When a company beats analyst expectations, it is usually a good sign. It means the company is doing something right. If it falls short, it could mean the company is on a downward trend. In this case, it is best for investors to avoid an underperforming stock unless they want to take a big risk or they understand why the performance fell short to begin with.
There were seven stocks that have market caps over $25 billion that reported their earnings on January 24. There were winners (those that beat analyst expectations), losers (those that fell short) and a couple that came in somewhere in the middle.
Apple, Inc. (AAPL) has a $391.89 billion market cap. Right now, it is priced at 10.63 times its forward earnings. Over the last five years, the company has enjoyed EPS growth of 64.95% per annum on average. Analysts estimate the company's EPS will grow by 18.17% per annum over the next five years. AAPL's revenue rose over 73 percent from $26.74 billion during the same quarter last year to $46.33 billion, shattering analyst expectations of $38.85 billion. Its net income increased even more dramatically, moving 118% to $13.06 billion or $13.87 a share, annihilating analyst expectations of $10.08 a share.
Johnson & Johnson (JNJ) has a $177.51 billion market cap and is currently priced at 12.48 times its earnings. The company's EPS has grown 7.35% per annum over the last five years. Analysts predict JNJ's growth will continue at roughly as much going forward, estimating EPS growth of 6.17% per annum over the next five years. JNJ's sales rose 3.9% year over year to finish the quarter at roughly $16.26 billion, falling short of analyst estimates of $16.27 billion. JNJ performed better with regard to its net earnings, rising 9.3% to $3.1 billion and diluted shares growing 9.7% to $1.13. In contrast, analysts had estimated an EPS of $1.09. Warren Buffett's Berkshire Hathaway has a large position in JNJ. JNJ has a dividend yield of 3.5%.
Verizon Communications, Inc. (VZ) has a market cap of $106.99 billion and is priced at 15.00 times its future earnings. Over the last five years, VZ's EPS has slipped an average of -16.07% per annum. Expectations are much better for the company going forward. Analysts estimate its EPS will grow 10.58% per annum over the next five years. VZ reported a revenue increase of 7.7% to $28.44 billion from $26.39 billion the same quarter last year. Excluding one-time pension items, VX reported a net income of 52 cents a share, falling short of analyst estimates of 53 cents a share. Verizon has a high dividend yield of 5.3%.
McDonald's Corp. (MCD) has a $101.04 billion market cap and is currently trading at 17.23 times its forward earnings. The company's EPS has grown 17.75% per annum over the last five years. Analysts estimate its growth will be moderately less aggressive going forward, predicting EPS growth of 10.54% on average per annum over the next five years. MCD's revenue for the quarter rose 9.8% quarter over quarter from $6.21 billion last year to $6.82 billion. Its net income grew 11% to $1.38 billion, or $1.33 per share, beating estimates of $1.29 a share.
EMC Corp. (EMC) has a $51.28 billion market cap. The company is priced at 14.70 times its forward earnings. EMC's EPS has grown 13.52% per annum over the last five years. Analysts predict its earnings will increase by 16.43% per annum over the next five years. EMC reported revenue of $5.57 billion, beating estimates of $5.49 billion. The company's EPS also beat analyst expectations, coming in at 49 cents a share compared to estimates of 46 cents a share.
DuPont de Nemours & Co. (DD) has a $45.65 billion market cap. Right now, it is priced at 11.60 times its forward earnings. DD's EPS has grown 9.64% over the last five years. Its EPS is expected to grow at roughly the same rate (9.70%) going forward. DD fell short of analyst estimates about its revenue, coming in at $8.4 billion on analyst estimates of $8.53 billion. However, DD was able to beat EPS estimates of 33 cents a share, coming in at 35 cents a share.
Kimberly-Clark Corp. (KMB) has a $28.48 billion market cap and is currently priced at 13.79 times its forward earnings. The company's EPS has grown 6.08% per annum over the last five years. It is expected to grow 6.28% per annum over the next five years. KMB slightly underperformed analyst estimates about its revenue, weighing in at $5.2 billion over estimates of $5.22 billion. At $1.28 a share, the company also fell short of EPS estimates of $1.30 a share.