As shown in the chart below, the percentage of companies beating earnings estimates came in at 64.6% last quarter. Since 1998, the quarterly average has been 62.5%, and the reading has been above the historical average for the last six quarters.
The direction of the beat rate from quarter to quarter is more important than where it comes in each quarter, and the reading has moved slightly lower recently after peaking earlier in the bull market. For the bull market's sake, it would be good to see an increase in the beat rate this earnings season versus the last one.
While the average historical beat rate for all companies is 62.5%, some companies beat their earnings estimates much more often than that. From our Interactive Earnings Report Database available to Bespoke Premium Plus members, below we highlight the S&P 1500 companies with the highest beat rates going back to 2001. To make the list, the company must have at least 20 quarterly reports on file. As shown, 7 stocks in the S&P 1500 have 100% earnings beat rates, which is pretty impressive. These 7 stocks are L-3 Communications (LLL), Gen-Probe (GPRO), Strayer (STRA), Guess? (GES), ANSYS (ANSS), Philips-Van Heusen (PVH), and Harsco (HSC).
While it's nice to beat estimates on a regular basis, it's important to remember that the price reaction to the report is the ultimate arbiter of whether the report was good or bad. And just because a company has a high likelihood of beating estimates, it doesn't guarantee that the stock will trade higher when it does. In theory, a high historical beat rate would make it harder to impress investors with each passing earnings release.
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