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Philip van Doorn

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Feb. 14, 2019, 12:02 p.m. EST

20 companies with zooming sales and fattening margins that can power their stocks forward

The ability to raise prices while sales are going up is always a good sign

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By Philip van Doorn, MarketWatch


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Twitter and Amazon were among large companies showing growing fourth-quarter sales by 20% or more while also expanding their gross profit margins.

Investors are used to seeing earnings-season headlines as companies typically “beat” analysts’ estimates for sales and earnings. This is part of the Wall Street game, aided by the companies themselves, that sets up an earnings-beat rate that typically exceeds two-thirds of the S&P 500.

But beating an estimate alone means nothing — a company can have declining sales or earnings and still report results higher than what analysts expect.

Earnings results for any one quarter can be skewed by accounting changes, legal settlements, divestitures, accounting policy changes or other one-time events So what can you easily learn from an earnings report?

Sales and margins

A company’s sales may increase greatly simply because it acquired another company. Or maybe it’s because of heavy discounting. It’s important to understand whether or not a company is having difficulty defending its market position. Discounting to juice sales for a quarter or two may help pad an executive’s bonus, but it is unsustainable and does nothing for investors. This is why you should look at gross profit margins as well.

A company’s gross margin is its sales, less the cost of goods sold, divided by sales. It doesn’t reflect overhead expenses. It simply gives an indication of pricing power. If your sales are rising quickly while the gross margin is expanding, you’re doing a good job moving product.

We still have a way to go before all the fourth-quarter results are in, but the consensus among analysts polled by S&P Global Market Intelligence is for S&P 500 /zigman2/quotes/210599714/realtime SPX +0.0020%  companies to increase their quarterly sales 6.7% from a year earlier, while improving earnings per share by 14.9%. Keeping in mind that 2018 results (especially for earnings) were elevated by the cut in the maximum federal corporate income-tax rate to 21% from 35%, it’s obvious that we’re entering new territory. For 2019, analysts expect first-quarter sales for the S&P 500 to increase by 6%, with EPS declining by 0.6%.

So you can expect a far different tone during coming earnings seasons. The problem with margin data is that we have to look back — but it still points to impressive pricing power for these companies.

Having their cake and eating it too

Through Feb. 12, data for quarters ended Oct. 26 or later were available for 390 S&P /zigman2/quotes/210599714/realtime SPX +0.0020%  companies. Here are the 20 that increased sales the most in the most recently reported quarter while also expanding their gross margins:

Company Ticker Industry Increase in quarterly sales from year-earlier quarter Gross margin - most recent quarter Gross margin - year-earlier quarter Most recent reported quarter end through Feb. 12
Marathon Petroleum Corp. /zigman2/quotes/209634297/composite MPC Oil Refining/ Marketing 68% 9.43% 8.50% 12/31/2018
Occidental Petroleum Corp. /zigman2/quotes/207018272/composite OXY Oil & Gas Production 37% 35.11% 29.32% 12/31/2018
SL Green Realty Corp. /zigman2/quotes/208985878/composite SLG Real Estate Investment Trusts 34% 62.68% 38.30% 12/31/2018
UDR Inc. /zigman2/quotes/200760603/composite UDR Real Estate Investment Trusts 32% 41.05% 23.49% 12/31/2018
Helmerich & Payne Inc. /zigman2/quotes/209685666/composite HP Contract Drilling 31% 15.42% 8.73% 12/31/2018
Prologis Inc. /zigman2/quotes/200785374/composite PLD Real Estate Investment Trusts 30% 37.19% 35.77% 12/31/2018
Autodesk Inc. /zigman2/quotes/209828392/composite ADSK Software 29% 88.47% 83.97% 10/31/2018
Duke Realty Corp. /zigman2/quotes/200302802/composite DRE Real Estate Investment Trusts 26% 28.33% 27.22% 12/31/2018
Northrop Grumman Corp. /zigman2/quotes/205518355/composite NOC Aerospace & Defense 24% 20.46% 19.76% 12/31/2018
FMC Corp. /zigman2/quotes/200631712/composite FMC Chemicals: Agricultural 24% 44.45% 42.62% 12/31/2018
Twitter Inc. /zigman2/quotes/203180645/composite TWTR Internet Software/ Services 24% 70.42% 70.23% 12/31/2018
Nucor Corp. /zigman2/quotes/201889722/composite NUE Steel 24% 17.67% 10.22% 12/31/2018
National Oilwell Varco Inc. /zigman2/quotes/208758290/composite NOV Oilfield Services/ Equipment 22% 17.06% 7.57% 12/31/2018
Regeneron Pharmaceuticals Inc. /zigman2/quotes/203149337/composite REGN Biotechnology 22% 91.70% 91.14% 12/31/2018
Fortinet Inc. /zigman2/quotes/205733290/composite FTNT Computer Communications 22% 75.23% 74.51% 12/31/2018
Nvidia Corp. /zigman2/quotes/200467500/composite NVDA Semiconductors 21% 60.39% 59.52% 10/28/2018
Cboe Global Markets Inc. /zigman2/quotes/208166986/composite CBOE Investment Banks/ Brokers 20% 34.17% 33.78% 12/31/2018
American Express Company /zigman2/quotes/203805826/composite AXP Financial Conglomerates 20% 70.04% 68.26% 12/31/2018
Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN Internet Retail 20% 38.13% 36.32% 12/31/2018
Keysight Technologies Inc. /zigman2/quotes/207530903/composite KEYS Electronic Equipment/ Instruments 19% 56.83% 55.81% 10/31/2018
Source: FactSetr

