Investors searching for stock winners in earnings season should turn towards companies with a track record of beating estimates and subsequently trading higher. The third-quarter earnings season has just kicked off, and investors will be watching closely for comments from companies about the impact of inflation and supply chain issues. So far, a majority of companies have topped Wall Street’s expectations. S & P 500 earnings are expected to grow by 3.6% for the third quarter, according to Refinitiv. However, take energy companies out of the equation, and S & P earnings would fall by 3.1%. When looking for companies with a winning earnings history, CNBC Pro reviewed data from Bespoke Investment Group to find names that beat per-share earnings estimates 75% of the time or more and had an average gain on earnings day of at least 1%. Intuitive Surgical has the highest one-day average change on earnings day, according to Bespoke. The medical device company beats estimates 88% of the time and has a 2.5% average one-day stock change. However, despite its stellar history, Intuitive Surgical missed second-quarter earnings and revenue expectations when it reported in July. The company is set to announce third-quarter earnings on Tuesday. Shares are down almost 50% year to date, but have about 31% upside to the average analyst target price, according to FactSet. “We see long tailwinds that should continue to support adoption despite the challenging capital equipment environment,” BTIG analyst Ryan Zimmerman wrote in a note Monday. Lam Research, a supplier of equipment and services to the semiconductor industry, has the highest average beat rate of 91%, according to Bespoke. It typically rallies 1.1% on earnings day. Lam shares, down more than 50% so far this year, took a hit last week after the Commerce Department announced new restrictions on exporting advanced computer chips to China. The company reports its latest quarterly results on Wednesday. Shares have about 48% upside to the average analyst price target, FactSet data show. Citizens Financial also reports on Wednesday. The bank has beaten Wall Street expectations 84% of the time and has an average 1.7% rally on earnings days. So far, bank earnings have been positive this season, with big names like JPMorgan Chase, Bank of America and Wells Fargo all topping estimates. Citizens Financial’s shares are down about 23% so far this year and have 20% upside from the average analyst price target, according to FactSet. Tractor Supply, which announces its third-quarter earnings Friday, has the lowest beat rate on the list, topping estimates 75% of the time. It has rallied an average of 1.4% on earnings days. The retailer specializes in farm supplies, pet and family feed and supplies and other home improvement products. Piper Sandler is bullish on the stock, giving it an overweight rating. Its analyst is expecting inline earnings for the third quarter and a strong fourth quarter. “TSCO continues to outpace ours [third quarter farm and ranch retailer] survey average given TSCO has no exposure to firearms/ammo, which have been seeing notable sales declines [year over year]; and (2) TSCO over-indexes for pet food and animal feed, which remain very strong across the industry,” analyst Peter Keith wrote in a note last week. The stock is down about 15% year to date and has about 16% upside to the average price target, according to FactSet. — CNBC’s Michael Bloom contributed reporting.
