The earnings game on Wall Street is stacked in favor of generating positive headlines for companies as they “beat” earnings estimates. Investors have learned to take many earnings-season “surprises” with a grain of salt, but some surprises are important enough to drive analysts’ estimates significantly higher, which in turn can support higher share prices over the long term.
Before showing you which large-cap companies have shown the largest revenue surprises this earnings season, it helps to understand how common certain surprises can be.
For starters, “earnings season” isn’t a cut-and-dry period, because many companies have fiscal quarters that end in the middle of the calendar quarter. For the S&P 500 SPX, +0.89% through May 15, FactSet had data for 454 companies for fiscal quarters ended Feb. 17 or later. So the following lists are derived from 91% of the components of the large-cap benchmark index.
The Wall Street earnings game is played by the companies, who might understandably underpromise and then overdeliver with earnings-per-share numbers, as well as the sell-side analysts who base their estimates in part on the “guidance” provided by the companies. Through May 15, 83% of S&P 500 companies that had reported so far this earnings season had beaten consensus earnings-per-share estimates, according to S&P Global Market Intelligence.
Keep in mind that beating an estimate may set up a good headline even if the overall story is negative. Maybe a company beat an estimate because its decline in earnings or sales was less than expected. Going further, maybe even a decline in sales has a silver lining if profit margins rise.
So the 83% earnings “beat rate” isn’t a surprise. But 43% of the companies beat their sales (or revenue) estimates. The sales numbers might be of greater interest, in part because of all the one-time events that can skew earnings figures.
Positive sales surprises
Among the 454 S&P 500 companies for which FactSet had data for fiscal quarters ended Feb. 17 or later, these are the 10 companies that have had the highest positive revenue surprises through May 15. Sales estimates before the earnings report reflect the consensus of analysts.
| Company | Ticker | Industry | Estimated sales before earnings report ($mil) | Actual reported sales ($mil) | Sales surprise |
| Pioneer Natural Resources Co. | PXD, +2.38% | Oil & Gas Production | $1,751 | $2,413 | 38% |
| Fifth Third Bancorp | FITB, +0.89% | Regional Banks | $1,656 | $2,187 | 32% |
| HollyFrontier Corp. | HFC, +2.24% | Oil Refining/Marketing | $3,275 | $3,897 | 19% |
| Alexandria Real Estate Equities Inc. | ARE, +0.65% | Real Estate Investment Trusts | $271 | $315 | 16% |
| Lockheed Martin Corp. | LMT, +1.57% | Aerospace & Defense | $12,580 | $14,336 | 14% |
| Electronic Arts Inc. | EA, +2.30% | Recreational Products | $1,201 | $1,364 | 14% |
| Principal Financial Group Inc. | PFG, +1.35% | Life/Health Insurance | $3,281 | $3,681 | 12% |
| Anadarko Petroleum Corp. | APC, -0.19% | Integrated Oil | $2,874 | $3,218 | 12% |
| Vulcan Materials Co. | VMC, +0.53% | Construction Materials | $895 | $997 | 11% |
| Westinghouse Air Brake Technologies Corp. | WAB, -0.09% | Trucks/Construction/Farm Machinery | $1,476 | $1,641 | 11% |
| Source: FactSet | |||||
You can click on the tickers for more information about each company.
If you are a shareholder or considering an investment in any of these companies, you should do your own research to understand why sales rose for the quarter. Sometimes one-time factors are at play.
Fifth Third Bancorp FITB, +0.89% of Cincinnati is an interesting example. The company sold shares of WorldPay WP, +1.39% the payment processor formerly known as Vantiv, in the first quarter. Bank financial statements include gains on a sale as noninterest income, which is actually a revenue figure.
