This Twitter post from financial-data provider FactSet provided food for thought:
$SPX EPS estimate for Q1 2018 has increased by 5.6% since December 31, the largest increase during a quarter since we began tracking this data in 2002. https://t.co/huaP4zNJNH pic.twitter.com/EOh2f2iRuh
— FactSet (@FactSet) March 16, 2018
FactSet said one reason for the dramatic increase in analysts’ earnings estimates for S&P 500 SPX, -0.18% companies was the decline in the value of the dollar, which helps U.S. exporters.
But the tax cut that President Trump signed in December is also factored in. It may help with sales as U.S. consumers have a bit more money in their pockets, and it will buttress the bottom line for companies by reducing the maximum federal corporate income tax rate to 21% from 35%.
So rather than look at the first-quarter estimates, we decided to look at earnings and sales estimates for all of 2018, to see which ones had been increased the most by analysts since the end of last year.
We began with the S&P 500, which actually comprises 505 stocks because several companies have two classes of common shares. Then we narrowed the list to 405 companies for which consensus earnings-per-share estimates had been raised at least a penny since the end of 2017. We then narrowed the list further to 299 companies for which EPS and sales estimates had both been raised since Dec. 31.
Looking at the companies with the largest increases in 2018 EPS estimates since Dec. 31, analysts have raised their earnings estimates tremendously for oil producers. But the revisions were made to very low earnings estimates because of the long-term dip in oil prices.
To paint a broader picture, here’s a list of 40 S&P 500 companies for which analysts have increased 2018 EPS estimates the most since the end of 2017, while also raising their sales estimates:
| Company | Ticker | Industry | Current EPS estimate for 2018 | EPS estimate for 2018 as of Dec. 31 | Increase in EPS estimate | Current estimated sales for 2018 ($mil) | Estimated sales for 2018 as of Dec. 31 ($mil) | Increase in sales estimate |
| Anadarko Petroleum Corp. | APC, +5.16% | Oil and Gas Production | $1.37 | -$0.34 | N/A | $12,730 | $11,865 | 7% |
| Helmerich & Payne Inc. | HP, +5.47% | Contract Drilling | $0.06 | -$0.40 | N/A | $2,331 | $2,173 | 7% |
| Marathon Oil Corp. | MRO, +6.95% | Oil and Gas Production | $0.51 | -$0.03 | N/A | $5,371 | $5,132 | 5% |
| CF Industries Holdings Inc. | CF, +1.87% | Chemicals: Agricultural | $1.01 | $0.36 | 183% | $4,412 | $4,324 | 2% |
| EOG Resources Inc. | EOG, +3.40% | Oil and Gas Production | $3.97 | $1.99 | 100% | $10,391 | $9,503 | 9% |
| Pioneer Natural Resources Co. | PXD, +3.24% | Oil and Gas Production | $6.04 | $3.42 | 77% | $4,695 | $4,380 | 7% |
| Apache Corp. | APA, +5.05% | Oil and Gas Production | $1.35 | $0.78 | 74% | $6,596 | $6,356 | 4% |
| Occidental Petroleum Corp. | OXY, +3.33% | Oil and Gas Production | $2.63 | $1.71 | 54% | $14,760 | $14,283 | 3% |
| ConocoPhillips | COP, +4.28% | Oil and Gas Production | $2.67 | $1.74 | 53% | $32,714 | $29,626 | 10% |
| Concho Resources Inc. | CXO, +3.04% | Oil and Gas Production | $3.73 | $2.45 | 52% | $3,416 | $3,199 | 7% |
| Fluor Corp. | FLR, +1.96% | Engineering and Construction | $3.30 | $2.36 | 40% | $19,007 | $18,801 | 1% |
| Huntington Ingalls Industries Inc. | HII, -0.33% | Aerospace and Defense | $16.63 | $12.02 | 38% | $7,545 | $7,488 | 1% |
| Kohl's Corp. | KSS, -0.65% | Department Stores | $5.19 | $3.80 | 37% | $19,178 | $18,440 | 4% |