You can click the tickers for more about each company, including news, profiles, price ratios and targets, ratings and estimates.

Gross margin data is typically not available for banks and insurance companies, which focus on different measures of profitability.

Sales growth and margin expansion are only two data points, but they can get you started as you analyze companies for possible investment.

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/zigman2/quotes/210599714/realtime
US : S&P US
3,006.79
+0.06 +0.0020%
Volume: 1.55B
Sept. 19, 2019 5:17p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,006.79
+0.06 +0.0020%
Volume: 1.55B
Sept. 19, 2019 5:17p
loading...
/zigman2/quotes/209634297/composite
US : U.S.: NYSE
$ 53.92
+0.16 +0.30%
Volume: 3.64M
Sept. 19, 2019 6:30p
P/E Ratio
11.68
Dividend Yield
3.93%
Market Cap
$35.50 billion
Rev. per Employee
$1.59M
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/zigman2/quotes/207018272/composite
US : U.S.: NYSE
$ 45.79
+1.17 +2.62%
Volume: 10.55M
Sept. 19, 2019 6:30p
P/E Ratio
9.06
Dividend Yield
6.90%
Market Cap
$40.96 billion
Rev. per Employee
$1.60M
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/zigman2/quotes/208985878/composite
US : U.S.: NYSE
$ 81.73
+0.07 +0.09%
Volume: 579,864
Sept. 19, 2019 6:30p
P/E Ratio
30.69
Dividend Yield
4.16%
Market Cap
$6.74 billion
Rev. per Employee
$1.44M
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/zigman2/quotes/200760603/composite
US : U.S.: NYSE
$ 48.23
-0.08 -0.17%
Volume: 1.87M
Sept. 19, 2019 6:30p
P/E Ratio
84.26
Dividend Yield
2.84%
Market Cap
$14.12 billion
Rev. per Employee
$828,095
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/zigman2/quotes/209685666/composite
US : U.S.: NYSE
$ 43.01
-0.57 -1.31%
Volume: 910,721
Sept. 19, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
6.60%
Market Cap
$4.71 billion
Rev. per Employee
$303,392
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/zigman2/quotes/200785374/composite
US : U.S.: NYSE
$ 85.02
-0.03 -0.04%
Volume: 1.84M
Sept. 19, 2019 6:30p
P/E Ratio
31.60
Dividend Yield
2.49%
Market Cap
$53.66 billion
Rev. per Employee
$1.73M
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/zigman2/quotes/209828392/composite
US : U.S.: Nasdaq
$ 153.38
+2.27 +1.50%
Volume: 1.35M
Sept. 19, 2019 4:00p
P/E Ratio
606.48
Dividend Yield
N/A
Market Cap
$33.68 billion
Rev. per Employee
$292,023
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/zigman2/quotes/200302802/composite
US : U.S.: NYSE
$ 33.36
+0.09 +0.27%
Volume: 3.12M
Sept. 19, 2019 6:30p
P/E Ratio
51.85
Dividend Yield
2.58%
Market Cap
$12.06 billion
Rev. per Employee
$2.37M
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/zigman2/quotes/205518355/composite
US : U.S.: NYSE
$ 375.58
-1.84 -0.49%
Volume: 1.03M
Sept. 19, 2019 6:30p
P/E Ratio
18.35
