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Deep Dive: Tesla, Take-Two and Exxon are among the exceptions to this big problem for stock prices

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the close up of the five rows coins ,and the coins jar that fell, with the back ground is a dark blue graph.

Over the long haul, stock prices are pushed higher by steady increases in estimates for companies’ sales and earnings. But this process has been reversed recently for many sectors and scores of companies — since June 30, consensus 12-month sales estimates have been cut for 172 companies in the S&P 500.

Still, there are always exceptions, and some of those are listed below, followed by a round up of estimate changes by sector and a list of 20 companies in the S&P 500
SPX
that have suffered the largest recent cuts in sales estimates.

Let’s begin by accentuating the positive.

Biggest sales estimate increases among the S&P 500

When looking at individual companies, it can be more helpful to begin with changes in revenue projections, rather than earnings, because of the accounting vagaries that can distort any company’s profit.

Here are the 20 companies in the S&P 500 with the largest increases in consensus 12-month sales estimates since June 30:

Company

Ticker

Change in rolling 12-month sales estimate since June 30

Change in rolling 12-month EPS estimate since June 30

Price change since June 30

2022 price change

P/E

P/E as of June 30

Take-Two Interactive Software Inc.

TTWO

66%

10%

-4%

-34%

19.0

21.6

Albemarle Corp.

ALB

35%

73%

36%

22%

12.6

15.9

Enphase Energy Inc.

ENPH

16%

22%

56%

66%

63.6

49.8

Tesla Inc.

TSLA

13%

16%

34%

-15%

55.9

48.4

Exxon Mobil Corp.

XOM

11%

16%

6%

49%

8.0

8.7

Hess Corp.

HES

11%

2%

10%

58%

10.9

10.1

Carnival Corp.

CCL

10%

N/A

12%

-52%

N/A

N/A

Kinder Morgan Inc. Class P

KMI

10%

3%

5%

10%

14.3

14.2

Halliburton Co.

HAL

9%

13%

-14%

18%

10.5

13.8

EOG Resources Inc.

EOG

9%

1%

7%

33%

7.5

7.1

Lamb Weston Holdings Inc.

LW

9%

8%

9%

23%

25.1

24.9

Cardinal Health Inc.

CAH

8%

0%

29%

31%

12.4

9.6

Camden Property Trust

CPT

8%

14%

-9%

-31%

41.4

52.1

Royal Caribbean Group

RCL

8%

N/A

34%

-39%

64.4

N/A

Prologis Inc.

PLD

8%

4%

-8%

-36%

27.6

31.1

Norwegian Cruise Line Holdings Ltd.

NCLH

8%

N/A

31%

-30%

N/A

N/A

Atmos Energy Corp.

ATO

8%

2%

0%

8%

18.9

19.3

VICI Properties Inc.

VICI

8%

3%

7%

6%

15.3

14.7

Comerica Inc.

CMA

8%

16%

6%

-11%

7.8

8.5

Schlumberger NV

SLB

7%

15%

5%

25%

14.5

15.8

Source: FactSet

Click on the tickers for more about each company, including news coverage, financials and charts. Then read Tomi Kilgore’s detailed guide to the wealth of information available for free on MarketWatch quote pages.

Take-Two Interactive Software Inc.
TTWO
tops the list. The company owns Rockstar Games, which develops the Grand Theft Auto series of videogames, along with several other popular gaming franchises. Jefferies analyst Andrew Uerkwitz cited the company’s “unprecedented wave of content” when raising his target price for the shares by 66% to $200 on Sept. 9. Anticipation is building for the release of GTA VI, although Take-Two has made no specific announcement, other than to say that it has allocated more resources to that game, while thanking staff members who have supported GTA V and its expansions since its release in 2013.

Uerkwitz rates Take-Two a “buy” and wrote in a note to clients that he would “happily wait patiently” for the new game’s release. When GTA VI is announced, the analyst expects “a rerating in the valuation and consistent stock appreciation as excitement and anticipation builds.”

Tesla Inc.
TSLA
ranks fourth the list, with its new factories in Texas and Germany expected to feed continued production increases, along with a boost to demand from renewed electric-vehicle tax subsidies in the Inflation Reduction Act an the expected availability of its Cyber Truck in 2023.

For Exxon Mobil Corp.
XOM,
earnings estimates have continued to increase, despite the pull back in the price of West Texas crude oil
WBS.

Lower on the list is Comerica Inc.
CMA,
the Dallas-based bank that has already seen a large increase in its net interest income. The bank tops a list of lenders expected to take best advantage of the rising-interest-rate environment.

Companies with “N/A” for the current forward price-to-earnings ratio are those expected to show negative EPS over the next 12 months.

Forward P/E is the most commonly used price valuation for stocks. This is a company’s current share price divided by the consensus 12-month earnings-per-share estimate among analysts working for brokerage firms. If the rolling 12-month earnings estimates increase steadily, higher stock prices are supported over time. Investors are used to these numbers going up quarter-to-quarter as companies file financial statements.

P/E ratios are down, but maybe not down enough

There is pressure on stocks because of the Federal Reserve’s tightening of monetary policy in an effort to bring inflation under control. This has pushed interest rates higher, making bonds a viable choice for many investors who had shied away from them for years.

