By Philip van Doorn, MarketWatch
Wall Street analysts tend to accentuate the positive — after all, their broker colleagues have stocks to sell. Indeed, there currently is not a single company within the S&P 500 with majority “sell” or equivalent ratings among analysts polled by FactSet, and that’s hardly unusual.
Analysts will lower their revenue and earnings estimates for various reasons, including poor financial quarters, negative guidance from companies, legal challenges or sales and supply disruptions from world events, such as the coronavirus. But a sharp decline in consensus may not be bad news, as it might not mean analysts have soured on a company’s prospects. It may reflect an accounting change, the sale of a business unit or other events. So it’s important to do your own research on any company listed below that interests you.
Severe estimate cuts may be particularly alarming now, because stock valuations have risen so much. The weighted aggregate forward price-to-earnings ratio for the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.36% has increased to 19 from 16.3 over the past 12 months, according to FactSet.
Still, focusing on negative events can provide insight into industry developments and may even highlight investment opportunities if you can become confident, through your own research, that a company is likely to improve from its current distress.
So here are lists of companies whose consensus revenue or earnings estimates for this calendar year have been cut the most since the end of 2019.
Largest sales estimate cuts
Here are the 10 S&P 500 companies with the largest declines in consensus 2020 revenue estimates since the end of 2019:
|Company||Ticker||Industry||Decline in sales estimate from Dec. 31 to Feb. 20||Change in EPS estimate from Dec 31 to Feb. 20|
|Boeing Co.||/zigman2/quotes/208579720/composite BA||Aerospace & Defense||-20.0%||-70.1%|
|Global Payments Inc.||/zigman2/quotes/201234787/composite GPN||Data Processing Services||-16.1%||0.3%|
|Danaher Corp.||/zigman2/quotes/210555154/composite DHR||Medical Specialties||-13.7%||-4.7%|
|Cabot Oil & Gas Corp.||/zigman2/quotes/205804016/composite COG||Integrated Oil||-12.2%||-31.4%|
|eBay Inc.||/zigman2/quotes/204653455/composite EBAY||Other Consumer Services||-11.4%||4.0%|
|Wynn Resorts Ltd.||/zigman2/quotes/208845907/composite WYNN||Casinos/Gaming||-10.4%||-50.3%|
|Abiomed Inc.||/zigman2/quotes/202106417/composite ABMD||Medical Specialties||-7.5%||-6.3%|
|CF Industries Holdings Inc.||/zigman2/quotes/209482112/composite CF||Chemicals: Agricultural||-7.2%||-25.1%|
|Under Armour Inc. Class A||/zigman2/quotes/204420722/composite UAA||Apparel/Footwear||-7.0%||-69.9%|
|Hologic Inc.||/zigman2/quotes/201671131/composite HOLX||Medical Specialties||-6.9%||0.5%|
You can click on the tickers for more about each company.
The consensus 2020 sales estimate for Global Payments /zigman2/quotes/201234787/composite GPN +4.26% declined 16% between Dec. 31 and Feb. 20. The company explained that this reflected a change in how it calculates adjusted net revenue.
Global Payments completed its merger with Total System Services on Sep. 18. Global Payments Chief Operating Officer Cameron Bready said during the company’s third-quarter earnings conference call Oct. 31 that “based on feedback from the SEC [Securities and Exchange Commission],” the company expected, going forward, “to report on an adjusted net revenue basis excluding the addition of network fees,” according to a transcript provided by FactSet.
Bready further explained: “Although we believe adjusted net revenue plus network fees provides useful insight into the economics of our business in a manner consistent with how the company assesses and measures performance, the SEC has requested we discontinue its use. As a result, we’ll report without the addition of network fees in the future, consistent with how TSYS [Total System Services] has reflected this item historically.”
Here’s a link to the company’s third-quarter earnings press release , which further explains the accounting changes. For all of 2019, Global Payments reported GAAP revenue of $4.92 billion, increasing 46% from $3.37 billion in 2018. Adjusted net revenue for 2019 rose 48% to $4.59 billion from $3.10 billion in 2018. The adjusted revenue numbers excluded $1.05 billion in network fees in 2019 and $0.87 billion in 2018. Here’s a link to the fourth-quarter earnings release .