Keeping in mind that a positive surprise for sales (or earnings for that matter) may not signal an overall trend, here are comparisons of the quarterly sales numbers to those from a year earlier, along with gross profit margins:
| Company | Ticker | Quarterly sales ($mil) | Quarterly sales - year earlier ($mil) | Change in sales | Gross margin | Gross margin - year-earlier quarter |
| Pioneer Natural Resources Co. | PXD, +2.38% | $2,244 | $2,336 | -4% | 24.69% | 25.56% |
| Fifth Third Bancorp | FITB, +0.89% | $2,474 | $1,742 | 42% | N/A | N/A |
| HollyFrontier Corp. | HFC, +2.24% | $3,899 | $4,127 | -6% | 12.39% | 11.25% |
| Alexandria Real Estate Equities Inc. | ARE, +0.65% | $361 | $327 | 11% | 36.74% | 38.82% |
| Lockheed Martin Corp. | LMT, +1.57% | $14,336 | $11,635 | 23% | 15.26% | 14.25% |
| Electronic Arts Inc. | EA, +2.30% | $1,238 | $1,605 | -23% | 77.30% | 85.17% |
| Principal Financial Group Inc. | PFG, +1.35% | $3,703 | $2,895 | 28% | N/A | N/A |
| Anadarko Petroleum Corp. | APC, -0.19% | $3,128 | $3,027 | 3% | 39.35% | 40.07% |
| Vulcan Materials Co. | VMC, +0.53% | $997 | $854 | 17% | 19.23% | 18.65% |
| Westinghouse Air Brake Technologies Corp. | WAB, -0.09% | $1,594 | $1,056 | 51% | 25.54% | 27.47% |
| Source: FactSet | ||||||
A company’s gross margin is its sales less the cost of goods sold, then divided by sales. It doesn’t reflect overhead expenses, but it does give an indication of a company’s pricing power. A widening margin while sales are increasing is a good sign. A narrowing margin might mean a company is juicing sales or being forced to defend its market share by offering discounts on its products or services. Gross profit margins aren’t available for banks and insurance companies.
A company with a sales surprise may have actually seen a decline in revenue — HollyFrontier HFC, +2.24% is an example. The refiner also showed a significantly improved gross margin.
Here’s a summary of analyst opinion for the group:
| Company | Ticker | Share 'buy' ratings | Share neutral ratings | Share 'sell' ratings | Closing price - May 15 | Consensus price target | Implied 12-month upside potential |
| Pioneer Natural Resources Co. | PXD, +2.38% | 88% | 12% | 0% | $151.49 | $203.45 | 34% |
| Fifth Third Bancorp | FITB, +0.89% | 36% | 61% | 3% | $27.00 | $31.18 | 15% |
| HollyFrontier Corp. | HFC, +2.24% | 26% | 58% | 16% | $43.71 | $55.73 | 28% |
| Alexandria Real Estate Equities Inc. | ARE, +0.65% | 58% | 42% | 0% | $145.54 | $148.27 | 2% |
| Lockheed Martin Corp. | LMT, +1.57% | 62% | 38% | 0% | $334.15 | $367.11 | 10% |
| Electronic Arts Inc. | EA, +2.30% | 64% | 36% | 0% | $96.77 | $110.89 | 15% |
| Principal Financial Group Inc. | PFG, +1.35% | 20% | 73% | 7% | $54.78 | $56.46 | 3% |
| Anadarko Petroleum Corp. | APC, -0.19% | 10% | 87% | 3% | $72.87 | $71.02 | -3% |
| Vulcan Materials Co. | VMC, +0.53% | 71% | 19% | 10% | $129.83 | $137.82 | 6% |
| Westinghouse Air Brake Technologies Corp. | WAB, -0.09% | 70% | 30% | 0% | $68.39 | $91.29 | 33% |
| Source: FactSet | |||||||
Negative Sales surprises
Here are the 10 S&P 500 companies with the largest negative revenue surprises this earnings season:
