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Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.


Number Cruncher

The curious lure of conservative earnings estimates Add to ...

What we’re looking for

Companies that have put out earnings per share guidance lower than the EPS consensus from sell-side analysts.

Earnings season is in full swing, and thanks mainly to the euro zone’s growing debt crisis, expectations for earnings growth are low.

There is often a disparity between the expectations of analysts and those of the companies in question. Identifying stocks with more conservative estimates than the Street may be a good way to keep underperformers out of your portfolio.

More about today’s screen

This screen comes courtesy of Bloomberg’s Constantin Cosereanu. The criteria is as follows:

Companies must be based in Canada or the United States;

a market cap greater than $100-million (U.S.);

the company’s EPS guidance for the current fiscal year is less than the consensus broker estimate.

What we found

The screen returned 11 Canadian stocks and dozens of U.S. ones. For reasons of space, we’ve chosen the first 11 U.S. stocks as they appeared on the list.

At time of writing, corporate earnings news in general has not been good. Only one of the 16 companies that have reported as of Wednesday night has beaten expectations. Three companies have reported results in line with expectations, and 12 companies have missed expectations.

With expectations of record or near-record second-quarter earnings, Potash Corp. is forecasting earnings for the full year to be in the range of $3.40 per share, 7 cents lower than the consensus broker estimate.

There is currently a multibillion U.S. antitrust lawsuit by potash buyers that accuses Potash Corp. and others of acting like a cartel.

Potash Corp. will announce its earnings on July 26.

Among U.S.-listed companies in our list, Big Pharma stalwart Pfizer is forecasting earnings for the full year of $2.19 per share, while the Street is expecting $2.21.

In an industry that has seen better days, Pfizer has had a particularly hard time. Its stock is underperforming peers like Merck and Abbott Labs. It faces several lawsuits for anticompetitive behaviour. And two of the world’s largest emerging markets – India and China – are enacting policies that will make generic drugs very cheap or absolutely free, which will eat into Pfizer’s bottom line.

Pfizer will announce its earnings on July 31.

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Companies with conservative earnings guidance

Company Symbol Company current FY EPS guidance $ Consensus broker EPS estimate $
Potash Corp. of Sask. POT-T 3.40 3.47
Can Natl Railway CNR-T 5.36 5.43
Pulse Seismic PSD-T 0.08 0.10
Calian Technology CTY-T 1.82 1.82
Gildan Activewear GIL-T 1.30 1.32
Manitoba Telecom MBT-T 2.42 2.57
Martinrea Int'l MRE-T 1.15 1.17
Lululemon Athletica LLL-T 1.58 1.63
Capital Power Co. CPX-T 1.22 1.42

Source: Bloomberg


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