4 Stocks That Had Massive Earnings Surprises In 2018

It’s been a challenging year for those invested in the U.S. stock market. The market has had a rougher run than 2017, fettered by federal interest rate hikes and U.S.-China trade tensions.

Meanwhile, the Trump administration’s move for a massive corporate tax cut early this year was a breather for the U.S. stock market. This ensured higher earnings for companies. Then again, investors are apprehensive about the Federal Reserve, which is expected to raise rates for the fourth time this year at its Dec 18-19 meeting. An increase might induce more volatility in the market.

Moreover, investors are vexed about escalating global trade tensions as the Trump administration uses tariffs to close its trade deficit, particularly with China. This has been dampening investors’ sentiments throughout the year. The trade disputes with China have resulted in supply-chain disruptions, eating into corporate profits and in turn showing on stock performance.

Given the prevailing market conditions, let’s take a look at the stocks that survived the onslaught and even surpassed market expectations.

Importance of Massive Earnings Surprise

An earnings surprise is when quarterly earnings reported by a company come in higher than the estimates of analysts. After much brainstorming and analysis of financials, analysts come up with earnings estimates for companies. They, in fact, club their insights and a company’s guidance while deriving an earnings estimate. Stocks of companies, which have solid quarterly earnings (on a nominal basis), generally take a hit if they miss or meet expectations.

On the contrary, outperforming the consensus mark is almost equivalent to surpassing the company’s own guided range as well as market expectations. And if the margin of earnings surprise is big enough, it typically drives the stock higher right after the release. Thus, more than anything else, an earnings surprise can work wonders for a stock.

Our Strategy to Pick Top 4 Stocks

In order to shortlist stocks that posted massive earnings surprises in the trailing four quarters, we chose the following as our primary screening parameter.

Average EPS Surprise greater than 100% in the trailing four quarters: We elevated the margin for outperformance higher by setting the average earnings surprise for the trailing four quarters at 100%.

Zacks Rank 1 or 2: We picked only those companies which have a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Our Top Picks

Here we list four stocks that have an average earnings surprise of more than 100% for the trailing four quarters.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) is a global biopharmaceutical company that focuses on developing and commercializing innovative therapies. The company currently sports a Zacks Rank #1. Vanda Pharmaceuticals surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 736.7%. Also, it has expected earnings growth of 245.7% and 17.7% for 2018 and 2019, respectively.

Vanda Pharmaceuticals Inc. Price and EPS Surprise

Vanda Pharmaceuticals Inc. Price and EPS Surprise | Vanda Pharmaceuticals Inc. Quote

Penumbra, Inc. (NYSE:PEN) is a global healthcare company that designs, develops, manufactures and markets medical devices for innovative therapies. The company currently sports a Zacks Rank #1 and has surpassed the consensus mark in each of the trailing four quarters, the average being 591.7%. The company’s 2018 and 2019 earnings are expected to grow 4,900% and 65.6%, respectively.

Penumbra, Inc. Price and EPS Surprise

Penumbra, Inc. Price and EPS Surprise | Penumbra, Inc. Quote

G-III Apparel Group, Ltd. (NASDAQ:GIII) design, source and market apparel and accessories within its owned, licensed and private label brands. Currently, G-III Apparel Group sports a Zacks Rank #1. The company has trailing four-quarter earnings beat of 429%. Earnings estimates for 2018 and 2019 are pegged at 68.8% and 13.2%, respectively.

G-III Apparel Group, LTD. Price and EPS Surprise

General Finance Corporation (NASDAQ:GFN) , a leading specialty rental services company offering portable storage, modular space and liquid containment solutions, currently sports a Zacks Rank #1. General Finance has surpassed the consensus mark in each of the trailing four quarters, the average being 325%. Also, earnings for 2018 and 2019 are expected to increase 433.3% and 70.3%, respectively.

General Finance Corporation Price and EPS Surprise

General Finance Corporation Price and EPS Surprise | General Finance Corporation Quote

In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?

These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>