Blowout Profits At 8 Companies Turn Into Quick Stock Gains

What’s in it for you when an S&P 500 company tops profit forecasts? Investors in the right places are finding out in a big way.


Eight S&P 500 companies, including consumer discretionary plays Nike (NKE) and Chipotle Mexican Grill (CMG) plus HCA Healthcare (HCA), topped second-quarter profit views by more than 10%. But more importantly for investors, the shares popped 10% or more following their positive earnings surprise, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.

Seeing such positive reactions to big earnings beats is refreshing, if not surprising.

Many investors thought strong earnings were already priced into the S&P 500. S&P 500 companies are on pace to report more than 74% higher profit in the second quarter — the strongest growth since 2009, says FactSet. And the S&P 500 is up nearly 20% this year in anticipation.

But where do you find more upside? S&P 500 profits for the second quarter coming in even higher than anyone thought. Nearly 90% of the roughly quarter of S&P 500 companies to report have topped profit expectations.

“We cannot recall a time when US equity markets have run so far ahead of Wall Street analysts’ earnings estimates,” said Nicholas Colas, co-founder of DataTrek Research. “The reason for this optimism is earnings leverage.”

S&P 500 Profit Coming In Strong

Coming into the quarter, earnings expectations were sky-high. But reality is proving to be even stronger.

And analysts weren’t just putting out an easy profit bar for S&P 500 companies to top. The 74% quarterly profit growth called for is actually up from the 63% growth they expected as of June 30, FactSet says.

That’s why positive earnings surprises are still largely being met with big stock gains — even though the S&P 500 is up so much already this year. Shares of just 28 S&P 500 companies of the 84 that topped quarter profit estimates by 10% or more, or just a third, fell following their reports.

The rest are up. And many by a large amount.

Nike Shoots And Scores

If you’re looking for an example of a profit beat followed by a stock surge, look at Nike.

Shares of the athletic gear maker vaulted more than 23% higher since it reported a strong profit gain on June 24. The S&P 500 in that time is only up roughly 4%. Nike is the top-performing S&P 500 company of any that have topped second-quarter profit forecasts by at least 10% so far.

Why such good feelings? Nike reported a quarterly profit of 93 cents a share. And that absolutely demolished profit forecasts by more than 80%. And it’s not just a cost-cutting juke move. Revenue in the period topped expectations, too, by 12%. Just look at the nearly perfect 96 Composite Rating to see how everything is going right.

And now for the fiscal year, analysts think Nike can make $4.30 a share, up more than 20% from last year. Should you buy Nike stock now? 

Action In S&P 500 Consumer Discretionary, Health Care

Chipotle is another big S&P 500 winner following an earnings beat. Shares are up nearly 18% in the mere days following the burrito chain’s profit report on July 20. Chipotle reported a quarterly profit of $7.46 a share, topping views by nearly 15%.

And now, analysts are scrambling to up their profit target for the year. Analysts are now calling for Chipotle to make $25.52 a share this fiscal year. That’s up more than 130% from last year. And it’s up more than 5% from what they expected just three months ago.

The profit beat at hospital operator HCA Healthcare is even more dramatic. The company also on July 20 reported a second-quarter profit of $4.37 a share, topping views by nearly 40%. Shares since then are up more than 13%.

To be sure, stocks gains are far from assured following a profit beat. Shares of tech giant Intel (INTC) are down more than 5% since it reported on July 21. And that’s even following its turning a profit of $1.28 a share, exceeding views by nearly 20%. Microsoft (MSFT) and Apple (AAPL) shares, too, failed to lift off in after-hours trading following their profit reports late Tuesday.

But overall, it seems, S&P 500 companies are still finding ways to top sky-high profit expectations. And investors are mostly impressed.

S&P 500 Stock Winners Following Profit Beats

They’re up the most after topping second-quarter profit views by 10% or more

Company Ticker EPS Q2 surprise Profit announcement Stock % ch. after announce Sector Composite Rating
Nike (NKE) 82.7% 6/24/2021 23.6% Consumer Discretionary 96
Chipotle Mexican Grill (CMG) 14.6 7/20/2021 18.3% Consumer Discretionary 99
HCA Healthcare (HCA) 38.3 7/20/2021 13.8% Health Care 97
The Interpublic Group of Companies (IPG) 63.9 7/21/2021 13.0% Communication Services 85
CarMax (KMX) 60.4 6/25/2021 13.0% Consumer Discretionary 91
AutoZone (AZO) 32.3 5/25/2021 12.2% Consumer Discretionary 94
Lennar (LEN) 24.0% 6/16/2021 10.6% Consumer Discretionary 85
Costco Wholesale (COST) 20.7% 5/27/2021 10.0% Consumer Staples 89
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz


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