It has been an excellent third-quarter earnings season so far. Of the S&P 500 stocks that have reported earnings, a majority have beaten analyst estimates.
According to Factset Insight, 56% of the index companies have reported earnings so far in Q3 2021. Of those, 82% beat the consensus earnings per share (EPS). That’s higher than the five-year average of 76%. Further, not only are more companies beating estimates, but they’re also beating them by a wider margin. The five-year average beat is 8.4%. This year, it’s 190 basis points higher.
Which sectors are delivering the goods?
Real Estate is doing the best, with 93% of the companies reporting estimate beats. The next best is a tie between Communication Services and Healthcare at 91%. Finally, in the third spot, Financials have beaten estimates 88% of the time.
Who will be the winners in Q4 2021 and beyond? Here are the 10 S&P 500 stocks I believe will continue to beat the pros.
- Abbott Laboratories (NYSE:ABT)
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Chevron (NYSE:CVX)
- Delta Air Lines (NYSE:DAL)
- Ford (NYSE:F)
- Intel (NASDAQ:INTC)
- MGM Resorts (NYSE:MGM)
- Pfizer (NYSE:PFE)
- SVB Financial (NASDAQ:SIVB)
- Thomson Reuters (NYSE:TRI)
S&P 500 Stocks to Buy: Abbott Laboratories (ABT)
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First up on this list of S&P 500 stocks is Abbott Laboratories. If you were looking for bad news from Abbott’s Q3 2021 earnings report, you most likely didn’t find any. Instead, it was a flawless period with a 14% beat on revenue and a 49% beat on earnings.
Compared to last the year, the company’s revenues of $10.9 billion were 23.4% higher year-over-year (YOY). On the bottom line, it grew earnings per share 42.9% YOY to $1.40.
Covid-19 remains a moneymaker for the company. Its Covid-19 tests accounted for $1.9 billion or 20% of its overall sales. In addition, sales from all its segments grew by double digits during Q3.
Lastly, this company expects earnings in 2021 to be $5.05 per share at the midpoint of its guidance. That’s up from the previous guidance of $4.40 at the midpoint. That’s 32 times its 2021 earnings. Based on past valuations, this is a pretty reasonable figure for ABT stock.
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Next up on this list of S&P 500 stocks to buy is Alphabet. Since the company reported Q3 results on Oct. 26, GOOG stock is up 8%. But given how it performed in the third quarter, you would have thought this would have been more.
On the bottom line, Alphabet reported earnings of $18.94 billion or $27.99 per share. There are a number of S&P 500 comanpies with share prices less than $27.99. But I digress. Alphabet’s EPS beat the consensus by some 18%. In terms of revenue, this company also delivered $65.1 billion on the top line, 41% higher YOY and 2.5% higher than analyst estimates.
A standout in the quarter was Google Cloud, which saw revenue increase 45% to $4.99 billion. That’s $20 billion on an annualized basis, but still remains a small part of the overall business. That said, as Alphabet seeks to grab a big chunk of business related to artificial intelligence (AI), more quarters like this will surely help it succeed.
Back in late 2016, I argued three reasons why GOOG stock was a must-own. Up about 280% since then, I bet there are at least six reasons the stock is a must-own now.
S&P 500 Stocks to Buy: Chevron (CVX)
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To be an oil and gas company right now and not beat analyst estimates would have to be downright embarrassing. According to Factset Insight, up to Oct. 29, the energy sector S&P 500 stocks had reported $23.6 billion in earnings. That compares to a loss of $1.5 billion in Q3 2020.
Even though I’m not a fan of oil companies like Chevron, I also included CVX stock on a list of mega-cap stocks offering outsized returns back in February. Mainly, I felt that the company’s commitment to renewable energy to offset its carbon emissions was a responsible way to handle the transition away from fossil fuels.
It also didn’t hurt that its debt-to-EBITDA was one-third of Exxon Mobil’s (NYSE:XOM). Today, the stock is up 36% year-to-date (YTD) compared to 58% for XOM stock.
