Analysts are constantly using quantitative screens to search the stock universe for what is the best performing category. In a recent report from Merrill Lynch’s Savita Subramanian, the superb strategist at the firm gives readers a quantitative gold mine of data. One stock metric that not only may indicate overall company strength, but might provide investors with a path for future gains is earnings momentum.
In a momentum stock market, people are rarely looking at anything other than the stock price, but when the market gets rich, and shares start to get shaky like we are seeing now, then investors often turn to different metrics to find stocks to buy. One of the best indicators is a company’s earnings momentum as it helps investors buy stocks that are on an earnings roll, and strong earnings generally support prices.
Here are the five companies with the highest earnings-per-share momentum based upon the Merrill Lynch quantitative formula.
Electronic Arts Inc. (NASDAQ: EA) come out as the earnings momentum leader and the video game company has been on a roll. In the Merrill Lynch statistics, the company has an earnings momentum score of 9266.7. The company develops, markets, publishes, and distributes game software content and online services for video game consoles, Internet-connected consoles, personal computers, mobile phones, and tablets worldwide. The stock has more than doubled in the last year. Shares closed Monday at $71.22.
Vornado Realty Trust (NYSE: VNO) is a Real Estate Investment Trust that comes in second on the Merrill Lynch screen with a momentum total of 3380. The firm invests in the real estate markets of the United States and makes investments in commercial real estate properties to create its portfolio. The stock is way off it’s January highs as many bond proxies have been hit by investors expecting higher interest rates. The stock closed Monday at $96.31.
eBay Inc. (NASDAQ: EBAY) recently spun-off its lucrative PayPal division and comes in third on the Merrill Lynch screen with a momentum total of 1828.6. eBay operates as a technology company that enables commerce and payments on behalf of users, merchants, retailers, and brands of various sizes in the United States and internationally. The stock closed Monday at $28.00.
Prologis, Inc. (NYSE: PLD) is one the top companies to buy in the industrial REIT sector and comes in #4 on the Merrill Lynch screen with a momentum total of 1691.7. The firm engages in the ownership, development, management, and leasing of industrial distribution and retail properties. The stock closed on Monday at $39.95.
Starbucks Corporation (NASDAQ: SBUX) dominates the retail coffee business in the United States and comes in at #5 on the Merrill Lynch list with a momentum score of 1625. The ubiquitous retail company posted very solid earnings last week and continue to be one of the highest recommended stock on Wall Street. Shares closed Monday at $56.98.
While earnings momentum doesn’t always translate to higher prices for all stocks, it’s still a good template for investors looking to buy stock as the Merrill Lynch formula uses two years of earnings, so trends have time to develop.