Dividend Yield
1.41%
Market Cap
$63.55 billion
Rev. per Employee
$354,059
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/zigman2/quotes/200631712/composite
US : U.S.: NYSE
$ 90.39
-0.49 -0.54%
Volume: 701,749
Sept. 19, 2019 6:30p
P/E Ratio
23.47
Dividend Yield
1.77%
Market Cap
$11.79 billion
Rev. per Employee
$647,644
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/zigman2/quotes/203180645/composite
US : U.S.: NYSE
$ 42.93
-0.31 -0.72%
Volume: 7.42M
Sept. 19, 2019 6:30p
P/E Ratio
14.23
Dividend Yield
N/A
Market Cap
$33.19 billion
Rev. per Employee
$776,112
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/zigman2/quotes/201889722/composite
US : U.S.: NYSE
$ 52.72
-0.17 -0.32%
Volume: 2.87M
Sept. 19, 2019 6:30p
P/E Ratio
7.44
Dividend Yield
3.03%
Market Cap
$15.98 billion
Rev. per Employee
$953,128
loading...
/zigman2/quotes/208758290/composite
US : U.S.: NYSE
$ 22.89
-0.05 -0.22%
Volume: 3.90M
Sept. 19, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
0.87%
Market Cap
$8.83 billion
Rev. per Employee
$241,137
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/zigman2/quotes/203149337/composite
US : U.S.: Nasdaq
$ 286.15
+1.09 +0.38%
Volume: 421,070
Sept. 19, 2019 4:00p
P/E Ratio
15.91
Dividend Yield
N/A
Market Cap
$31.45 billion
Rev. per Employee
$906,865
loading...
/zigman2/quotes/205733290/composite
US : U.S.: Nasdaq
$ 78.42
-0.45 -0.57%
Volume: 1.09M
Sept. 19, 2019 4:00p
P/E Ratio
36.92
Dividend Yield
N/A
Market Cap
$13.41 billion
Rev. per Employee
$308,161
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/zigman2/quotes/200467500/composite
US : U.S.: Nasdaq
$ 176.94
-3.04 -1.69%
Volume: 6.41M
Sept. 19, 2019 4:00p
P/E Ratio
39.98
Dividend Yield
0.36%
Market Cap
$107.76 billion
Rev. per Employee
$882,428
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/zigman2/quotes/208166986/composite
US : Cboe BZX US Equities Exchange
$ 116.44
+0.78 +0.67%
Volume: 730,983
Sept. 19, 2019 4:10p
P/E Ratio
32.14
Dividend Yield
1.11%
Market Cap
$13.00 billion
Rev. per Employee
$3.29M
loading...
/zigman2/quotes/203805826/composite
US : U.S.: NYSE
$ 117.79
-0.95 -0.80%
Volume: 1.99M
Sept. 19, 2019 6:30p
P/E Ratio
14.60
Dividend Yield
1.32%
Market Cap
$97.73 billion
Rev. per Employee
$733,559
loading...
/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 1,821.50
+4.04 +0.22%
Volume: 2.08M
Sept. 19, 2019 4:00p
P/E Ratio
75.57
Dividend Yield
N/A
Market Cap
$901.02 billion
Rev. per Employee
$359,671
loading...
/zigman2/quotes/207530903/composite
US : U.S.: NYSE
$ 100.01
-1.33 -1.31%
Volume: 957,311
Sept. 19, 2019 6:30p
P/E Ratio
61.59
Dividend Yield
N/A
Market Cap
$18.76 billion
Rev. per Employee
$313,721
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Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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