Earnings Distortion Scorecard: Calendar 4Q19 Earnings Season Preview

Welcome to the first research service that identifies which companies are most likely to beat or miss their earnings estimates based on abnormally low or high earnings distortion.

We measure earnings distortion using a proprietary human-assisted ML methodology featured in a recent paper from Harvard Business School (HBS) and MIT Sloan. This paper empirically shows that street earnings estimates are incomplete and less accurate since they do not consistently and accurately adjust for unusual gains/losses buried in footnotes.

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Earnings Distortion from unusual items is an increasingly material force. Earnings for the S&P 500 were distorted by an average of 22% in 2018.

As corporate managers bury key data in footnotes to manipulate earnings, and investors miss them, investment opportunities arise because stocks prices tend to be driven by core earnings power.

Only our research gives investors the tools they need to accurately measure core earnings.

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Every week during the upcoming earnings season, we will publish a special Earnings Distortion Score[1] for key companies reporting the following week. We will segment these companies into five categories:

Strong Beat
Beat
Inline
Miss
Strong Miss

These scores indicate how likely companies are to beat or miss estimates based on how much their estimates contain unusual gains/losses which cause earnings to be over/understated.

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Earnings Season Weekly Reports

Starting the week of January 6, 2020, we’ll break down the important earnings releases for the following week. In this analysis, you’ll get-up-to date information regarding a stock’s earnings release date and its earnings distortion score on the likelihood of beating or missing consensus expectations.

This report will be available to Gold and higher members.

Each week, we will focus on the following companies:

Week of 1/6/20: LEN, STZ, WBA

Week of 1/13/20: AXP, BAC, BK, BLK, C, CFG, CSX, DAL, FAST, FRC, GS, INFO, JPM, KMI, KSU, MS, MTB, NFLX, PBCT, PNC, PPG, RF, SCHW, SLB, STT, UAL, UNH, USB, VFC, WFC

Week of 1/20/20: AAL, ABBV, ABT, AEP, ALK, AMTD, APD, APH, BMY, CCI, CL, CMA, CMCSA, COF, CTXS, DFS, DHI, EDU, ETFC, FCX, FFIV, HAL, IBM, INTC, ISRG, JBHT, JNJ, KEY, KMB, LRCX, LUV, LVS, MKC, NEE, NSC, NTRS, NVR, PG, PGR, PLD, RJF, RMD, ROL, SIVB, SLG, SWK, SYF, TAL, TDY, TEL, TER, TRV, TXN, TXT, UNP, URI, UTX, VAR, WAT, WDC, ZION

Week of 1/27/20: AAPL, ABC, ABMD, ADP, AFG, AGN, AIV, AJG, ALGN, ALLY, AMD, AMGN, AMP, AMZN, ANTM, AON, AOS, APTV, AVY, BA, BABA, BEN, BIIB, BKR, BLL, BRO, BXP, CAT, CE, CHKP, CHRW, CHTR, CMS, COP, CPT, CVX, D, DD, DHR, DOV, DRE, EA, EBAY, ELS, EMN, EPD, EQR, ESS, ETN, EW, FB, FBHS, FICO, GD, GE, GLW, GWW, HCA, HES, HOG, HOLX, HON, HP, HSY, IDXX, IEX, ILMN, IP, IR, ITW, IVZ, JCI, JNPR, KIM, KKR, KLAC, LHX, LLY, LMT, LYB, MA, MAA, MCD, MCK, MDLZ, MKTX, MMC, MMM, MMP, MO, MSCI, MSFT, MXIM, NDAQ, NLOK, NOC, NOW, NUE, PCAR, PFE, PFG, PH, PHM, PKG, PKI, PNR, PYPL, RCL, RHI, ROK, ROP, RTN, S, SBUX, SHW, SIRI, SPG, SYK, T, TMO, TROW, TSCO, UPS, V, VLO, VZ, WHR, WRB, WRK, WY, WYNN, XEL, XLNX, XOM, XRX, YUMC, ZBH

