(This is the third in a three-part series listing the small-cap, midcap and large-cap companies included in the S&P 1500 Composite Index that are expected to show the fastest sales growth in 2018. Part one focused on small-cap companies and part two listed midcap companies.)
Another earnings season that includes eye-popping year-over-year comparisons will begin next week.
We discussed the tendency for companies to “beat” earnings estimates and what it means, or doesn’t mean, in part two of this series, in which we’re listing companies that are expected to achieve the largest increases in sales for all of 2018. One important reason to look at sales is that earnings-per-share (EPS) can be very confusing given the myriad one-time items that can skew any company’s quarterly (and therefore annual) bottom line.
Here are sales and earnings-per-share growth expectations for the three indexes that make up the S&P 1500 Composite Index, based on consensus estimates among analysts:
Index Ticker Estimated increase in sales - third quarter Estimated increase in sales - 2018 Estimated increase in EPS - third quarter Estimated increase in EPS - 2018 Total return - 2018 through Oct. 3 S&P Small-Cap 600 Index SML, -1.24% 8.6% 8.8% 23.0% 28.0% 12.7% S&P Mid-Cap 400 Index MID, -1.10% 11.5% 11.5% 25.4% 23.8% 6.7% S&P 500 Index SPX, -0.82% 9.1% 8.8% 24.1% 23.4% 11.0% Source: FactSet
The expectations for all three indexes are impressive, reflecting the boost to earnings from the massive cuts in corporate federal income-tax rates signed into law by President Trump in December.
Expected large-cap sales winners
Here are the 20 companies among the S&P 500 SPX, -0.82% expected to achieve the highest increases in sales for 2018:
Company Ticker Industry Sales increase - 2017 Expected sales increase - 2018 Expected sales increase - 2019 Nektar Therapeutics NKTR, -3.11% Biotechnology 86% 284% -79% Evergy Inc. EVR, -1.74% Electric Utilities 0% 80% 18% Lennar Corp. Class A LEN, -3.35% Homebuilding 16% 62% 15% FMC Corp. FMC, -0.75% Chemicals: Agricultural 13% 61% 7% Concho Resources Inc. CXO, -0.95% Oil & Gas Production 58% 60% 35% Discovery Inc. Class A DISCA, -0.51% Cable/Satellite TV 6% 57% 5% Pioneer Natural Resources Co. PXD, -1.30% Oil & Gas Production 51% 55% 11% Jacobs Engineering Group Inc. JEC, +0.31% Engineering & Construction -9% 51% 12% Micron Technology Inc. MU, -2.19% Semiconductors 64% 50% 2% EOG Resources Inc. EOG, -0.12% Oil & Gas Production 50% 49% 18% EQT Corp. EQT, +0.09% Oil & Gas Production 66% 49% 5% CBRE Group Inc. Class A CBRE, -2.37% Real Estate Development 9% 48% 6% Microchip Technology Corp. MCHP, -4.91% Semiconductors 17% 43% 9% Newfield Exploration Co. NFLX, -3.55% Oil & Gas Production 20% 41% 12% Take-Two Interactive Software Inc. TTWO, -3.11% Recreational Products 1% 41% -1% Helmerich & Payne Inc. HP, -0.40% Contract Drilling 11% 39% 16% Lam Research Corp. LRCX, -2.08% Electronic Production Equipment 36% 38% -7% Vertex Pharmaceuticals Corp. VRTX, -1.87% Biotechnology 46% 38% 19% Facebook Inc. Class A FB, -2.20% Internet Software/Services 47% 37% 25% Netflix Inc. NFLX, -3.55% Cable/Satellite TV 32% 36% 24% Source: FactSet
The 2017 sales increases are based on figures that may have been updated by analysts after mergers or sales of business units to create fair comparisons with expectations for 2018.
You can click the tickers for information about each company, including news, price ratios, charts and financials.
There are five oil producers on the list, reflecting the 53% increase in the price of West Texas Intermediate Crude oil CL1, -2.09% over the past year. The increased efficiency for shale oil producers means that if oil prices merely stabilize, profits for the industry will rise significantly over the next several years.
Read: As oil prices rise, shares of companies with low debt stand out from the pack
Nektar Therapeutics NKTR, -3.11% leads the list, with analysts expecting sales to nearly quadruple this year. But this provides a useful example on the importance of doing additional research to understand what’s really going on. Nektar’s sales are rising so much this year because the company recognized $1.06 billion in license revenue from its collaboration with Bristol-Meyers Squibb BMY, +0.18% in clinical trials of combinations of BMY’s Opdivo lung cancer medication with other treatments. The company is expected to resume its money-losing ways in 2019, as you will see in the next table.
The semiconductor manufacturers on the list — Micron MU, -2.19% and Microchip MCHP, -4.91% — are expected to see sales growth fall back to Earth next year after incredible expansions in 2017 and 2018. The same should happen with Lam Research LRCX, -2.08% which makes wafer processing semiconductor manufacturing equipment.
The two companies on the bottom of the list — Facebook FB, -2.20% and Netflix NFLX, -3.55% — are expected to have similar sales growth numbers for 2018 and then sales growth declining but remaining significant in 2019.
