From the data from Bespoke Investment Group to identify stocks reporting earnings that typically underperform Wall Street forecasts and fall after their announcements. These stocks miss their earnings per share targets less than half of the time and have a next-day drop of more than 2% on average.
According to Bespoke data, commercial spaceflight company Virgin Galactic only beats Wall Street estimates about 17% of the time and trades down nearly 5% after its report.
The next day, however, shares fell after the company filed to sell up to $500 million in common stock. For the month of July, shares were down about 34%.
According to Bespoke data, Maxar Technologies beats analyst estimates about 40% of the time and trades down about 5% after its report.
According to Bespoke, alternative meat company Beyond Meat only meets Wall Street’s earnings forecast about a quarter of the time. Following earnings, the stock is down about 6.7 percent.
Earlier this month, the plant-based protein leader introduced new meat-free chicken tenders in nearly 400 restaurants across the United States. In addition, the company is attempting to expand its presence in China.
According to Bespoke, the companies that never beat earnings estimates are UTZ Brands, BridgeBio Pharma, Fate Therapeutics, and Eventbrite.
Furthermore, UTZ Brands trades down an average of 8% on report day. After earnings, BridgeBio Pharma and Fate Therapeutics typically fall 6.3 percent and 3.5 percent, respectively.
Eventbrite falls the most of any stock on the list, falling 9.8 percent on average after its report.
According to analysis, Pacific Biosciences, Switch, and Fiesta Restaurant Group are also among the companies that frequently disappoint.
Market reaction to earnings
A steady but uneven rally. We are nearing the end of the S&P500’s sixth consecutive month of gains, which has only happened three times in the last three years from February to August (strong mid bull-market years: 1954, 1964 and 1995).
Nonetheless, the gap has narrowed. Some momentum indicators point to exhaustion, and earnings reactions indicate that much fundamentally positive news has already been priced in.
The dip-buying reflex is still active. The 9:30 open is once again serving as a time for indexes to firm up a little. Confidence in liquidity/easy financial conditions, as well as a longer – if not stronger – period of economic recovery, reinforce this impulse. The market currently views the slowdown threat of Covid delta variant spread as more of a moderation of growth and an excuse for the Fed to be more dovish than expected just a month ago.
Seasonal weakness cannot be ignored in August. The month is up roughly half of the time, but the risk/reward ratio has historically skewed to the downside on average.
After a huge lead, the equal-weight Russell 1000 is now running even with the S&P500 for the year.
This week, small caps outperformed, and there has been a slight revival in the reflation sectors. Just in time for another “immaculate rotation” away from mega-cap tech? Can this work if earnings-forecast revisions are stalling, as they appear to be?
This year, the broad market has been able to hold its own even when AAPL and AMZN (which account for more than 10% of the S&P500) were drags on the tape. It entails doing things the hard way. It takes more energy to make cyclical groups work, but it is not impossible.
The position/sentiment is moderate, neutral, and perplexed. This is supported by the Bank of America Bull/Bear Index, the NAAIM Exposure Index, the AAII retail survey, and the lukewarm response to the Robinhood IPO. It’s a good idea to keep your expectations in check.
Today’s market breadth is negative but not a washout. Sectors that are defensive or of high quality will almost certainly receive a bid (health care, staples). Treasury yields are low, and today’s PCE price data supports the premise of a “transitory inflation surge.”
The VIX has a slight bid, which accounts for the usual Friday drag. Is it based on the graph? Historically, August is a month with a definite upside bias to volatility (though not without exception).