Here’s a summary of current analyst opinion for all the companies on the list above, which includes changes in consensus price targets:
|Company||Ticker||share 'buy' ratings||Share neutral ratings||Share 'sell' ratings||Closing price - Feb. 20||Cons. price target||Implied 12-month upside potential||Change in price target since Dec. 31|
|Boeing Co.||/zigman2/quotes/208579720/composite BA||31%||65%||4%||$336.28||$352.05||5%||-9%|
|Global Payments Inc.||/zigman2/quotes/201234787/composite GPN||81%||16%||3%||$208.47||$223.43||7%||14%|
|Danaher Corp.||/zigman2/quotes/210555154/composite DHR||79%||16%||5%||$160.26||$175.76||10%||9%|
|Cabot Oil & Gas Corp.||/zigman2/quotes/205804016/composite COG||52%||41%||7%||$15.35||$19.33||26%||-11%|
|eBay Inc.||/zigman2/quotes/204653455/composite EBAY||27%||64%||9%||$37.69||$39.20||4%||-2%|
|Wynn Resorts Ltd.||/zigman2/quotes/208845907/composite WYNN||67%||33%||0%||$133.33||$149.88||12%||10%|
|Abiomed Inc.||/zigman2/quotes/202106417/composite ABMD||56%||33%||11%||$168.08||$216.00||29%||-5%|
|CF Industries Holdings Inc.||/zigman2/quotes/209482112/composite CF||47%||47%||6%||$39.48||$47.78||21%||-9%|
|Under Armour Inc. Class A||/zigman2/quotes/204420722/composite UAA||21%||64%||15%||$16.50||$17.96||9%||-14%|
|Hologic Inc.||/zigman2/quotes/201671131/composite HOLX||47%||42%||11%||$52.70||$56.89||8%||5%|
It’s interesting to see that half of these companies have majority “buy” or equivalent ratings from the same analysts that cut their sales estimates so severely.
Here’s a different list showing the 10 S&P 500 companies with the largest decreases in consensus 2020 earnings-per-share estimates since the end of 2019:
|Company||Ticker||Industry||Cons. EPS estimate - Feb. 20||Cons. EPS estimate - Dec. 31||Decline in EPS estimate from Dec. 31 to Feb. 20||Change in sales estimate from Dec. 31 to Feb. 20|
|Hess Corp.||/zigman2/quotes/203832174/composite HES||Integrated Oil||-$0.26||$0.29||N/A||2.6%|
|Apache Corp.||/zigman2/quotes/200648444/composite APA||Integrated Oil||-$0.01||$0.04||N/A||0.0%|
|Boeing Co.||/zigman2/quotes/208579720/composite BA||Aerospace & Defense||$5.43||$18.20||-70.1%||-20.0%|
|Under Armour Inc. Class A||/zigman2/quotes/204420722/composite UAA||Apparel/Footwear||$0.14||$0.48||-69.9%||-7.0%|
|Wynn Resorts Ltd.||/zigman2/quotes/208845907/composite WYNN||Casinos/Gaming||$2.89||$5.81||-50.3%||-10.4%|
|Mosaic Co.||/zigman2/quotes/203825795/composite MOS||Chemicals: Agricultural||$0.68||$1.27||-46.7%||-5.7%|
|MGM Resorts International||/zigman2/quotes/209932643/composite MGM||Casinos/Gaming||$0.86||$1.42||-39.3%||-4.8%|
|UDR Inc.||/zigman2/quotes/200760603/composite UDR||Real-estate investment Trusts||$0.22||$0.34||-34.9%||2.4%|
|Cabot Oil & Gas Corp.||/zigman2/quotes/205804016/composite COG||Integrated Oil||$0.89||$1.30||-31.4%||-12.2%|
|IPG Photonics Corp.||/zigman2/quotes/203325788/composite IPGP||Semiconductors||$3.47||$4.86||-28.5%||-6.3%|
Here’s a summary of current analyst opinion for the group, which includes changes in consensus price targets:
|Company||Ticker||share 'buy' ratings||Share neutral ratings||Share 'sell' ratings||Closing price - Feb. 20||Cons. price target||Implied 12-month upside potential|
|Hess Corp.||/zigman2/quotes/203832174/composite HES||42%||58%||0%||$64.72||$73.70||14%|
|Apache Corp.||/zigman2/quotes/200648444/composite APA||29%||65%||6%||$28.58||$31.34||10%|
|Boeing Co.||/zigman2/quotes/208579720/composite BA||31%||65%||4%||$336.28||$352.05||5%|
|Under Armour Inc. Class A||/zigman2/quotes/204420722/composite UAA||21%||64%||15%||$16.50||$17.96||9%|
|Wynn Resorts Ltd.||/zigman2/quotes/208845907/composite WYNN||67%||33%||0%||$133.33||$149.88||12%|
|Mosaic Co.||/zigman2/quotes/203825795/composite MOS||58%||37%||5%||$18.47||$24.78||34%|
|MGM Resorts International||/zigman2/quotes/209932643/composite MGM||53%||42%||5%||$32.34||$35.88||11%|
|UDR Inc.||/zigman2/quotes/200760603/composite UDR||33%||62%||5%||$50.73||$51.00||1%|
|Cabot Oil & Gas Corp.||/zigman2/quotes/205804016/composite COG||52%||41%||7%||$15.35||$19.33||26%|
|IPG Photonics Corp.||/zigman2/quotes/203325788/composite IPGP||31%||69%||0%||$140.87||$158.23||12%|
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