year-ago period. Shares are down 38% this year so far as investors brace for more bad news.
Bad News Bears
It's not all gushers and profits in the S&P 500 energy sector. Baker Hughes, which offers tools and chemicals needed in the oil business, has been nothing but a disappointment on the earnings front for a year. The company's adjusted profit in the past four quarters has missed expectations by an average of 28.2%. The latest miss happened on July 20 when the company reported a quarterly profit of 11 cents a share, missing views by 50%. Investors don't look kindly on an energy company missing amid a boom for energy. Shares are down 4% this year, while share of the energy sector are up more than 40%.
Another case of a bad news bear is Monster Beverage, seller of energy drinks to adrenaline junkies. Monster had been one of the top stocks of the 2000s. But lately, tougher competition is making it harder to keep up with expectations. The company's adjusted quarterly profit has fallen short by 11%, on average, in the past four quarters. Again, the worst of the missed happened in the second quarter. Monster Beverage on Aug. 4 reported an adjusted profit of 51 cents a share, missing views by 27%.
Perhaps the company will reverse the bad luck and report a monster third-quarter on Nov. 4. Analysts are calling for it to make 61 cents a share, or down 3% from the same year-ago period. S&P 500 investors will see if that hurdle is low enough for Monster to cross.
Or, it, like many S&P 500 company, could just come up with an excuse. "This season, company managements have a panoply of headwinds to blame when offering up disappointing results," Ablin said.
Big Disappointments In S&P 500
Companies that missed adjusted quarterly profit estimates in past four straight quarters
|Camden Property||-29.0%||Real Estate|
|Monster Beverage||-11.1||Consumer Staples|
Sources: IBD, S&P Global Market Intelligence, based on adjusted earnings per share in past four quarters
Follow Matt Krantz on Twitter @mattkrantz