During his press conference on Sept. 21 following the Federal Open Market Committee’s announcement of its decision to increase the federal-funds rate by another 0.75 percentage points, Federal Reserve Chairman Jerome Powell said “no one knows” if the central bank’s moves will lead to a recession.

But Wall Street analysts’ estimates for sales and earnings — based on companies’ reported results and forecasts and the analysts’ own projections — have been declining for scores of companies.

Here’s how the weighted aggregate rolling 12-month consensus estimates among analysts polled by FactSet for revenue and earnings have changed since June 30 for the 11 sectors of the S&P 500
SPX
and for the full index. The sectors are sorted by ascending changes in EPS estimates:

Sector

Change in rolling 12-month EPS estimate since June 30

Change in rolling 12-month sales per share estimate since June 30

2022 price change

Price change — June 30 through Sept. 21

Forward P/E

Forward P/E as of Dec. 31

Materials

-6.2%

-0.7%

-22%

-4%

13.0

17.0

Communication Services

-5.6%

-2.5%

-36%

-9%

14.7

20.9

Information Technology

-3.5%

-1.3%

-27%

0%

19.9

28.1

Health Care

-1.3%

1.5%

-13%

-4%

15.6

17.2

Consumer Staples

-1.0%

1.1%

-8%

-2%

19.9

21.8

Consumer Discretionary

-0.4%

0.4%

-25%

12%

26.5

33.0

Industrials

-0.2%

0.7%

-17%

1%

16.4

20.6

Real Estate

1.1%

0.3%

-26%

-6%

17.0

24.2

Financials

1.1%

1.4%

-18%

2%

11.5

14.7

Utilities

2.3%

1.3%

2%

4%

20.2

20.8

Energy

8.0%

6.6%

38%

7%

8.4

11.0

S&P 500

-1.0%

0.9%

-20%

0%

16.4

21.5

Source: FactSet

Rolling forward EPS estimates have declined for seven of the 11 S&P 500 sectors since June 30. For the full benchmark index, they are down 1%. Sales estimates are down for “only” three of the 11 sectors. Then again, if we had done a similar comparison a year earlier, all 11 sectors’ estimates for EPS and sales would have been higher, while the S&P 500’s rolling forward EPS estimate would have been up 6.1%, with the sales estimate up 0.9%.

Looking to the right of the chart, forward P/E ratios have declined considerably. For the full S&P 500, the current P/E valuation of 16.4 compares to a averages of 18.9 for five years, 17.2 for 10 years and 15.7 for 15 years, according to FactSet.

Why might the P/E ratios have further to fall? Because the flow of estimate cuts may continue. This alone can raise P/E ratios, but the combination of rising interest rates and estimate cuts doesn’t bode well.

On the other hand, the two price-change columns underline the stock market’s tendency to look ahead.

Biggest sales estimate cuts among the S&P 500

Among the S&P 500, 172 companies have had rolling consensus 12-month sales estimates decline since June 30. Here are the 20 for which these estimates have been cut most severely:

Company

Ticker

Change in rolling 12-month sales estimate since June 30

Change in rolling 12-month EPS estimate since June 30

Price change since June 30

2022 price change

P/E

P/E as of June 30

Micron Technology Inc.

MU

-30%

-57%

-9%

-46%

10.8

5.2

Western Digital Corp.

WDC

-21%

-63%

-22%

-47%

10.5

5.1

Seagate Technology Holdings PLC

STX

-21%

-39%

-17%

-47%

10.5

7.7

Nvidia Corp.

NVDA

-17%

-30%

-13%

-55%

32.4

25.8

Moderna Inc.

MRNA

-17%

-28%

-12%

-50%

9.4

7.7

Stanley Black & Decker Inc.

SWK

-14%

-39%

-20%

-56%

12.9

9.9

Roper Technologies Inc.

ROP

-12%

-9%

-6%

-24%

25.7

24.7

Freeport-McMoRan Inc.

FCX

-11%

-33%

-4%

-33%

12.1

8.4

Intel Corp.

INTC

-11%

-28%

-24%

-45%

11.3

10.8

D.R. Horton Inc.

DHI

-11%

-14%

8%

-34%

5.2

4.1

Teradyne Inc.

TER

-11%

-16%

-10%

-50%

17.3

15.9

NVR Inc.

NVR

-11%

-16%

1%

-32%

10.1

8.4

Twitter Inc.

TWTR

-10%

-40%

10%

-5%

55.8

30.3

Invesco Ltd.

IVZ

-9%

-15%

-1%

-30%

7.5

6.5

SVB Financial Group

SIVB

-9%

-16%

-9%

-47%

10.5

9.7

PerkinElmer Inc.

PKI

-9%

-7%

-11%

-37%

18.8

19.7

Garmin Ltd.

GRMN

-8%

-16%

-14%

-38%

15.8

15.5

Newell Brands Inc.

NWL

-8%

-16%

-20%

-30%

9.1

9.5

Align Technology Inc.

ALGN

-8%

-11%

-4%

-66%

22.6

21.0

T. Rowe Price Group

TROW

-8%

-16%

-3%

-44%

13.0

11.3

Source: FactSet

For most of these companies, the EPS estimate cuts have been much greater than the sales estimate cuts, reflecting how important it is to hit certain revenue levels to improve profit margins.

It is also interesting to see the increases in P/E ratios driven by the EPS estimate cuts, during year when P/E ratios generally have declined.

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