| Company | Ticker | Industry | Estimated sales before earnings report | Actual reported sales from press release | Sales Surprise |
| Alliance Data Systems Corp. | ADS, +1.55% | Data Processing Services | $1,814 | $1,300 | -28% |
| Devon Energy Corp. | DVN, +1.20% | Oil & Gas Production | $1,909 | $1,501 | -21% |
| Dominion Energy Inc. | D, +1.39% | Electric Utilities | $4,838 | $3,858 | -20% |
| Jefferies Financial Group Inc. | JEF, -0.21% | Investment Banks/Brokers | $1,008 | $828 | -18% |
| Atmos Energy Corp. | ATO, +0.90% | Gas Distributors | $1,285 | $1,095 | -15% |
| ONEOK Inc. | OKE, +1.26% | Oil & Gas Pipelines | $3,231 | $2,780 | -14% |
| DTE Energy Co. | DTE, +0.86% | Electric Utilities | $3,858 | $3,369 | -13% |
| Fluor Corp. | FLR, -0.67% | Engineering & Construction | $4,779 | $4,193 | -12% |
| Invesco Ltd. | IVZ, +0.44% | Investment Managers | $991 | $887 | -11% |
| CenterPoint Energy Inc. | CNP, +0.61% | Electric Utilities | $3,893 | $3,531 | -9% |
| Source: FactSet | |||||
Here are comparisons of the quarterly sales numbers to those from a year earlier, along with gross profit margins:
| Company | Ticker | Quarterly sales ($mil) | Quarterly sales - year earlier ($mil) | Change in sales | Gross margin | Gross margin - year-earlier quarter |
| Alliance Data Systems Corp. | ADS, +1.55% | $1,334 | $1,382 | -3% | 48.52% | 53.65% |
| Devon Energy Corp. | DVN, +1.20% | $2,209 | $2,239 | -1% | 20.73% | 16.75% |
| Dominion Energy Inc. | D, +1.39% | $3,804 | $3,478 | 9% | 41.80% | 53.97% |
| Jefferies Financial Group Inc. | JEF, -0.21% | $1,309 | $2,946 | -56% | 88.33% | 37.26% |
| Atmos Energy Corp. | ATO, +0.90% | $1,095 | $1,219 | -10% | 34.42% | 28.20% |
| ONEOK Inc. | OKE, +1.26% | $2,761 | $3,199 | -14% | 17.50% | 17.05% |
| DTE Energy Co. | DTE, +0.86% | $3,578 | $3,733 | -4% | 18.28% | 14.47% |
| Fluor Corp. | FLR, -0.67% | $4,193 | $4,824 | -13% | 1.50% | 1.21% |
| Invesco Ltd. | IVZ, +0.44% | $1,244 | $1,365 | -9% | 67.51% | 66.84% |
| CenterPoint Energy Inc. | CNP, +0.61% | $3,524 | $3,102 | 14% | 10.50% | 12.25% |
| Source: FactSet | ||||||
Here’s a summary of analyst opinion about the companies with the greatest negative sales surprises:
| Company | Ticker | Share 'buy' ratings | Share neutral ratings | Share 'sell' ratings | Closing price - May 15 | Cons. price target | Implied 12-month upside potential |
| Alliance Data Systems Corp. | ADS, +1.55% | 46% | 54% | 0% | $145.47 | $180.05 | 24% |
| Devon Energy Corp. | DVN, +1.20% | 55% | 45% | 0% | $30.93 | $38.98 | 26% |
| Dominion Energy Inc. | D, +1.39% | 32% | 63% | 5% | $74.29 | $78.00 | 5% |
| Jefferies Financial Group Inc. | JEF, -0.21% | 50% | 50% | 0% | $18.92 | $32.00 | 69% |
| Atmos Energy Corp. | ATO, +0.90% | 56% | 22% | 22% | $100.74 | $105.57 | 5% |
| ONEOK Inc. | OKE, +1.26% | 46% | 54% | 0% | $67.25 | $71.95 | 7% |
| DTE Energy Co. | DTE, +0.86% | 25% | 56% | 19% | $125.68 | $126.23 | 0% |
| Fluor Corp. | FLR, -0.67% | 33% | 67% | 0% | $29.70 | $34.33 | 16% |
| Invesco Ltd. | IVZ, +0.44% | 22% | 72% | 6% | $20.59 | $22.93 | 11% |
| CenterPoint Energy Inc. | CNP, +0.61% | 53% | 47% | 0% | $29.42 | $32.27 | 10% |
| Source: FactSet | |||||||
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