Earnings season always features headlines that say companies “beat” or “miss” analysts’ estimates.

In the latest quarter, even more companies have been beating than usual, and in particular those in the health-care industry.

Companies’ gains have been helped by tax cuts passed by Congress and signed into law by President Trump in late December. However, most companies weren’t able to put the rules into effect until midway through the first quarter. This means the second-quarter earnings season is the first one to show the full effect of the tax cuts. And we may have another two quarters of fantastic year-over-year comparisons of quarterly earnings ahead.

S&P Global Market Intelligence estimated Monday that the S&P 500’s aggregate earnings per share for the second quarter were up 24.7% from a year earlier, with 81% of companies having reported. Looking back to the second quarter of 2017, earnings for the S&P 500 were up only 3.6%, according to FactSet.

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Wall Street analysts play a big role in maintaining the health of the stock market by helping companies under-promise and over-deliver on earnings. This is why, in a typical earnings season, about 70% of the companies that make up the S&P 500 Index SPX, +0.35% report earnings per share exceeding the consensus estimates among sell-side analysts polled by FactSet.

Those earnings “beats” drive many thoughtless headlines in the financial media, when the more important story might be how much a company’s sales or expenses have increased, whether a company is suffering from competitors’ pricing pressure, or whether management sees trouble ahead.

Quarterly data

When looking at data during earnings season, it is always difficult to determine when all the numbers are in, because 18% of S&P 500 companies end their fiscal quarters on days that don’t match the end of calendar quarters. So rather than try to figure out when second-quarter earnings season ends, the following data reflect S&P 500 companies’ most recently filed quarterly earnings reports through Friday, Aug. 3.

Here are beat rates for earnings and sales for the 11 S&P 500 sectors for the most recently reported quarters through Aug.3:

S&P 500 sector Share beating EPS estimates Share beating revenue estimates Number of companies Telecommunications Services 100% 67% 3 Health Care 97% 84% 63 Information Technology 93% 87% 71 Materials 83% 79% 24 Industrials 83% 79% 70 Consumer Staples 81% 63% 32 Utilities 79% 69% 29 Consumer Discretionary 76% 68% 76 Financial Services 72% 69% 68 Real Estate 58% 76% 33 Energy 55% 58% 31 S&P 500 80% 75% 500 Source: FactSet

There are only three companies in the S&P 500 telecommunications sector: AT&T T, -0.50% Verizon VZ, +0.40% and CenturyLink CTL, -0.69% so the sector’s 100% beat rate isn’t impressive.

But the health-care sector has 63 companies, of which 61 (97%) beat analysts’ estimates when they most recently reported their results.

Here are the 12 S&P 500 companies that surprised analysts with earnings per share coming out ahead of consensus estimates by at least 15% for their most recently reported quarters through Aug. 3:

Company Ticker Estimated quarterly EPS before report Actual reported EPS EPS surprise Estimated quarterly sales before earnings report ($mil) Actual reported sales ($mil) Sales surprise Abiomed Inc. ABMD, +0.38% $0.80 $1.95 144% $174 $180 4% Incyte Corp. INCY, -2.05% $0.16 $0.24 47% $474 $522 10% Illumina Inc. ILMN, -0.04% $1.11 $1.43 29% $787 $830 5% Vertex Pharmaceuticals Inc. VRTX, +0.21% $0.75 $0.94 26% $681 $751 10% Gilead Sciences Inc. GILD, -0.08% $1.56 $1.91 22% $5,200 $5,648 9% Alexion Pharmaceuticals Inc. ALXN, -0.25% $1.72 $2.07 20% $977 $1,045 7% Align Technology Inc. ALGN, +1.66% $1.09 $1.30 20% $472 $490 4% Boston Scientific Corp. BSX, -1.13% $0.34 $0.41 20% $2,466 $2,490 1% Cigna Corp. CI, -0.73% $3.31 $3.89 18% $11,149 $11,477 3% Regeneron Pharmaceuticals Inc. REGN, -1.22% $4.69 $5.45 16% $1,565 $1,608 3% Eli Lilly and Co. LLY, +1.41% $1.30 $1.50 16% $6,050 $6,355 5% Bristol-Myers Squibb Co. BMY, +0.39% $0.87 $1.01 15% $5,485 $5,704 4% Source: FactSet

You can click on the tickers for more information about each company, including news, charts, price ratios and financials.

All of those companies have reported their results for quarters ending June 30 or July 1.

The table emphasizes how important it is to dig deeper to understand how well a company is doing, rather than simply react to a headline or hang your hat on an impressive EPS figure. A company may show much higher earnings, especially with the tax windfall. But any company can have very large accounting adjustments any quarter that distort earnings results. This is why we have included columns showing how the companies’ sales compared to estimates. Again, we must expect any company to beat any consensus estimate, but the results are much less extreme.

Also see: Five outperforming health-care funds and the top 10 stocks they hold

So here’s another list of S&P 500 health-care companies that surprised analysts with earnings per share coming out ahead of consensus estimates by at least 5% for their most recently reported quarters through Aug. 3:

Company Ticker Estimated quarterly sales before earnings report ($mil) Actual reported sales ($mil) Sales surprise Estimated quarterly EPS before report Actual reported EPS EPS surprise Vertex Pharmaceuticals Inc. VRTX, +0.21% $681 $751 10% $0.75 $0.94 26% Incyte Corp. INCY, -2.05% $474 $522 10% $0.16 $0.24 47% Gilead Sciences Inc. GILD, -0.08% $5,200 $5,648 9% $1.56 $1.91 22% Alexion Pharmaceuticals Inc. ALXN, -0.25% $977 $1,045 7% $1.72 $2.07 20% Nektar Therapeutics NKTR, +2.69% $36 $38 7% -$0.53 -$0.60 N/A Varian Medical Systems Inc. VAR, -0.99% $668 $709 6% $1.00 $1.04 4% Amgen Inc. AMGN, -0.19% $5,729 $6,059 6% $3.55 $3.83 8% Illumina Inc. ILMN, -0.04% $787 $830 5% $1.11 $1.43 29% Eli Lilly and Co. LLY, +1.41% $6,050 $6,355 5% $1.30 $1.50 16% Allergan PLC AGN, -0.56% $3,916 $4,099 5% $4.13 $4.42 7% Source: FactSet

So the sales beats are far more modest than the earnings beats. But they can help you with your own research.

Incyte INCY, -2.05% Illumina ILMN, -0.04% Vertex Pharmaceuticals VRTX, +0.21% Gilead Sciences GILD, -0.08% Alexion Pharmaceuticals ALXN, -0.25% and Eli Lilly LLY, +1.41% made both lists. This alone doesn’t necessarily mean that the companies did more than report results that were less disappointing than expected. For example, Gilead’s second-quarter sales were down 21% from a year earlier because the company faced “increased competition” for its chronic hepatitis medications.

Quarterly data can point you in certain directions, but if you are considering any of these companies for investment, you need to do your own research in order to form an opinion about how likely the company is to succeed in its business strategy over the next decade.

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