Moving forward, I expect the 34% earnings beat ($2.96 vs. $2.21 estimate) and 10% sales beat ($44.71 billion vs. $40.52 billion estimate) ought to help even the score for this pick of the S&P 500 stocks in Q4 and beyond.
Delta Air Lines (DAL)
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Next up on this list of S&P 500 stocks is DAL stock. Back in July 2020, I suggested that Delta shareholders would benefit long-term from the strong leadership of CEO Ed Bastian.
For one, I admired Bastian for keeping middle seats unoccupied while other airlines were stuffing their flights full of people. Sure, there was plenty of data suggesting — occupied or not occupied — the middle seat wasn’t a game-changer when it came to passenger safety from Covid-19. However, this decision did send a signal to travelers that Delta was serious about passenger health. Eventually, that would be rewarded with a higher share price. The stock is up 69% since that article.
Delta reported Q3 2021 results in mid-October. Revenue, earnings per share and load factor — the number of seats available filled with passengers — were all better than analyst expectations.
On the top line, revenues beat by $800 million or roughly 10%. Earnings per share beat by 5 cents or 20% as well. Finally, Delta’s load factor was 80%, 230 basis points higher than the consensus.
Maybe most importantly, though, Q3 marked the airline’s “first quarterly profit since the start of the pandemic.” I am now looking for DAL stock to test $60 in 2022.
S&P 500 Stocks to Buy: Ford (F)
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When CEO Jim Farley was hired at Ford back in August 2020, I wondered what took Executive Chairman Bill Ford so long. I wrote the following back in September 2020:
“In early March , I stated that patient investors would be rewarded […] Now that Hackett’s moving aside, I hope for long-suffering shareholders that this COO promotion turns out better than the last one.”
It seems it has.
Ford reported Q3 2021 earnings on Oct. 27 — and they were off-the-charts good. For example, the company’s EPS of 51 cents was almost double analyst expectations. In addition, automotive revenue was $670 million higher than the consensus at $33.21 billion.
More importantly, though, Ford is going full-tilt on the electrification of its fleet. Initiatives include boosting production for the F-150 Lightning electric pickup to 80,000 yearly and spending more than $15 billion between now and 2025 on battery-electric vehicles (BEVs).
All in all, F stock is another solid pick on this list of S&P 500 stocks. I’d say CEO Jim Farley is doing his best to keep pace with General Motors (NYSE:GM) CEO Mary Barra.
Ford is back.
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Next up on this list of S&P 500 stocks is INTC stock. Unfortunately, despite releasing good earnings in late October, Intel shares still fell on the news.
This chipmaker reported Q3 2021 results on Oct. 21. For starters, the EPS of $1.71 was 60 cents or 54% better than analyst expectations. However, because the company reported revenue that was $100 million less than the consensus of $18.2 billion, shares fell in after-hours trading.
While INTC has made back some of the post-earnings declines, the stock is still relatively flat for the year. By comparison, Nvidia (NASDAQ:NVDA) is up 133% YTD.
At this point, it doesn’t matter how enthusiastic CEO Pat Gelsinger is about the company’s plans for the future. Investors just don’t seem to be buying what Intel is selling. Gelsinger stated the following in the Q3 press release:
“We are still in the early stages of our journey, but I see the enormous opportunity ahead, and I couldn’t be prouder of the progress we are making towards that opportunity.”
I mean, the company even raised its 2021 EPS guidance to $5.28 per share. In 2022, it expects $74 billion in revenue, $900 million higher than analyst estimates according to Barron’s.
Intel remains an interesting play if you are a value investor, but there’s no question Nvidia is the better company.
S&P 500 Stocks to Buy: MGM Resorts (MGM)
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MGM Resorts reported a Q3 results beat on both the top and bottom line. For starters, the casino operator generated revenues of $2.71 billion during the quarter, about $240 million higher than the consensus estimate of $2.47 billion. Furthermore, its EPS in the quarter was 3 cents, 7 cents better than the 4 cent loss expected by analysts.
