Investors should monitor companies that might disappoint in their earnings reports, possibly leading to a decline in their stock prices. Wall Street has been reducing its third-quarter growth projections for several months. According to a recent FactSet report, companies in the S&P 500 are anticipated to experience a 4.2% increase in earnings compared to the same quarter last year, a decrease from the 7.8% growth anticipated on June 30. This trend is not unusual, as third-quarter growth estimates generally decrease in the preceding months. As of now, nearly 10% of S&P 500 companies have reported their results, with over 79% surpassing earnings estimates, according to FactSet. However, several companies might still fall short. To identify those at risk, CNBC Pro utilized FactSet to screen S&P 500 stocks scheduled to report next week, focusing on companies whose earnings estimates have been reduced by at least 10% over the past three and six months.
Valero Energy’s investor sentiment has significantly declined ahead of its quarterly results, which are due on October 24. Analysts have reduced earnings per share estimates by 80.3% over the past three months and 85% over the past six months. Despite this, 60% of Wall Street analysts still favor the stock. One such analyst is Joe Laetsch from Morgan Stanley, who has an overweight rating and a price target of $165 on Valero, indicating a 22.5% potential upside. The stock has increased by approximately 4% this year. Laetsch commented that Valero is well-positioned in the tight refining environment due to its substantial downstream exposure relative to its peers and expects the company to continue generating substantial free cash flow.
Enphase Energy is another company on the radar, as analysts tracked by FactSet have lowered their earnings per share estimates by nearly 39% and 35.5% over the past three and six months, respectively. Less than half of the analysts rate the stock as a buy. RBC Capital Markets analyst Christopher Dendrinos recently downgraded Enphase to sector perform from outperform and reduced his price target by $25 to $100, suggesting a potential gain of 8.6%. Dendrinos expressed concerns about a slower growth pace next year for Enphase amid weak demand in the residential solar market. He also noted that the adoption of third-party ownership (TPO) systems in the U.S. could impact Enphase’s demand growth since the company holds less market share in TPO systems compared to its competitors. Enphase’s shares, which will report earnings on October 22, are down 30% year-to-date.
Tesla is scheduled to announce its earnings on October 23 after the market closes. The company faces significant challenges to achieve a substantial stock increase as it fell short in third-quarter deliveries and did not impress investors with its recent robotaxi announcement. Analysts have reduced Tesla’s earnings per share estimates by 24.1% over the past three months and 30.8% over the past six months. Overall, 34.5% of analysts rate the automaker as a buy. Wells Fargo remains bearish on Tesla going into the earnings report, as it reaffirmed an underweight rating and anticipates that the company will miss third-quarter estimates.
