WHAT ARE WE LOOKING FOR?
By most measures, earnings for 2010 have gotten off to a good start. Today, let's look for continued earnings momentum among major North American sectors.
MORE ABOUT TODAY'S SCREEN
We'll use StarMine, a Thomson Reuters service that gathers earnings estimate data from analysts. StarMine can help us find earnings-revision momentum, which we'll define here as how much earnings estimates have risen or fallen in the past 30 and 60 days for all 10 main sectors. We're looking at earnings estimate revisions for the current quarter and the next 12 months. The thinking here is that sectors with the strongest earnings-revision momentum should continue to do well.
We'll sort by sectors with the strongest earnings revisions over the past two months for the next quarter. We'll accept only mid- and large-capitalization companies in the screen.
WHAT DID WE FIND OUT?
The financials sector stands out. Over the past two months, analysts have revised their earnings estimates higher by 3.6 per cent for the next quarter and 4.5 per cent for the next 12 months. Earnings growth for the next 12 months also looks strong. Take a look at the second-to-last column, which shows the "SmartEstimate" for the next 12 months. StarMine believes this is a better earnings estimate indicator than the mean consensus forecast. The SmartEstimate takes into account only those analysts with the most timely and accurate earnings estimate history. In other words, the SmartEstimate puts the most weight on the most accurate analysts.
The SmartEstimate for the North American financials sector shows 105-per-cent earnings growth for the next 12 months, which is higher than for any other sector.
Scott Adams