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In this article I will be screening for companies that have underperformed the S&P 500 (SPY) year to date, but have recently had earnings estimates raised and raised long-term growth estimates. In addition, I did not want just any company with raised estimates I also wanted companies that have had a history paying and growing dividends. The purpose of this screen is to find stocks that have underperformed but may outperform in the future due to the increased estimates for earnings, long-term growth, as well as dividend growth. For my search I will be using the Zacks.com stock screener with the criteria listed below.

Criteria

  • Relative Price Change: <1

  • PE[ttm]: >1

  • % Change Q2 [next Quarter] Est: >5

  • % Change LT growth Est: >1

  • Dividend Yield: >2

  • 5 yr Historical Dividend Growth: >5

Results

After running the screen I found that four companies met all the criteria I outlined above. The four companies are ConocoPhillips (COP), Progressive Waste Solutions (BIN), Oneok Partners LP (OKS), and Stanley Black & Decker (SWK). In the table below is data from the screen as well as performance data.

YTD Perf.

% Chng. Est

% Chng. LT Growth

Div. Yield

5 yr Hist Div Growth

ConocoPhillips

19.02%

6.48%

9.64%

4.11%

9.95%

Progressive Waste Solutions

13.46%

8.16%

25.56%

2.20%

20.42%

Oneok Partners LP

-4.53%

9.68%

20.27%

5.83%

6.29%

Stanley Black & Decker

17.18%

6.81%

4.28%

2.29%

11.08%

S&P 500

20.05%

Valuation

I will look at how each company is valued using a DCF Calculator to estimate the fair value of each stock to see if any of the four are undervalued. The data for earnings and growth is from Zacks.com, benchmark data from longrundata.com, and CPI data from the BLS. I used the following assumptions for the calculator:

  • Earnings Grow for Next: 5 years

  • Level Off to: 1% for every year after

  • Benchmark return: 10-year annualized SPY return of 7.68%+1.80% inflation= 9.48% benchmark

EPS [ttm]

LT growth Est.

Current Price

Fair Value

Under/Over Valued?

ConocoPhillips

$5.70

5.00%

$66.17

$80.28

Undervalued

Progressive Waste Solutions

$1.05

16.70%

$24.45

$23.60

Overvalued

Oneok Partners LP

$2.48

4.45%

$49.21

$34.14

Overvalued

Stanley Black & Decker

$5.01

13.40%

$88.34

$99.02

Undervalued

Closing Thoughts

I believe ConocoPhillips & Stanley Black & Decker are worth a deeper look because each stock has recently had positive revisions to earnings estimates, and long-term growth. In addition, each company is growing the dividend, and each stock is undervalued as measured by my fair value estimate. The other two stocks that met my screen criteria but did not pass my fair value test should also be looked at more in depth. Progressive Waste was near fairly valued so if the market corrects shares might fall enough to undervalued. Oneok Partners is a MLP so for someone who is looking for income and dividend growth and has a long investment horizon, Oneok could be an option.

Disclaimer

Source: 4 Companies With Raised Earnings Estimates And Dividend Growth