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May 17, 2019, 7:12 a.m. EDT

These 20 S&P 500 companies have posted the biggest sales surprises this earnings season

Quarterly sales numbers can give you more insight than a quick ‘earnings beat’ headline

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By Philip van Doorn, MarketWatch


Bloomberg
HollyFrontier Corp’s first-quarter sales came in 19% higher than analysts expected.

The earnings game on Wall Street is stacked in favor of generating positive headlines for companies as they “beat” earnings estimates. Investors have learned to take many earnings-season “surprises” with a grain of salt, but some surprises are important enough to drive analysts’ estimates significantly higher, which in turn can support higher share prices over the long term.

Before showing you which large-cap companies have shown the largest revenue surprises this earnings season, it helps to understand how common certain surprises can be.

For starters, “earnings season” isn’t a cut-and-dry period, because many companies have fiscal quarters that end in the middle of the calendar quarter. For the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.38%  through May 15, FactSet had data for 454 companies for fiscal quarters ended Feb. 17 or later. So the following lists are derived from 91% of the components of the large-cap benchmark index.

The Wall Street earnings game is played by the companies, who might understandably underpromise and then overdeliver with earnings-per-share numbers, as well as the sell-side analysts who base their estimates in part on the “guidance” provided by the companies. Through May 15, 83% of S&P 500 companies that had reported so far this earnings season had beaten consensus earnings-per-share estimates, according to S&P Global Market Intelligence.

Keep in mind that beating an estimate may set up a good headline even if the overall story is negative. Maybe a company beat an estimate because its decline in earnings or sales was less than expected. Going further, maybe even a decline in sales has a silver lining if profit margins rise.

So the 83% earnings “beat rate” isn’t a surprise. But 43% of the companies beat their sales (or revenue) estimates. The sales numbers might be of greater interest, in part because of all the one-time events that can skew earnings figures.

Positive sales surprises

Among the 454 S&P 500 companies for which FactSet had data for fiscal quarters ended Feb. 17 or later, these are the 10 companies that have had the highest positive revenue surprises through May 15. Sales estimates before the earnings report reflect the consensus of analysts.

Company Ticker Industry Estimated sales before earnings report ($mil) Actual reported sales ($mil) Sales surprise
Pioneer Natural Resources Co. /zigman2/quotes/206736173/composite PXD Oil & Gas Production $1,751 $2,413 38%
Fifth Third Bancorp /zigman2/quotes/207561596/composite FITB Regional Banks $1,656 $2,187 32%
HollyFrontier Corp. /zigman2/quotes/201783514/composite HFC Oil Refining/Marketing $3,275 $3,897 19%
Alexandria Real Estate Equities Inc. /zigman2/quotes/206543290/composite ARE Real Estate Investment Trusts $271 $315 16%
Lockheed Martin Corp. /zigman2/quotes/200691238/composite LMT Aerospace & Defense $12,580 $14,336 14%
Electronic Arts Inc. /zigman2/quotes/206954087/composite EA Recreational Products $1,201 $1,364 14%
Principal Financial Group Inc. /zigman2/quotes/201030797/composite PFG Life/Health Insurance $3,281 $3,681 12%
Anadarko Petroleum Corp. Integrated Oil $2,874 $3,218 12%
Vulcan Materials Co. /zigman2/quotes/203479463/composite VMC Construction Materials $895 $997 11%
Westinghouse Air Brake Technologies Corp. /zigman2/quotes/207960170/composite WAB Trucks/Construction/Farm Machinery $1,476 $1,641 11%
Source: FactSet

You can click on the tickers for more information about each company.

If you are a shareholder or considering an investment in any of these companies, you should do your own research to understand why sales rose for the quarter. Sometimes one-time factors are at play.

Fifth Third Bancorp /zigman2/quotes/207561596/composite FITB -0.37% of Cincinnati is an interesting example. The company sold shares of WorldPay , the payment processor formerly known as Vantiv, in the first quarter. Bank financial statements include gains on a sale as noninterest income, which is actually a revenue figure.

Keeping in mind that a positive surprise for sales (or earnings for that matter) may not signal an overall trend, here are comparisons of the quarterly sales numbers to those from a year earlier, along with gross profit margins:

Company Ticker Quarterly sales ($mil) Quarterly sales - year earlier ($mil) Change in sales Gross margin Gross margin - year-earlier quarter
Pioneer Natural Resources Co. /zigman2/quotes/206736173/composite PXD $2,244 $2,336 -4% 24.69% 25.56%
Fifth Third Bancorp /zigman2/quotes/207561596/composite FITB $2,474 $1,742 42% N/A N/A
HollyFrontier Corp. /zigman2/quotes/201783514/composite HFC $3,899 $4,127 -6% 12.39% 11.25%
Alexandria Real Estate Equities Inc. /zigman2/quotes/206543290/composite ARE $361 $327 11% 36.74% 38.82%
Lockheed Martin Corp. /zigman2/quotes/200691238/composite LMT $14,336 $11,635 23% 15.26% 14.25%
Electronic Arts Inc. /zigman2/quotes/206954087/composite EA $1,238 $1,605 -23% 77.30% 85.17%
Principal Financial Group Inc. /zigman2/quotes/201030797/composite PFG $3,703 $2,895 28% N/A N/A
Anadarko Petroleum Corp. $3,128 $3,027 3% 39.35% 40.07%
Vulcan Materials Co. /zigman2/quotes/203479463/composite VMC $997 $854 17% 19.23% 18.65%
Westinghouse Air Brake Technologies Corp. /zigman2/quotes/207960170/composite WAB $1,594 $1,056 51% 25.54% 27.47%
Source: FactSet

A company’s gross margin is its sales less the cost of goods sold, then divided by sales. It doesn’t reflect overhead expenses, but it does give an indication of a company’s pricing power. A widening margin while sales are increasing is a good sign. A narrowing margin might mean a company is juicing sales or being forced to defend its market share by offering discounts on its products or services. Gross profit margins aren’t available for banks and insurance companies.