On top of this, revenues in China jumped 517% YOY to $289 million, while domestic operations saw sales climb by 187% YOY to $1.4 billion during the quarter. Essentially, the business on both sides of the Pacific continues to rebound to pre-pandemic numbers.
Of the major sports-betting stocks, MGM also appears to have had the best October, gaining 5.1%. Plus, now that DraftKings (NASDAQ:DKNG) has dropped its plans to make a bid for Entain (OTCMKTS:GMVHY), MGM can go back to working with its joint venture to grow BetMGM.
I’m sure MGM will revisit the idea of buying Entain and bringing BetMGM in-house once its existing markets get fully stabilized. All told, MGM stock is another solid name on this list of S&P 500 stocks.
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If there’s one of the S&P 500 stocks that’s a perennial underperformer, my vote would be on Pfizer.
Over the past 15 years, PFE stock has generated an annualized total return of 5.87%, about half the return of the entire U.S. market. Year-to-date, it’s got a total return of roughly 24%. That’s roughly equal to the U.S. markets on the whole.
It wouldn’t be so bad if Pfizer were merely sputtering along. However, that’s not the case. The company reported Q3 2021 earnings on Nov. 2. It beat on the top and bottom line and upped its guidance for all of 2021.
In Q3, Pfizer had earnings of $1.34, some 26 cents higher than the analyst estimate. Meanwhile, revenue was $24.09 billion, $1.51 billion higher than the consensus. CEO Albert Bourla stated the following in the company press release:
“More than 75% of the revenues we have recorded up through third-quarter 2021 for Comirnaty [the Covid-19 vaccine] have come from supplying countries outside the U.S., and we remain on track to achieve our goal of delivering at least two billion doses to low- and middle-income countries by the end of 2022.”
Recently, the Centers for Disease Control and Prevention (CDC) gave final approval for the Pfizer vaccine, marking it safe for kids between the ages of 5 and 11. As such, Canada’s health officials shouldn’t be too far behind.
And the rich get richer.
S&P 500 Stocks to Buy: SVB Financial (SIVB)
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Next up on this list of S&P 500 stocks is one of my favorite banking plays, SIVB stock. This company remains one of the best-run financial institutions in the United States, serving a very appetizing financial services market segment.
Focused on providing banking and investment services for entrepreneurs and innovators, it consistently outperforms analyst estimates. In the third quarter, for example, SVB Financial had earnings of $7.26 per share, some $2.20 higher than the consensus or a roughly 44% surprise. In Q2 2021, the earnings surprise was also impressive at around 40%. Finally, on the top line, SVB had revenue of $1.53 billion, 17.2% higher than the estimate.
As far as its outlook goes, this company expects its net interest income and core fee income to grow, spurred on by increases in average loan balances and average deposits.
All I can say is I encourage all readers to check out this bank stock. SIVB is the real deal.
Thomson Reuters (TRI)
The last entry on this list of S&P 500 stocks is TRI stock. This Canadian media, business information and data company is having a quiet but excellent year in the markets, generating a YTD return of 49% so far. With almost two months left in the year, a more than 50% gain seems inevitable.
TRI stock has outperformed the U.S. markets over practically every period — both short and long-term. It’s sneaky good. On Nov. 2, the company reported its Q3 results.
For starters, Thomson Reuters beat on both the top and bottom line with sales of $1.52 billion, 6% higher than the previous year and slightly ahead of the analyst estimate. In addition, its EPS of 46 cents marked an 18% increase YOY, coming in 8 cents higher than the consensus estimate as well.
In 2021, this company expects 2021 free cash flow (FCF) of $1.15 billion at the midpoint of its guidance. Based on a market capitalization of $57.6 billion today, it has an FCF yield of around 2%.
That’s not cheap, but you get what you pay for. Over the long haul, investors can make a healthy total return from Thomson Reuters’ business model.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.