In the world of investing, past performance is certainly no guarantee of future performance. A stock that has been going up for years, may suddenly stop rising and start declining. Ditto for a stock that has been sinking. In the blink of an eye it starts rising. The same is true during earnings season. Just because a company beat the estimate the prior quarter doesn't mean it will beat again this quarter.
But what if that company has put together a hot streak of earnings beats? What if a company has beaten not just two or three quarters in a row, but 20 quarters in a row - or 5 years - without a miss? Apple (AAPL) had put together just such an impressive earnings surprise streak until it finally missed in late 2011. In the 6 quarters since the miss, it has missed another 3 times. Share price, however, peaked in between the second and third miss.
But during its earnings surprise streak, investors were handsomely rewarded.
Perfection Isn't Easy
Even with all of the unknowns in investing, I'd rather buy a company that is on an earnings hot streak, than one that is dead cold. Companies with a perfect earnings track record for the last 5 years are a small select group. It's incredibly difficult to keep beating for 5 years through all the ups and downs in the economy. Management has to manage expectations very, very well. There's little room for error. That takes skill (and maybe some luck.)
These three companies haven't missed in 5 years. I featured two of these companies last quarter and they came through with another earnings beat. Of course, an earnings beat doesn't necessarily mean a stock will rise afterwards. Being light on guidance or an earnings/sales warning, for instance, could put the damper on an earnings beat. But I still like my chances with an earnings beat versus an earnings miss.
Will their streaks continue this earnings season?
3 Companies With Perfect Earnings Surprise Track Records
1. Wyndham Worldwide
Wyndham is one of the largest hospitality companies in the world. It operates about 630,000 hotel rooms worldwide and operates vacation rentals and exchanges with over 106,000 vacation properties in 100 countries. It also operates a network of 190 timeshare properties with about 915,000 owners.
- Forward P/E = 15.4
- Expected 2013 earnings growth = 15%
- Zacks Rank #3 (Hold)
- Reporting second quarter results on July 24
2. Jarden Corporation
Jarden owns over 100 of the most famous consumer brands in the world including Rawlings, Crock-Pot, Mr. Coffee, Sunbeam, Seal-a-Meal, and First Alert.
- Forward P/E = 13.4
- Expected 2013 earnings growth = 17.7%
- Zacks Rank #3 (Hold)
- Expected to report second quarter results on July 23
3. Herbalife Limited
Herbalife makes a whole host of nutrition products including protein shakes and snacks, energy and fitness drinks, vitamins and nutritional supplements. It sells its products through independent distributors in 85 countries.
The company has been in the news recently due to a change in auditors resulting from the resignation of a partner with its former auditor. It did not have to restate any financial statements.
- Forward P/E = 9.4
- Expected 2013 earnings growth = 18.7%
- Zacks Rank #2 (Buy)
- Expected to report second quarter results on Aug 5
APPLE INC (AAPL): Free Stock Analysis Report (email registration required)
HERBALIFE LTD (HLF): Free Stock Analysis Report (email registration required)
JARDEN CORP (JAH): Free Stock Analysis Report (email registration required)
WYNDHAM WORLDWD (WYN): Free Stock Analysis Report (email registration required)