Analysts have been more upbeat on company earnings. Investors don't share that sentiment.
Apple, State Street and other companies have had their earnings-per-share estimates increased by analysts — one of the biggest catalysts for stocks to rise.
Such a disconnect may mean those companies' share prices may get a lift after they publish their earnings reports this week. A total of 122 S&P 500 members will release second-quarter results today through Friday.
The problem is, predicting the direction of a stock based on an earnings report is essentially as good as a coin flip. According to information collected during the past nine years by Bespoke Investment Group, a stock has risen in 32,563 instances, or 49.9% of the time, on the day a company reports earnings. Investors may have a better chance of winning at a Las Vegas casino.
To improve chances, perhaps, here are the five companies whose share prices are most out of line with analysts' EPS upgrades over the past month.
1. Apple has been bruised because of antenna problems with the company's new iPhone 4 handset. In the span of less than a month, Apple released the iPhone 4 and saw its stock hit an all-time high of $279.01 before dropping back below $250 in early July.
Report Date: July 20, after market closes
One-Month Price Change: 6% decline
One-Month Revisions to EPS: Analysts have increased their EPS targets by an average of 3.4% over the past month, according to Thomson Reuters. Twenty firms, including Morgan Stanley and Citigroup, have increased their earnings targets, while only five have lowered them.
Expectations: On average, analysts predict that Apple will report a quarterly profit of $3.07 a share on revenue of $14.6 billion. When reporting fiscal second-quarter results in April, Apple offered conservative guidance for its fiscal third quarter, as it often does. At the time, Apple said it expects revenue in the range of $13 billion to $13.4 billion on earnings in a range of $2.28 to $2.39 a share. On April 21, the day after Apple reported second-quarter results, the stock jumped 6%.
2. Comerica shares rallied in June after Briefing.com reported speculation about a takeover by Barclays . The rumor pushed the stock price up close to $40, but it has since slid below $37.
Report Date: July 21, before market opens
One-Month Price Change: 4.4% decrease
One-Month Revisions to EPS: Analysts have increased their EPS targets by an average of 9.5% over the past month, according to Thomson Reuters. Six investment firms, including Bank of America/Merrill Lynch and UBS, have raised their earnings estimates for the third quarter in the past month. None have lowered their forecasts, according to Thomson Reuters.
Expectations: The Thomson Reuters average estimate stands at 23 cents a share, although analysts predict earnings will come in as low as 15 cents a share and as high as 29 cents. In April, after the company reported first-quarter results, Comerica shares rose almost 3%.
3. Harley-Davidson was to be the next big takeover target, according to rumors in early June. The stock is down 25% since the company last reported earnings in April.
Report Date: July 20, before market opens
One-Month Price Change: 10% drop
One-Month Revisions to EPS: Firms covering Harley-Davidson have raised their EPS targets by 3.7% over the past month, according to Thomson Reuters. While William Blair and Deutsche Bank have trimmed estimates in the past month, Wells Fargo and Longbow Research have bumped up their targets.
Expectations: The iconic motorcycle maker is expected to notch a second-quarter profit of 41 cents a share, according to Thomson Reuters, with the range of estimates spanning from 26 cents to 56 cents. On April 20, Harley-Davidson handily beat the Thomson Reuters average estimate for first-quarter earnings, sending up the stock more than 7%.
4. Fifth Third Bancorp shares have been dragged down on concerns over financial reform and credit and loan woes. Since the bank last reported earnings April 22, the stock has dropped 18%.
Report Date: July 22, before market opens
One Month Price Change: 12% decline
One Month Revisions to EPS: Even though only UBS, has raised its EPS target while three other firms have cut forecasts, the average target for earnings this quarter is up 12.5%.
Expectations: Fifth Third should report a profit of 2 cents a share for the second quarter, according to the mean of 24 analyst estimates. Forecasts range from a loss of 8 cents a share to a profit of 10 cents a share. In April, the bank said it expects continued credit improvement in the second quarter, with delinquencies and nonperforming assets remaining relatively stable and charge-offs down another $100 million or so in the second quarter.
5. State Street shares were pressured by fears of what potential financial reform changes would mean for trust and custody banks. Initially, the so-called Volcker Rule would have prevented firms from speculating with their own money. Sen. Scott Brown (R.-Mass.) helped negotiate a relaxed Volcker Rule favoring in the final bill that allows State Street, which is based in Boston, to invest some of the firm's own money in the funds it oversees.
Report Date: July 20, before market opens
One-Month Price Change: The stock rallied sharply higher on July 7 after the company preannounced better-than-expected results for the second quarter. Still, the shares have fallen 2% over the past month.
One-Month Revisions to EPS: Nine research firms, including Sanford C. Bernstein and Credit Suisse, have increased their EPS targets for State Street over the past month, good for a 27% increase. Rochdale Securities and JPMorgan are among only four firms that have cut State Street earnings targets during the same time.
Expectations: Earlier this month, State Street said it expects to report second-quarter earnings of 93 cents a share, which prompted analysts to boost their EPS targets. One analyst forecasts earnings of 96 cents.
Disclosure information was not available for Holmes or his company.