This year is nearing the halfway mark and analysts are beginning to project their biggest winners and losers on the year. S&P Capital IQ recently released a report regarding the performance of companies in terms of earnings per share (EPS) and revenue. In fact, the firm has listed its top 10 picks in each category. The analysts on the call for S&P Capital IQ were Michael Thompson, Lindsey Bell and Kenneth Leon.
S&P Capital IQ considers the biggest winners in its report to be Salesforce.com Inc. (NYSE: CRM) and Gilead Sciences Inc. (NASDAQ: GILD), as the only companies expected to produce top 10 growth rates for both earnings and revenue in 2015. Gilead is now even trading like a value stock, while Salesforce.com comes with a valuation that sometimes makes even the most aggressive growth investors wonder just how high it can go on its own.
From an earnings per share perspective, five of the top companies are airlines or auto manufacturers. This was Southwest Airlines Co. (NYSE: LUV), American Airlines Inc. (NASDAQ: AAL), and Delta Air Lines Inc. (NYSE: DAL) in the skies. The auto leaders featured were General Motors Co. (NYSE: GM) and Ford Motor Co. (NYSE: F). The key driver (or lift-off) behind these earnings is the current trend of oil prices.
In terms of revenue growth, health care is the most heavily represented sector, as it accounts for seven of the top 10 companies, according to S&P Capital IQ. Four companies come from the biotech subsector: Vertex Pharmaceuticals Inc. (NASDAQ: VRTX), Regeneron Pharmaceuticals Inc. (NASDAQ: REGN), Celgene Corp. (NASDAQ: CELG) and Gilead Sciences. The remaining three come from the pharmaceutical subsector: Actavis PLC (NYSE: ACT), Perrigo PLC (NYSE: PRGO) and Mylan N.V. (NASDAQ: MYL).
Although crude oil prices have recently passed $60 per barrel for benchmark West Texas Intermediate (WTI), they remain 43% below the peak of $107.26 reached in June 2014. Airline margins improve on low oil and fuel prices. These companies have also benefited from industry consolidation, which has reduced competition and capacity, making it easier for airlines to raise fares and increase passenger yields.
With expected growth of 38.9%, transportation — including airlines — is driving the industrial sector’s 6.2% expected growth for 2015. In 2014, industrials’ earnings grew 10.5%, with transportation generating 15.6% growth.
As for the previously mentioned auto companies, they are benefiting from pent-up vehicle demand, given lower oil prices and an elevated average vehicle age of 11.4 years. At the same time, consumers have also increased their interest in sport utility vehicles (SUVs), which carry higher margins, due to lower oil prices. The consumer discretionary sector is expected to have the third-best growth in 2015 at 11.3%.
To round out the top 10 earnings list, S&P Capital IQ listed Adobe Systems Inc. (NASDAQ: ADBE), Marathon Petroleum Corp. (NYSE: MPC) and Morgan Stanley (NYSE: MS). The reasoning behind this is that these companies are either operating in high-growth end or are reorganizing their businesses to better address the operating environment.
Below is a table listing the top 10 companies based on expected 2015 EPS growth:
Note that the market caps listed on this table are as of May 18.