10 companies totally blow away profit targets

A scene from the new game Star Wars Battlefront by EA Games.

Investors don’t usually like surprises. But this earnings season has been loaded with the kind they love: Better-than-expected profits.

There are 10 companies in the Standard & Poor’s 500 index, including video-streamer Netflix (NFLX), Nike (NKE) and Goldman Sachs (GS) that not only topped third-quarter profit forecasts, but smashed past them by 25% or more, according to a USA TODAY analysis of data from S&P Global Market Intelligence.

Powerful earnings surprises are exactly what investors were hoping for going into the third-quarter earnings season. Coming into earnings season, analysts were calling for 0.7% lower earnings from companies in the Standard & Poor’s 500, says S&P Global. If those estimates were correct, companies would report the fifth-straight quarter of lower earnings.

But views have turned markedly more positive since companies started beating views. Analysts now think S&P 500 profit will be roughly flat or even positive, says John Butters, analyst at financial data firm Factset. “Companies are beating on the top line and bottom line by more than we usually see,” he says. With more than 70 S&P 500 companies reporting, so far 78% have beaten earnings estimates, topping the 67% that have on average the past five years, Butters says.

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Wait! Could that be earnings growth finally turning positive?

Some of these earnings aren’t just beating estimates, but walloping them. Netflix is the star example of a company that blasted past estimates with so much power investors are still scrambling to push shares higher to reflect reality. The company reported an adjusted quarterly profit of 12 cents a share, which was double the profit expected by analysts and 71% higher than during the same period a year ago. Analysts and investors were surprised with the number of subscribers the company added. Shares have soared 25% over the past month.

The banks also have been a surprisingly strong point of earnings power, largely because they’re doing much better than many feared given the low interest rate environment. But Goldman Sachs proved the doubters wrong, posting adjusted quarterly profit of $4.88 a share, topping estimates by 27.4% helped by trading revenue. A number of other big financials, including American Express (AXP) and Morgan Stanley (MS) also blew away earnings forecasts, helping the sector be an even bigger lift to corporate profits. Financials are now seen delivering nearly 15% profit growth in third quarter, the best of any sector. Both Goldman and American Express have seen their shares rise 5% in the month. “The big banks may finally be putting the nightmare that was 2008/2009 behind them,” says Ed Yardeni, president of Yardeni Research, in a note to clients.

But just blowing away third-quarter earnings estimates isn’t enough if investors have fears about the future. Sneaker maker Nike reported 30% higher adjusted profit of 73 cents a share in the quarter ended in August. Shares, though, are down nearly 6% over the past month as investors fret over the November quarter. Analysts have slashed their forecast for the November quarter by 16%, says S&P Global.

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Nonetheless, the overwhelming preponderance of good news is a positive. “The early read is encouraging and suggests (the second quarter) was the bottom for (profit growth),” Yardeni says.


Company, Symbol, Q3 earnings surprise.

Netflix, NFLX, 100%.

FMC Technologies, FTI, 52.2%.

Prologis, PLD, 44.4%.

Yahoo!, YHOO, 42.9%.

SL Green Realty, SLG, 32%.

NIKE, NKE, 30.4%.

American Express, AXP, 29.2%.

Goldman Sachs, GS, 27.4%.

ConAgra, CAG, 27.1%.

Morgan Stanley, MS, 27%.

Source: S&P Global Market Intelligence, USA TODAY.

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