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What are we looking for?

North American-listed companies with strong earnings quality and best-in-class environmental, social and governance (ESG) scores.

The screen

After numerous earnings misses in 2020, earnings season is off to a strong start this year, with 60 per cent of companies in the S&P 500 index having reported earnings. Of those who have reported, 86 per cent have beat analysts’ consensus with a positive earnings surprise, making the first three months of 2021 one of the best quarters on record for earnings surprise. Today, we look for names that can continue to produce strong earnings through the rest of the year, and rank in the top tier in terms of ESG scores.

  • First, we screen for North American listed companies with a market capitalization greater than US$1-billion.
  • Next, we screen for companies with high earnings quality. We use the Refinitiv StarMine Earnings Quality model to screen for companies with an earnings quality score of 80 or higher, representing the top 20 per cent of companies. The Earnings Quality model is a percentile ranking of stocks based on the sustainability of earnings, with 100 representing the highest rank.
  • Finally, we screen for companies with an ESG combined score of 80 or higher, representing the top 20 per cent of companies in North America. The ESG combined score is an overall company score assigned by Refinitiv based on self-reported information in the environmental, social and corporate governance pillars. With more than 450 ESG data points going back to 2002, Refinitiv offers standardized and comparable ESG data, which we believe solves one of the biggest challenges in using this information.

More about Refinitiv

Refinitiv, a London Stock Exchange Group business, is one of the world’s largest providers of financial market data and infrastructure, serving more than 40,000 institutions worldwide. Refinitiv provides information, insights and technology that drive innovation and performance in global financial markets, enabling the financial community to trade smarter and faster, overcome regulatory challenges and scale intelligently.

What we found

The screen, ranked by the StarMine Earnings Quality model, produced 10 companies across seven different sectors.

Polaris Inc., which ranked highest in earnings quality with a score of 97, manufactures powersport vehicles including ATVs and snowmobiles. Polaris benefited from exceptional retail sales in the first quarter, growing 70 per cent from the same period a year ago, owing to strong demand and lower supply. While these growth numbers are likely unsustainable, Polaris does expect growth of upward of 5 per cent as the company grows its portfolio of electric-powered vehicles, while also focusing on cost-reduction activities to maintain profit margins. Polaris has also shown year-over-year improvement in its ESG metrics, notably the social pillar, where the company started disclosing information on the gender pay gap, introduced flexible working hours and implemented responsible product monitoring.

Pan American Silver Corp. , the only Canadian-domiciled company to make the screen, is a Nasdaq-listed mining company with assets in Central and Latin America, as well as Canada. The company, which also trades on the Toronto Stock Exchange, has resumed operations from mines that were previously shut down because of COVID-19 restrictions, which it said could increase production by more than 30 per cent in 2021. Couple this with the rising price of silver, which accounts for 30 per cent of Pan American’s revenue, and there should be a boost for earnings for the rest of the year. Pan American has also shown improvements in its overall ESG scores, with the social pillar seeing improvements. These include disclosing the number of new female employees, adding daycare services, and increasing health and safety training hours by more than 50 per cent.

Investors are advised to do their own research before trading in any of the securities shown.

Select stocks with strongly sustainable earnings and top-tier Refinitiv ESG score

CompanyTickerMkt Cap. (US$ Mil.)Earns. Quality Score ESG Combined Score1Y Ttl. Rtn. (%)Div. Yld. (%)Recent Close (US$)
Polaris Inc.PII-N8,740.479782116.31.8142.72
Owens CorningOC-N10,378.319593148.61.099.35
Baker Hughes Co.BKR-N22,592.10928261.93.321.69
Texas InstrumentsTXN-Q165,121.39898866.02.3178.80
Newmont Corp.NEM-N51,642.9086875.33.464.46
Halliburton Co.HAL-N18,381.598487108.20.920.66
Abbott LaboratoriesABT-N211,750.90828135.11.5119.53
Campbell Soup Co.CPB-N14,665.658183-
Pan American SilverPAAS-Q7,066.95818051.10.833.60

Source: Refinitiv 

Stephen Donovan, MBA, is a customer success leader, Refinitiv buy-side and commodities trading for the Americas.

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