Week of 2/3/20: ADM, ADS, AFL, ALL, ALNY, ALXN, AME, AMG, ARE, ARMK, ATO, AVB, BAP, BAX, BDX, BR, BSX, CAH, CB, CBOE, CDW, CERN, CHD, CI, CINF, CLX, CMG, CMI, CNC, COTY, CPRI, CTSH, DIS, DLR, DTE, DXC, EL, EMR, EXC, EXPE, F, FISV, FLT, FOXA, FTNT, FTV, GILD, GL, GM, GOOGL, HAS, HBI, HIG, HUM, IAC, ICE, IT, JKHY, K, LEG, LH, LNC, MAC, MAS, MCHP, MET, MHK, MKL, MPC, MPW, MRK, MSI, MTCH, MTD, NBIX, NOV, NWSA, NXPI, ODFL , ORLY, PAYC, PM, PRU, PSX, QCOM, QRVO, REGN, RL, RSG, SEE, SGEN, SNA, SNAP, SPGI, SPOT, STX, SWKS, SYY, TDG, TMUS, TPR, TRMB, TSN, TTWO, TWTR, UI, UNM, VRSN, VRTX, VTR, WCG, WEC, WLTW, WU, XYL, YUM

Week of 2/10/20: AEE, AIG, AIZ, AKAM, AMAT, ANET, ATVI, BWA, CAN, CBRE, CCEP, CF, CME, CSCO, CTL, DE, DGX, DISH, DUK, DVA, EPAM, EQIX, FIS, FLIR, FMC, FRT, GPN, HII, HLT, IFF, INCY, INVH, IPG, IPGP, IQV, IRM, KO, L, MCO, MGM, MLM, MRO, NLY, NTAP, NVDA, NWL, OMC, OXY, PEAK, PEP, PGR, PPL, PXD, RE, REG, RNG, SCCO, SHOP, SSNC, STE, TAP, TRIP, TRU, TWLO, UAA, UDR, VMC, WELL, WM, WMB, WST, YNDX, ZBRA, ZTS

Week of 2/17/20: A, AAP, ADI, AGR, ALB, ALLE, AWK, BIDU, BMRN, CDNS, CLR, COG, CPRT, CVS, CXO, DPZ, DVN, DXCM, ECL, ED, EFX, ES, ETR, EXAS, EXPD, EXR, FANG, FE, FLS, GDDY, GPC, GRMN, HFC, HPE, HRL, HSIC, HST, INTU, KEYS, KHC, LDOS, LNT, MDT, MLCO, MOS, NBL, NCLH, NEM, NI, NTES, O, PNW, PWR, ROKU, SNPS, SO, SUI, TFX, TTD, TUS, TYL, VER, VNO, VRSK, WMT, WPC, WTR, XEC, Y

Week of 2/24/20: ADSK, AES, AMT, ANSS, APA, AZO, BBY, BIO, BKNG, CNP, CPB, CSGP, DISCA, EIX, EOG, EV, GPS, HD, HEI, HPQ, JD, JWN, KDP, LB, LBRDK, LKQ, LNG, LOW, LYV, M, MAR, MELI, MNST, MYL, NLSN, NRG, OKE, PANW, PEG, PGR, PODD, PRGO, PSA, SJM, SPLK, SQ, SRE, TJX, UHS, VEEV, VMW, VST, WAB, WDAY, XRAY

Week of 3/2/20: BURL, COO, COST, CRM, DLTR, HRB, KR, KSS, MRVL, ROST, TCOM, TGT, WB

Week of 3/9/20: ADBE, AVGO, DG, ORCL, PGR, ULTA, ZTO

Week of 3/16/20: CAG, CTAS, DRI, FDX, GIS, MU, NKE, TIF

Week of 3/23/20: ACN, FDS, INFO, KMX, LEN, LULU, MKC, PAYX, PVH

Week of 3/30/20: LW, WBA

For more on how to use core earnings and earnings distortion to pick better stocks, see these reports.

This article originally published on December 19, 2019.

Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, sector, style, or theme.

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[1] Note that Earnings Distortion scores will be added to our website via a new column on the Screeners and Portfolios page in January 2020.

Click here to download a PDF of this report.

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