Even though the stock market has rallied so far in 2023, there has been a weak trend during the year’s first earnings season: negative revisions to earnings estimates.
Below is a list of 20 companies in the S&P 500
SPX,
-0.63%
that have bucked this trend, having the most significant positive revisions to their consensus calendar 2023 earnings-per-share estimates among analysts polled by FactSet. After that is a list of the 20 companies in the benchmark index that have seen the worst revisions to their consensus 2023 EPS estimates.
Bucking the negative EPS revision trend, especially with such large increases in expected profits, may eventually support higher price-to-earnings valuations for some stocks.
Conversely, negative revisions might hurt share prices over the long haul, especially if subsequent earnings estimates don’t move to an upward path.
But so far this year, most of the stocks on the second list — the one with the worst EPS estimate revisions — have risen. For some of the stocks, this action may reflect investors’ enthusiasm for companies’ cost-cutting efforts, which are expected to lower profits temporarily. When workers are laid off, severance and other expenses result in elevated expenses before cost reductions are realized.
In the case of Tesla Inc.
TSLA,
+2.15%,
the consensus 2023 EPS estimate has declined 26% since Dec. 31, reflecting lower prices for the company’s electric vehicles. But the shares are up 58% so far this year, possibly as a result of investors’ opinions that the stock’s 65% plunge in 2022 was overdone. In a note to clients on Feb. 8, Wedbush analyst Dan Ives wrote that a previous headwind — disrupted sales in China because of government measures to lower the COVID-19 infection rate — had now become a tailwind with the country’s reopening.
“[W]e are now seeing a noticeable turnaround for Chinese EV buyers favoring Tesla vs. domestic players (BYD, Nio, Xpeng),” he wrote.
So changes in estimates alone cannot tell the whole story. But they can raise flags for investors to take a closer look at the negative or positive developments they signal.
A support structure for rising stock prices
Consensus earnings estimates among analysts who work at brokerage firms are important pillars of support for stock prices over the long term. The most commonly used measure of stock valuation is the forward price-to-earnings ratio. This is a company’s current share price divided by the consensus earnings-per-share estimate for the next 12 months.
For the benchmark S&P 500
SPX,
-0.63%,
analysts expect the index’s weighted EPS to increase 2% to $222.60 in calendar 2023 from $217.25 in 2022, despite fears that a recession may be brought about by the Federal Reserve’s interest-rate increases as it works to lower inflation. According to FactSet’s estimates, the S&P 500’s EPS increased 5% in 2022 from $206.56 in 2021.
All estimates in this article are for calendar years. Because about 20% of companies in the S&P 500 have fiscal years that don’t match the calendar, and many have fiscal-quarter ends that don’t even line up with calendar-month ends, FactSet uses actual data for fiscal quarters to calculate its own calendar-year estimates, incorporating forward estimates for the current year.
The dismal revisions
According to FactSet’s data, analysts expect 275 companies among the S&P 500 to improve their profits this year. That seems to be a pretty good number, especially when the index is expected to improve its weighted EPS by only 2%. There are 223 companies for which EPS is expected to decline this year, one for which EPS is expected to be unchanged from last year and one for which estimates aren’t available.
And now for the bad trend: Among the S&P 500, 288 companies have had their consensus 2023 EPS lowered since the end of 2022, while there have been 183 upward revisions, 28 unchanged estimates and one that is not available. That makes for a sour fourth-quarter earnings season. Investors typically look for estimates to be revised upward after corporate results are announced.
A year ago, there were 258 positive 2022 EPS estimate revisions for S&P 500 companies between the end of 2021 and Feb. 14, 2022.
So we have seen 58% of S&P 500 companies with negative earnings revisions, when a year ago there were 52% with positive revisions.
That is quite a swing to experience during a stock-market rally.
These companies have bucked the trend
Here are the 20 companies in the S&P 500 whose consensus EPS estimates for calendar 2023 have increased the most on a percentage basis since the end of 2022. The list begins with Wynn Resorts Ltd.