/zigman2/quotes/210599714/realtime
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3,108.46
-11.72 -0.38%
Volume: 2.37B
Nov. 20, 2019 5:03p
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/zigman2/quotes/206736173/composite
US : U.S.: NYSE
$ 130.47
+0.85 +0.66%
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30.25
Dividend Yield
1.35%
Market Cap
$21.47 billion
Rev. per Employee
$2.95M
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/zigman2/quotes/207561596/composite
US : U.S.: Nasdaq
$ 29.76
-0.11 -0.37%
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9.69
Dividend Yield
3.23%
Market Cap
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/zigman2/quotes/201783514/composite
US : U.S.: NYSE
$ 52.36
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Market Cap
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/zigman2/quotes/206543290/composite
US : U.S.: NYSE
$ 160.03
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2.50%
Market Cap
$18.35 billion
Rev. per Employee
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/zigman2/quotes/200691238/composite
US : U.S.: NYSE
$ 392.70
+1.89 +0.48%
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2.44%
Market Cap
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/zigman2/quotes/206954087/composite
US : U.S.: Nasdaq
$ 98.12
+1.43 +1.48%
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P/E Ratio
10.68
Dividend Yield
N/A
Market Cap
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/zigman2/quotes/201030797/composite
US : U.S.: Nasdaq
$ 54.28
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4.05%
Market Cap
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/zigman2/quotes/203479463/composite
US : U.S.: NYSE
$ 140.75
-0.40 -0.28%
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P/E Ratio
31.25
Dividend Yield
0.88%
Market Cap
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Rev. per Employee
$499,074
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/zigman2/quotes/207960170/composite
US : U.S.: NYSE
$ 78.96
-0.21 -0.27%
Volume: 1.03M
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P/E Ratio
59.10
Dividend Yield
0.61%
Market Cap
$15.18 billion
Rev. per Employee
$242,419
loading...
/zigman2/quotes/207561596/composite
US : U.S.: Nasdaq
$ 29.76
-0.11 -0.37%
Volume: 3.22M
Nov. 20, 2019 4:00p
P/E Ratio
9.69
Dividend Yield
3.23%
Market Cap
$21.20 billion
Rev. per Employee
$429,030
loading...
/zigman2/quotes/206736173/composite
US : U.S.: NYSE
$ 130.47
+0.85 +0.66%
Volume: 1.09M
Nov. 20, 2019 4:10p
P/E Ratio
30.25
Dividend Yield
1.35%
Market Cap
$21.47 billion
Rev. per Employee
$2.95M
loading...
/zigman2/quotes/207561596/composite
US : U.S.: Nasdaq
$ 29.76
-0.11 -0.37%
Volume: 3.22M
Nov. 20, 2019 4:00p
P/E Ratio
9.69
Dividend Yield
3.23%
Market Cap
$21.20 billion
Rev. per Employee
$429,030
loading...
/zigman2/quotes/201783514/composite
US : U.S.: NYSE
$ 52.36
+0.06 +0.11%
Volume: 2.09M
Nov. 20, 2019 4:10p
P/E Ratio
10.44
Dividend Yield
2.67%
Market Cap
$8.44 billion
Rev. per Employee
$4.89M
loading...
/zigman2/quotes/206543290/composite
US : U.S.: NYSE
$ 160.03
+0.69 +0.43%
Volume: 422,043
Nov. 20, 2019 4:10p
P/E Ratio
151.79
Dividend Yield
2.50%
Market Cap
$18.35 billion
Rev. per Employee
$3.72M
loading...
/zigman2/quotes/200691238/composite
US : U.S.: NYSE
$ 392.70
+1.89 +0.48%
Volume: 903,358
Nov. 20, 2019 4:10p
P/E Ratio
18.66
Dividend Yield
2.44%
Market Cap
$110.24 billion
Rev. per Employee
$512,019
loading...
/zigman2/quotes/206954087/composite
US : U.S.: Nasdaq
$ 98.12
+1.43 +1.48%
Volume: 3.04M
Nov. 20, 2019 4:00p
P/E Ratio
10.68
Dividend Yield
N/A
Market Cap
$28.23 billion
Rev. per Employee
$571,613
loading...
/zigman2/quotes/201030797/composite
US : U.S.: Nasdaq
$ 54.28
-0.51 -0.93%
Volume: 727,542
Nov. 20, 2019 4:00p
P/E Ratio
11.51
Dividend Yield
4.05%
Market Cap
$15.21 billion
Rev. per Employee
$865,214
loading...
/zigman2/quotes/203479463/composite
US : U.S.: NYSE
$ 140.75
-0.40 -0.28%
Volume: 800,079
Nov. 20, 2019 4:10p
P/E Ratio
31.25
Dividend Yield
0.88%
Market Cap
$18.68 billion
Rev. per Employee
$499,074
loading...
/zigman2/quotes/207960170/composite
US : U.S.: NYSE
$ 78.96
-0.21 -0.27%
Volume: 1.03M
Nov. 20, 2019 4:10p
P/E Ratio
59.10
Dividend Yield
0.61%
Market Cap
$15.18 billion
Rev. per Employee
$242,419
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