If it were called revenue season, rather than earnings season, the first quarter would have long ago been deemed a major disappointment with an attendant market sell-off.
According to S&P Capital IQ , among the S&P 500 companies that have reported, less than 40% met or beat the street’s revenue expectations. Typically more than 60% manage to deliver on revenue expectations. In the case of AT&T, (NYSE:T) revenue for the quarter fell 1.4% compared to a year earlier. For the likes of Procter & Gamble (PG), Google (GOOG), Amgen (AMGN) and McDonald’s (MCD) the transgression was weaker than expected sales.
But hey, it’s called earnings season, so the fact that nearly 70% of companies have managed to massage their balance sheets has trumped the weak revenue story. At least for now.
Profit growth through cost-cutting, asset sales and other non-organic growth tactics has been a centerpiece of the post-crisis investing landscape. Sluggish economic growth here and abroad has made it increasingly hard to generate substantive top line growth. In 2012 the S&P 500 average was a meager 0.8% increase, pulled down by a 10% decline for the energy sector. The 2013 forecast is for 3.1% revenue growth. (Ever-optimistic analysts are calling for 4.5% revenue growth in 2014.)
Amid this long-in-the-tooth bull run, finding companies with strong revenue stories -- not just deft earnings management -- seems a solid starting point for further investigation.
Using the YCharts Stock Screener, choose Indexes under the “Start With” tab on the left side of the screen, and then choose S&P 500. From there move to the Filters side of the screen and add “Revenue Quarterly YoY growth.” You can then use the slider for that metric to impose a fairly low bar: companies with positive year-over-year revenue growth. That knocks out about 150 companies. From there, Pro subscribers can take a shortcut to finding companies selling at compelling valuations: uncheck the “Neutral” and “Avoid” options sitting just under the sliders section. That leaves you with stocks currently rated Attractive by Ycharts’ proprietary analysis. Just 22 stocks make that cut.
Sorting the list by recent revenue growth, Western Digital (WDC) tops the list. It just reported a 24% jump in quarterly revenue to $3.61 billion. Platinum subscribers can keep track of sales forecasts under the Forward Estimates tab in the Chart Browser. As the chart below shows, the Street was expecting $3.59 billion in current quarter revenue growth. Moreover, the hard-drive manufacturer’s actual trailing 12-month revenue rocketed up more than 90%.