Bottom Three S&P 500 Stocks this 2Q Earnings Season

Author: Gary Ashton

Estimated read time: 3 minutes

Publication date: 8th Jul 2019 10:46 GMT+1

As second-quarter earnings season gets underway, several companies in the S&P500 will report results in July. We take a look at three potential losers using Finscreener.com’s earnings ratings screening tool. You can use this tool to screen your S&P 500 winning stocks, or those reporting in August instead of July. You can also use it to explore stocks trading in other equity indices like the NASDAQ 100 or Dow 30.

For this exercise, we rank large-cap ($10-200 billion) S&P 500 companies reporting 2Q financial results in July by their Earnings Rating. Fifteen names come up as a “Strong Sell” and have published earning estimate revisions. All of them have had their earnings estimates for the quarter revised down, but some are more severe in percentage terms than others, and still, others are poised to have a third quarterly negative earnings surprise. Below we examine the three names with the most substantial negative revision to their quarterly earnings estimates in percentage terms.

Three Potential Losers in 2Q-2019

One fascinating name is Electronic Arts Inc. (NASDAQ: EA) with a 566% downward revision to its 1Q-2020 earnings estimate of -$0.14 per share. The negative expected earnings are quite a shift from 4Q-2019 when the company reported earnings of $1.21 per share, which was a 55% positive surprise on Wall Street analyst estimates of $0.78 per share. Stranger still is that analysts expect FY-2020 (in March 2020) earnings to be up to $3.78 per share. Electronic Arts also reported positive earnings surprises of 6.86% in 3Q and 116% in 2Q-2019 respectively, according to data from Finscreener.com. The stock currently trades around $98 per share after reaching a high of $151.26 per share in July 2018.

Another stock with a “Strong Sell” earnings rating is Western Digital Corporation (NASDAQ: WDC). Wall Street revised down its 4Q-2019 (because the company has a June/June financial year) earnings estimates by 110% to -$0.04 per share. This latest potential quarterly loss would be followed by two negative earnings surprises of 150% and 7.1% in 3Q and 2Q respectively. Last quarter (3Q) analysts expected the company to report earnings per share of $0.24 and got a -$0.12 loss per share instead. The stock now trades around $48 per share after reaching a high of $106.96 in March 2018.

A final stock that could have a rough 2Q is The Boeing Company (NYSE: BA), which has been under pressure from the grounding of its 737 Max plane after two recent fatal crashes in Indonesia and Ethiopia respectively. Wall Street revised down 2Q estimated earnings by 61.6% to $1.81 per share after the company reported 1Q earnings of $3.16 per share. The sharp downward revision to 2Q earnings leaves the company with a “Strong Sell” earnings rating from Finscreener.com. The stock currently trades at an eye-watering $354.47 per share after reaching a high of $446 per share in March 2019 and has a 24.7x forward PE-ratio based on FY-2019 earnings, which still looks expensive.

Bottom Line

Finscreener.com has several tools to help users make better investment decisions. In this example, we use the earnings ratings screening tool to rank the bottom three large-cap S&P 500 stocks that are reporting financial results in July in terms of the highest negative revision to their June-quarter earnings estimates in percentage terms. The tool is an example of a first filter used to identify potential stocks to sell, avoid, or buy as a value investment. Investors should use the screener in conjunction with other Finscreener.com analytical tools to reach a final investment decision.


Disclaimer: Gary Ashton is an experienced financial consultant who writes for Finscreener.com. The observations he makes are his own and are not intended as investment or trading advice.