Stock Estimates Wall Street Consistently Gets Wrong

Wouldn’t it be nice to be able to accurately and consistently predict how a stock was going to perform? But, even having all of a company’s public information and after doing your research, stock market predictions are incredibly difficult. Even the professionals get it wrong fairly often.

There is big money to be made in projecting a stock’s future performance, so Wall Street is obsessed with putting together analyst reports and changing stock price targets. Business Insider recently pointed out how poorly Wall Street’s estimates can be, though.

Business Insider and Estimize, which aggregates Wall Street estimates from more than 3,000 portfolio managers, independent researchers, traders, assets managers and more, to see which stocks Wall Street most frequently gets wrong.

Goldman Sachs

Ticker: GS

Sector: Financial

Current price: $165.28

EPS trailing 12 months: 16.51

Goldman’s stock is up 81% from two years ago. The company’s last four quarters have been rather substantial positive surprises. Last quarter the EPS estimate was 2.43 with Goldman reporting in at 2.88, an 18.5% surprise. The quarter before that, Goldman beat estimates by 31.2%.

The next earnings report is Jan. 13, 2014. The earnings per share (EPS) estimate from 24 analysts averages 4.16. A year ago EPS came in at 5.6 (which had been a 48.1% surprise).

Herbalife

Ticker: HLF

Sector: Consumer goods

Current price: $67.10

EPS trailing 12 months: 4.85

Hedge-fund manager Bill Ackman famously massively shorted Herbalife. However, the stock is now up more than 108% year to date. That growth isn’t looking quite so nice if you held the stock March 2012, though, when the stock was above $70.

For four consecutive quarters the company has reported positive earnings surprises from as little as 1.9% back in the quarter ending December 2012 to 23.70% in the last quarter. This quarter, 7 analysts are estimating EPS of an average of 1.17, which is above the reported 1.05 a year earlier.

LinkedIn

Ticker: LNKD

Sector: Technology

Current price: $221.7

EPS trailing 12 months: 0.22

LinkedIn’s stock is up a whopping 216.59% from two years ago and it seems like analysts just can’t get a handle on the company — although their estimates are getting a little better. In the quarter ending December 2012, LinkedIn’s actual EPS of 0.35 exceeded the analyst estimates of 0.19 by 84.2%. Last quarter it exceeded analyst estimates by 21.9%.

Thirty-two analysts estimated an average EPS of 0.38 for this quarter, which is the highest estimate LinkedIn has seen in the last year and exceeds the actual EPS from a year ago.

Lululemon

Ticker: LULU

Sector: Consumer goods

Current price: $66.93

EPS trailing 12 months: 1.85

The yoga-wear retailer hasn’t had an easy time recently with clothing recalls for see-through pants and comments by the company’s chief executive officer blaming the pants’ problems on women’s bodies.

The company’s stock is down 18.72% from June, but still up 50% from where it was two years ago. Lululemon’s stock reported positive earnings surprises for the last four quarters, though to a lesser degree than the previous three stocks. For the current quarter, with earnings reported Dec. 11, 2013, the average EPS estimate from 31 analysts is 0.41, which is higher than the actual EPS has been for the last two quarters.

MasterCard

Ticker: MA

Sector: Financial

Current price: $754.03

EPS trailing 12 months: 25.28

MasterCard’s stock price has been on an impressive climb over the last two years, up 114.43% from $351.80 in November 2011. MasterCard has beaten earnings estimates for the last four quarters but by an inconsistent amount. In the quarter ending December 2012 it beat by 1%, the next quarter by less than that, in the quarter ending June 2013 MasterCard beat by 10.5%, and last quarter it beat by 4.6%.

The average EPS estimate of 29 analysts for this quarter is 5.98, which is above the EPS from a year ago.

Michael Kors

Ticker: KORS

Sector: Services

Current price: $80.95

EPS trailing 12 months: 2.46

Michael Kors had a big year in 2013. The stock is up 57.15% year to date. And just two years ago the stock was only at $24.10 — a 235.89% increase since then.

The specialty retailer has beaten EPS estimates by some impressive margins: 56.1% a year ago, then 28.2% and 24.5%. Last quarter it only beat by 4.4% when it reported EPS of 0.71. For this quarter, 21 analysts estimated an average EPS of 0.86, though, so Michael Kors has its work cut out for it.

Netflix

Ticker: NFLX

Sector: Services

Current price: $341.77

EPS trailing 12 months: 1.2

This year Netflix has shown original programming like House of Cards and Orange is the New Black, which has really helped to boost the company’s stock. Year to date the stock is up 271.45%.

However, Netflix’s EPS history is rather volatile. In the quarter ending December 2012, Netflix beat estimates by 200% when analysts predicted -0.13 and the company reported +0.31. However, the very next quarter Netflix missed by 73.7%. Now, 30 analysts estimated an average EPS of 0.65.

Nike

Ticker: NKE

Sector: Consumer goods

Current price: $78.58

EPS trailing 12 months: 2.96

Nike’s stock is up 51.58% year to date and the company has consistently beat EPS estimates by as much as 14% over the last four quarters.

For this quarter, 25 analysts estimated Nike’s average EPS will be 0.58, which is equal to its EPS from a year ago and quite a bit lower than it reported over the last three quarters.

SodaStream

Ticker: SODA

Sector: Consumer goods

Current price: $56.19

EPS trailing 12 months: 2.29

SodaStream is down 28% from its summer high of $76.11., but its one-year target estimate puts it right back there at $75.67.

A year ago, SodaStream had missed the EPS estimate by -7.7%, but it has since beaten estimates for three consecutive quarters. Now for this current quarter, 11 analysts estimated an average EPS of 0.64, which is actually below last quarter’s reported 0.76.

Yahoo!

Ticker: YHOO

Sector: Technology

Current price: $34.97

EPS trailing 12 months: 1.16

Year to date Yahoo!’s stock is up 74.15%, although its one-year target estimate doesn’t put the stock much higher — $35.14.

While Yahoo! has consistently beaten EPS estimates over the last four quarters (by 58% three quarters ago and just 3% last quarter), it’s been a little hit or miss with its revenue, missing twice in the last four quarters.