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If you see a headline about a company beating analyst expectations when it reports quarterly results, it might not mean much. Analysts may have set the bar too low, based in part on the company’s own forecasts. This is all part of a routine that allows him to set his “beat rate” above 70% each financial period. Alternatively, a company may actually report a “beat”, which is a lower net loss than expected.
So what makes for great quarterly results? What about increased sales and improved profit margins?
The screen below shows which 20 companies in the S&P 500 SPX reported the largest sales increases this fiscal year, while expanding two important margins at the same time.
It turns out that four companies, known as the “Magnificent Seven,” passed the screening.
According to Deutsche Bank analysts, the total market value of this group – Microsoft is
MSFT,
Apple.
AAPL,
Nvidia Inc.
NVDA,
Amazon.com Inc.
AMZN,
Meta Platforms Co., Ltd.
meta,
Alphabet Co., Ltd.
Google
and Tesla Inc.
TSLA
— larger than the Japanese, French and British stock markets combined.
Picking the winners of S&P 500 earnings season
Approximately 20% of S&P 500 SPX companies have fiscal years that do not match the calendar, so there is no proper beginning or end to quarterly earnings season. Through Monday, 338 companies included in the U.S. benchmark index had announced financial results for fiscal quarters ending on or after Nov. 15.
Screening for an increase in net income (or earnings per share) may not be meaningful as it is a one-time event that affects the bottom line. These may include write-downs of goodwill, other non-cash accounting adjustments, or special legal charges.
Therefore, we will list the companies whose quarterly sales increased the most compared to the same period last year, and at the same time improved their gross profit margin and operating profit margin.
- A company’s gross profit is its net sales less the cost of goods or services sold divided by its sales revenue. Net sales are sales minus discounts such as returns and coupons. The cost of goods or services sold includes the actual costs of producing the goods or providing the service. Gross profit reflects a company’s pricing power. A decline in gross profit margins may indicate that a company is being forced to cut prices to protect market share. The combination of gross profit expansion and sales growth is a good sign.
- A company’s net operating profit margin is even greater after subtracting overhead and other expenses that are not directly related to producing the goods or services sold. This is essentially profit before interest and taxes divided by sales.
Of the 338 S&P 500 companies surveyed, FactSet had gross margin and operating margin data for the most recent and prior year quarters for 263 companies. Margin is not available to most companies in the financial industry because the banking and insurance industries have different measures of profitability. Additionally, FactSet will not be able to provide operating income for some companies until more detailed 10th quarter reports are filed with the Securities and Exchange Commission.
Of the remaining 263 companies, the following 20 companies grew their quarterly sales the most and also expanded their gross and operating margins.
| company | ticker | Quarterly sales increased year on year | gross profit margin | Gross profit margin, same period last year | Operating profit margin | Operating profit margin, year-on-year comparison |
| Las Vegas Sands Corporation |
LVS |
161.0% | 38.94% | 17.55% | 37.05% | 8.33% |
| Wynn Resorts Co., Ltd. |
win |
83.1% | 34.82% | 19.53% | 29.17% | 9.63% |
| Carnival Co., Ltd. |
CCL |
40.6% | 21.77% | 1.02% | 18.16% | -1.80% |
| NextEra Energy Co., Ltd. |
knee |
34.8% | 40.73% | 22.80% | 56.32% | 37.29% |
| Trans Dime Group Co., Ltd. |
TDG |
28.1% | 57.35% | 56.48% | 49.02% | 48.96% |
| Royal Caribbean Group |
R.C.L. |
27.9% | 32.66% | 16.72% | 28.61% | 13.54% |
| Service Now Co., Ltd. |
now |
25.6% | 78.83% | 78.40% | 16.29% | 13.35% |
| Meta Platforms Co., Ltd. Class A |
meta |
24.7% | 81.05% | 78.63% | 51.62% | 40.33% |
| Arista Networks Co., Ltd. |
ANET |
20.8% | 65.30% | 60.26% | 42.48% | 38.51% |
| Dayforce Co., Ltd. |
Day |
18.9% | 55.29% | 51.77% | 15.86% | 10.24% |
| Cadence Design Systems Inc. |
C.D.N.S. |
18.8% | 89.79% | 89.06% | 55.87% | 27.23% |
| Intercontinental Exchange Co., Ltd. |
ice |
17.8% | 69.97% | 68.10% | 52.69% | 51.54% |
| Microsoft Corporation |
MSFT |
17.6% | 68.36% | 66.85% | 53.19% | 45.59% |
| clorox company |
CLX |
16.0% | 43.17% | 35.98% | 19.05% | 12.13% |
| Uber Technologies Co., Ltd. |
Uber |
15.4% | 29.93% | 28.73% | 8.80% | 2.13% |
| Chipotle Mexican Grill Co., Ltd. |
CMG |
15.4% | 21.97% | 20.57% | 18.61% | 17.98% |
| Alphabet Co., Ltd. Class A |
Google |
14.3% | 56.39% | 53.11% | 31.19% | 28.78% |
| Schlumberger Co., Ltd. |
S.L.B. |
14.1% | 18.72% | 14.15% | 20.73% | 15.99% |
| Amazon.com Inc. |
AMZN |
13.9% | 45.54% | 42.60% | 15.99% | 10.84% |
| Adobe Corporation |
adobe |
13.2% | 86.60% | 86.30% | 39.26% | 37.47% |
Click on the ticker to see details about each company, fund, or index.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on MarketWatch’s quotes page.
The top three companies on the list and Royal Caribbean Group
R.C.L.,
All of the companies ranked No. 6 operate in the travel and leisure industry, which is recovering from the COVID-19 pandemic.
The four Magnificent Seven companies that made it to the list above are Meta, Microsoft, Alphabet, and Amazon. Here’s why the other three aren’t on the list:
- Nvidia’s most recent earnings report was for the fiscal quarter that ended October 29th. Sales for the quarter tripled compared to the same period last year, and the company’s gross margin was 73.95%, a dramatic improvement from 53.57% in the same period last year. Nvidia dominated what was essentially a new market: graphics processing units deployed in data centers to support enterprise customers deploying artificial intelligence technology. Nvidia’s quarterly operating margin improved to 59.54% from 16.98% in the same period last year. The company is scheduled to announce its fourth quarter fiscal 2024 financial results on February 21st.
- For the quarter ended December 30, Apple’s gross profit margin improved to 45.87% from 42.96% a year ago, and its operating margin expanded to 36.15% from 33.23%. Quarterly sales increased 2.1% year-on-year.
- Tesla’s gross profit margin in the fourth quarter shrank to 17.63% from 23.76% a year earlier, and its operating profit margin shrank to 13.1% from 20.25% a year earlier. The company’s fourth quarter sales increased 3.5% from the same period last year.
Do not miss it: Want to pick stocks that beat index funds? Let’s look at companies with one key metric.
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