| Macy's Inc | M, -0.86% | Department Stores | $3.53 | $2.63 | 34% | $24,680 | $24,000 | 3% |
| Nvidia Corp. | NVDA, -0.41% | Semiconductors | $6.24 | $4.66 | 34% | $12,370 | $10,951 | 13% |
| Mosaic Co. | MOS, +0.92% | Chemicals: Agricultural | $1.45 | $1.10 | 32% | $8,693 | $7,075 | 23% |
| TransDigm Group Inc. | TDG, +0.39% | Aerospace and Defense | $17.33 | $13.40 | 29% | $3,723 | $3,710 | 0% |
| Boeing Co. | BA, -0.16% | Aerospace and Defense | $14.08 | $11.00 | 28% | $97,066 | $93,257 | 4% |
| Nucor Corp. | NUE, +1.79% | Steel | $5.45 | $4.34 | 25% | $22,932 | $20,706 | 11% |
| W.W. Grainger Inc. | GWW, -0.08% | Wholesale Distributors | $13.77 | $11.12 | 24% | $11,062 | $10,885 | 2% |
| Target Corp. | TGT, -1.98% | Discount Stores | $5.27 | $4.27 | 23% | $72,469 | $71,312 | 2% |
| Cimarex Energy Co. | XEC, +3.33% | Oil & Gas Production | $7.44 | $6.05 | 23% | $2,437 | $2,343 | 4% |
| Freeport-McMoRan Inc. | FCX, +3.73% | Precious Metals | $2.16 | $1.76 | 22% | $18,607 | $17,617 | 6% |
| Seagate Technology PLC | STX, -0.02% | Computer Peripherals | $4.89 | $4.01 | 22% | $10,839 | $10,337 | 5% |
| Progressive Corp. | PGR, -0.51% | Property/ Casualty Insurance | $3.69 | $3.03 | 22% | $31,198 | $30,405 | 3% |
| C.H. Robinson Worldwide Inc. | CHRW, +0.59% | Air Freight/ Couriers | $4.48 | $3.69 | 22% | $16,094 | $15,569 | 3% |
| E-Trade Financial Corp. | ETFC, +0.79% | Investment Banks/ Brokers | $3.22 | $2.67 | 21% | $2,747 | $2,589 | 6% |
| Gap Inc. | GPS, -0.65% | Apparel/ Footwear Retail | $2.61 | $2.17 | 21% | $16,277 | $15,703 | 4% |
| United Rentals Inc. | URI, +1.14% | Finance/ Rental/ Leasing | $14.73 | $12.22 | 21% | $7,578 | $7,429 | 2% |
| Dover Corp. | DOV, -0.81% | Miscellaneous Manufacturing | $5.47 | $4.54 | 20% | $8,162 | $8,127 | 0% |
| Fifth Third Bancorp | FITB, +0.27% | Regional Banks | $2.54 | $2.11 | 20% | $6,403 | $6,369 | 1% |
| Express Scripts Holding Co. | ESRX, -1.02% | Services to the Health Industry | $9.28 | $7.73 | 20% | $101,038 | $100,961 | 0% |
| T. Rowe Price Group | TROW, +0.52% | Investment Managers | $7.25 | $6.05 | 20% | $5,331 | $5,114 | 4% |
| Hewlett Packard Enterprise Co. | HPE, -0.37% | Computer Processing Hardware | $1.41 | $1.18 | 20% | $30,431 | $29,053 | 5% |
| Dollar General Corp. | DG, -0.46% | Discount Stores | $6.06 | $5.09 | 19% | $25,474 | $25,403 | 0% |
| Salesforce.com Inc. | CRM, -2.73% | Packaged Software | $2.05 | $1.72 | 19% | $12,664 | $12,536 | 1% |
| Charles Schwab Corp. | SCHW, -0.23% | Investment Banks/ Brokers | $2.40 | $2.03 | 19% | $10,016 | $9,814 | 2% |
| Norfolk Southern Corp. | NSC, +0.11% | Railroads | $8.49 | $7.16 | 19% | $10,999 | $10,955 | 0% |
| Netflix Inc. | NFLX, -0.32% | Cable/ Satellite TV | $2.72 | $2.29 | 19% | $15,875 | $14,983 | 6% |
| HCA Healthcare Inc | HCA, +0.30% | Hospital/ Nursing Management | $8.56 | $7.22 | 19% | $45,673 | $45,312 | 1% |
| Source:FactSet | ||||||||
Massive increases in earnings estimates may set up a year of positive headlines in the financial media touting massive increases in earnings (and perhaps sales), which can support higher stock prices.
The full effect of the tax cut won’t be felt until the second quarter because it took time during the first quarter for employers to adjust their payroll deductions. So in the middle of July, as second-quarter earnings season begins, it will be interesting to see if stock-price action mirrors the headlines for much of the expected earnings (and sales) increases.