Here are consensus EPS estimates for the group:
Company Ticker EPS - 2017 Consensus EPS estimate - 2018 Consensus EPS estimate - 2019 Expected change in EPS - 2018 Expected change in EPS - 2019 Nektar Therapeutics NKTR, -3.11% -$0.62 $3.68 -$1.95 N/A N/A Evergy Inc. EVRG, +0.66% $2.36 $2.50 $2.95 6% 18% Lennar Corp. Class A LEN, -3.35% $3.41 $4.99 $6.79 46% 36% FMC Corp. FMC, -0.75% $2.71 $6.09 $6.80 125% 12% Concho Resources Inc. CXO, -0.95% $2.11 $4.45 $6.09 110% 37% Discovery Inc. Class A DISCA, -0.51% $2.23 $2.25 $3.27 1% 45% Pioneer Natural Resources Co. PXD, -1.30% $2.14 $6.73 $11.00 215% 63% Jacobs Engineering Group Inc. JEC, +0.31% $3.24 $4.41 $5.31 36% 20% Micron Technology Inc. MU, -2.19% $4.90 $11.96 $10.54 144% -12% EOG Resources Inc. EOG, -0.12% $1.12 $5.56 $6.99 397% 26% EQT Corp. EQT, +0.09% $1.24 $1.80 $2.49 45% 38% CBRE Group Inc. Class A CBRE, -2.37% $2.71 $3.17 $3.38 17% 7% Microchip Technology Corp. MCHP, -4.91% $5.47 $6.71 $7.60 23% 13% Newfield Exploration Co. NFX, -3.39% $2.24 $3.54 $4.33 58% 23% Take-Two Interactive Software Inc. TTWO, -3.11% $3.35 $4.61 $5.14 38% 11% Helmerich & Payne Inc. HP, -0.40% -$1.23 $0.11 $1.16 N/A 939% Lam Research Corp. LRCX, -2.08% $9.96 $17.86 $14.97 79% -16% Vertex Pharmaceuticals Corp. VRTX, -1.87% $1.95 $3.79 $4.67 94% 23% Facebook Inc. Class A FB, -2.20% $5.40 $7.13 $8.16 32% 14% Netflix Inc. NFLX, -3.55% $1.25 $2.68 $4.36 114% 63% Source: FactSet
Again, the 2017 “actual” EPS numbers may be adjusted by analysts for comparison purposes.
Leaving aside the oil companies, some of which move from very low levels of expected EPS this year, Neflix stands out on this list as the company that analysts expect to show the highest EPS increase in 2019.
Here are total returns for 2018 and summaries of sell-side analysts’ opinions:
Company Ticker Total Return - YTD Share 'buy' ratings Share neutral ratings Share 'sell' ratings Closing price - Oct. 3 Consensus price target Implied 12-month upside potential Nektar Therapeutics NKTR, -3.11% -10% 70% 20% 10% $53.78 $81.11 51% Evergy Inc. EVRG, +0.66% 6% 50% 42% 8% $54.89 $59.15 8% Lennar Corp. Class A LEN, -3.35% -27% 81% 19% 0% $46.24 $65.06 41% FMC Corp. FMC, -0.75% -2% 69% 31% 0% $91.96 $102.15 11% Concho Resources Inc. CXO, -0.95% 5% 74% 26% 0% $157.13 $183.73 17% Discovery Inc. Class A DISC, -1.65% 49% 50% 43% 7% $33.32 $30.94 -7% Pioneer Natural Resources Co. PXD, -1.30% 6% 85% 15% 0% $183.57 $244.19 33% Jacobs Engineering Group Inc. JEC, +0.31% 19% 76% 18% 6% $77.62 $81.80 5% Micron Technology Inc. MU, -2.19% 10% 72% 28% 0% $45.15 $69.66 54% EOG Resources Inc. EOG, -0.12% 21% 67% 30% 3% $130.38 $139.42 7% EQT Corp. EQT, +0.09% -22% 67% 33% 0% $44.19 $63.59 44% CBRE Group Inc. Class A CBRE, -2.37% 2% 58% 42% 0% $44.32 $55.61 25% Microchip Technology Corp. MCHP, -4.91% -13% 81% 19% 0% $75.12 $112.88 50% Newfield Exploration Co. NFX, -3.39% -6% 60% 40% 0% $29.52 $37.57 27% Take-Two Interactive Software Inc. TTWO, -3.11% 24% 76% 19% 5% $136.11 $138.60 2% Helmerich & Payne Inc. HP, -0.40% 14% 36% 44% 20% $71.61 $67.09 -6% Lam Research Corp. LRCX, -2.08% -16% 74% 26% 0% $152.17 $220.15 45% Vertex Pharmaceuticals Corp. VRTX, -1.87% 28% 81% 19% 0% $192.21 $197.04 3% Facebook Inc. Class A FB, -2.20% -8% 79% 17% 4% $162.43 $204.60 26% Netflix Inc. NFLX, -3.55% 96% 61% 30% 9% $377.05 $377.72 0% Source: FactSet
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