C is for...
Current Quarterly Earnings

	CANSLIM Series
	O'Neil's Book Reviewed C - Current Earnings A - Annual Earnings N - News S - Supply & Demand L - Leaders I - Institutional Sponsorship M - Market Direction
	Join A Discussion
	CANSLIM Discussion Discuss the methodology, your thoughts on market direction, stocks fitting the formula...

Current Quarterly Earnings per Share, says O'Neil, are the "one key variable (that) stood out from all the rest in importance". In fact, three out of four of the top 500 stocks from 1953 - 1993 showed earnings increases averaging over 70% in the most recent quarter. And that was before the stocks exploded in value! And what about the one in four that didn't? They showed average increases of 90% in the following quarter.

The name of the game in stocks is clearly earnings, earnings, earnings!

But O'Neil warns that there are pitfalls. Corporations tend to put their best foot forward in their quarterly reports, and sometimes they can give misleading information. This is even more true in their press releases. Here are some pitfalls to avoid:

• Look at Quarterly Earnings per Share, not gross earnings. A company may have diluted the earnings per share by issuing new stock, which will not be reflected in a gross earnings report.
• Look at Quarterly Earnings, not six month or nine month earnings as some companies often report. If a company reports six or nine month earnings figures, break it down into quarters and make sure the most recent quarter does not represent a drop in earnings.
• Omit one time extraordinary gains. Companies sometimes have windfall profits from the sale of assets. Calculate the earnings after such non-recurring gains.

Additionally investors should look for accelerating earnings per share. These are commonly called an "earnings surprise" and are a good sign. Accelerating earnings virtually always show up prior to a stock's big move according to O'Neil.

On the other hand, decelerating earnings can spell big trouble. No, the stock won't necessarily tank. But it can mean "prolonged sideways movement". But O'Neil says he doesn't turn sour on a stock until it has two quarters of slowdown as even "the best of organizations can periodically have one slow quarter".

One tip O'Neil suggests is to consult logarithmic scale rather than arithmetic scale graphs. Log scales show changes by percentage. The increment from 1 to 2 ( a 100% increase) is the same as the increment from 2 to 4 (also a 100% increase). The changing slope of the graph created shows whether earnings (or whatever else you're charting) are accelerating or not. So a stock whose earnings go from a dollar to two dollars and then to three dollars would show a slope that starts flattening out in the second quarter rather than continuing in an un-interrupted straight line. Colleague Rob Rak (About.com's Guide to Daytrading) has an interesting article explaining log scale charts.

Finally O'Neil recommends checking other stocks in the same industry. He says you should be able to find at least one other stock also showing good earnings growth as a confirming factor. If you can't find one, the earnings growth may be an anomaly and the trend unsustainable.

How much earnings growth should you look for? O'Neil says at least 18% or 20%. In a bull market you should look for 40% or more.

So now let's get to the good stuff. How can you find stocks with increasing earnings per share?

Unfortunately, I could not find any websites that have filters to find such stocks. All you can do is check on actual earnings reports or get the information from media sources. But fortunately, there are lots of websites with that information. There are even sites that report earnings surprises. Here are some notable ones:

Canadian Stocks

Canadian Earnings
Canada Newswire publishes quarterly earnings reports daily. Includes current and previous year's revenue, net income, earnings per share, cash flow and number of shares outstanding. A superb resource.

Canada Corporate Earnings Schedule
Yahoo Canada Finance presents a calendar of expected earnings reports for the week. Updated weekly. Each company has links to quotes and news so you can call up the reports after they are published.

The FutureStock Review
This newsletter only recommends stocks that have growth rates in revenues and earnings exceeding 30%. Focus is Canadian small cap stocks with occasional U.S. recommendations.

globeinvestor Reports Page
Enter stock symbol, select Quarterly Report and click on Go for most recent revenue, net income and earnings per share figures.

Q1234.com
This site features live webcasts of corporate teleconferences as well as archives of the previous three months of telecasts and corresponding press releases. Most are quarterly reports.

SEDAR
The System for Electronic Document Analysis and Retrieval is the electronic filing system for the disclosure documents of public companies and mutual funds in Canada. Français

Wright Investors' Service Reports
Wright provides detailed reports on many Canadian companies. After selecting a company, click on Earnings Analysis for Quarterly EPS going back up to ten years. Stocks of other countries also covered.

U.S. Stocks

Earnings Reports Net Links
From About.com Stocks Guide Mike Griffis: A collection of links to U.S. earnings reports.

Earnings & Splits Net Links
From About.com's Daytrading Guide Rob Rak: A collection of links to U.S. earnings reports and stock splits.

Earnings Surprises
List of earnings surprises from Zacks Investment Research. Updated daily.

Earnings Whispers
Anticipated earnings as well as a full report on earnings delivered that is updated hourly.

Silicon Investor Expected EPS
Extensive listing of upcoming earnings reports of companies listed on U.S. exchanges.

Silicon Investor Reported EPS
Extensive listing of recently released earnings reports comparing estimated and reported EPS with earnings surprises noted. You can sift out the earnings surprises separately.

S&P 500 Quarterly Earnings Scorecard
Thomson Investors Network gives a detailed report on the most recent quarterly earnings reports for the S&P 500. Companies listed in order of percentage change from previous year.

U.S. Corporate Earnings Schedule
Yahoo Finance presents a calendar of expected earnings reports for the week. Updated weekly. Each company has links to quotes and news so you can call up the reports after they are published.

U.S. Expected Earnings Reports
Expected U.S. reports for the week from Equity Analytics. Includes an estimate of expected earnings per share as well as previous year's actual earnings.

Next: A is for Annual Earnings Increases

Buy the Book!

How to Make Money in Stocks

Comments? Suggestions? Why not post them on our Bulletin Board or email me.

E-mail me!

ZZZNEWSLETTERSIGNUP1ZZZ

Disclaimer: As with all my columns here, I should re-iterate a precaution. I am not a professional financial advisor. I am a financial journalist and editorialist. The views in these columns are my personal opinions. The author may hold interests in investments mentioned in this article.

Previous Features