WYNN,
-0.64%,
whose consensus 2023 EPS estimate was revised to a positive number from a previous negative number because of improved business in Macau with the lifting of COVID-19 restrictions by the Chinese government.
Company
Ticker
2023 EPS estimate
2023 EPS estimate on Dec. 31
% change in estimate
2023 price change
2022 price change
Wynn Resorts Ltd.
$0.55
-$0.46
N/A
33%
-3%
GE Healthcare Technologies Inc.
$2.71
$1.69
60%
19%
N/A
Marathon Petroleum Corp.
$19.34
$14.30
35%
10%
82%
Valero Energy Corp.
$22.06
$16.62
33%
10%
69%
Las Vegas Sands Corp.
$1.67
$1.26
33%
20%
28%
Ceridian HCM Holding Inc.
$1.24
$0.95
31%
20%
-39%
American Airlines Group Inc.
$1.99
$1.54
29%
30%
-29%
United Airlines Holdings Inc.
$7.91
$6.42
23%
30%
-14%
Lamb Weston Holdings Inc.
$4.28
$3.57
20%
11%
41%
Alexandria Real Estate Equities Inc.
$3.16
$2.66
19%
15%
-35%
Paccar Inc.
$6.42
$5.42
18%
11%
12%
Meta Platforms Inc. Class A
$9.61
$8.17
18%
49%
-64%
Newmont Corp.
$2.21
$1.90
16%
2%
-24%
NRG Energy Inc.
$5.96
$5.24
14%
12%
-26%
Mid-America Apartment Communities Inc.
$5.07
$4.49
13%
10%
-32%
Textron Inc.
$5.08
$4.54
12%
6%
-8%
United Rentals Inc.
$40.82
$36.52
12%
29%
7%
Omnicom Group Inc.
$7.28
$6.59
10%
14%
11%
NVR Inc.
$359.26
$325.73
10%
13%
-22%
Everest Re Group Ltd.
$46.36
$42.26
10%
15%
21%
Source: FactSet
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Theses companies had the worst estimate revisions this earnings season
Among the S&P 500, only four companies are expected to show net losses for calendar 2023, based on consensus estimates among analysts polled by FactSet. For all four of these companies, the consensus 2023 estimates have declined since the end of 2022, so they top this list, ordered alphabetically. After that we show the 16 other companies whose consensus 2023 EPS estimates have fallen the most since Dec. 31.
Company
Ticker
2023 EPS estimate
2023 EPS estimate on Dec. 31
% change in estimate
2023 price change
2022 price change
Carnival Corp.
-$0.01
$0.20
N/A
44%
-60%
Micron Technology Inc.
-$0.76
-$0.65
N/A
20%
-46%
Warner Bros. Discovery Inc. Series A
-$0.22
-$0.03
N/A
57%
-60%
Western Digital Corp.
-$0.75
$1.21
N/A
36%
-52%
Boeing Co.
$0.10
$3.58
-97%
13%
-5%
Ventas Inc.
$0.01
$0.16
-94%
14%
-12%
Intel Corp.
$0.51
$1.81
-72%
8%
-49%
Stanley Black & Decker Inc.
$1.56
$4.47
-65%
19%
-60%
MGM Resorts International
$0.56
$1.41
-60%
32%
-25%
General Electric Co.
$1.94
$4.03
-52%
26%
-11%
Illumina Inc.
$1.57
$3.07
-49%
7%
-47%
EQT Corp.
$4.84
$8.84
-45%
-9%
55%
Moderna Inc.
$2.75
$4.59
-40%
-5%
-29%
Lumen Technologies Inc.
$0.47
$0.76
-38%
-22%
-58%
Tyson Foods Inc. Class A
$4.67
$6.49
-28%
-2%
-29%
Coterra Energy Inc.
$2.92
$4.02
-27%
2%
29%
Tesla Inc.
$4.07
$5.53
-26%
58%
-65%
Qorvo Inc.
$4.84
$6.57
-26%
16%
-42%
Newell Brands Inc.
$1.08
$1.44
-25%
13%
-40%
Weyerhaeuser Co.
$0.91
$1.21
-25%
10%
-25%
Source: FactSet
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