Use Earnings Aristocrats to Play Earnings Beats
Editor’s Note: Most Wealthy Retirement readers appreciate the compounding power and reliability of Dividend Aristocrats (S&P 500 companies that have raised their dividends for at least 25 consecutive years).
As Marc details below, these are the most dependable earnings-smashing stocks that you can find in the market. And like their income-generating counterparts, Earnings Aristocrats also have a long track record of rewarding shareholders.
In fact, Marc believes these companies have the potential to double your investment in under 24 hours.
With earnings season fast approaching, now is the perfect time to stock up on Earnings Aristocrats.
– Kyle Wehrle, Assistant Managing Editor
It’s not often that one gets to coin a new term in finance. In fact, it almost never happens. But you’ll soon be hearing a lot more about the term “Earnings Aristocrats,” the name I’ve given to companies that have beaten earnings expectations for 25 quarters in a row or more.
When companies beat earnings expectations, their stocks can pop.
The chart below shows Omnicom Group (NYSE: OMC). Omnicom is not an exciting tech stock that’s on the radars of most investors. No one on Reddit or CNBC is talking about it. It’s a somewhat boring advertising company that pays a solid dividend and is targeted more by income investors than speculators.
In early February, the company reported earnings per share of $1.95. Wall Street had forecast $1.71. And you can see what happened.
The stock surged 14% in one day – more than a year’s average annual stock market return in less than 24 hours.
Again, this is not some high-flying tech stock.
When companies beat earnings expectations, their stocks can fly. This is why I set out to find Earnings Aristocrats, the stocks most likely to beat earnings quarter after quarter.
So I dug into the data.
As they say, past performance is no guarantee of future results. But as they also say, the trend is your friend. A company that has beaten expectations for 25 or more straight quarters is a heck of a lot more likely to do it again than a random company, regardless of how well you may think that company’s business is performing.
There are currently 44 companies that have beaten expectations every quarter for more than six years.
Some of them are household names that you know, like Procter & Gamble (NYSE: PG). Others you may not be familiar with, like design software company Ansys (Nasdaq: ANSS).
Earnings season unofficially begins on April 20. Expectations aren’t great, as Wall Street is forecasting the slowest earnings growth since the height of the pandemic in 2020.
But for traders, that’s actually a good thing. If expectations are low and we can find the stocks that will easily beat those estimates, we can make a lot of money when those stocks rip higher.
I believe savvy investors will begin using Earnings Aristocrats regularly each quarter to “game” the market and grab quick gains, collecting months’ worth – or even years’ worth – of returns in a very short period of time.
Anyone trading stocks during earnings season needs to be aware of which companies are most likely to beat forecasts and surge. Otherwise, it’s like you’re standing at home plate and swinging at pitches with a blindfold on.