There’s beating earnings estimates…and then there’s crushing earnings estimates. Both are generally favorable events for longs. Yet it is the earnings crushers that make the biggest statements to the market.
Within the past week, 39 S&P 500 companies surpassed the consensus expectation of bottom-line performance. Most of the beats were of the garden variety— 10%, 20%, or 30% above the Street. But there were also five companies that delivered positive earnings surprises of at least 60%.
Those that hit it out of the park during earnings season merit extra attention from investors. Gaining an understanding of why a company so drastically outperformed and the implications going forward is a valuable exercise when it comes to stock selection.
The NFL Honors may be over, but these stocks are still vying for the title of Q4 earnings M.V.P.
What Drove Disney’s Big Earnings Beat?
On February 9th, The Walt Disney Co. (NYSE:DIS) impressed the market with a fiscal Q1 adjusted earnings per share (EPS) tally of $1.06. It was not only the company’s best quarter in years, but some $0.43 ahead of the consensus estimate. The 68% beat announced to the world that the theme park operator is doing just fine despite the pandemic’s impact on the travel industry.
U.S. parks and resorts hauled in record revenue during the last three months of 2021. Mask-bearing families bravely invaded Disneyland and Disney World for some much-needed away from home time. Re-openings at Disneyland Paris and Hong Kong Disneyland were also greeted with strong attendance trends. Shanghai Disney and Tokyo Disney are gradually rediscovering the magic as well.
Disney is also discovering other ways to entertain. Streaming media subscriptions jumped to 196.4 million as nearly 12 million more customers signed up for the popular Disney+ service. The highly successful launch of the Encanto franchise also has the company off to a hot start in the new fiscal year.
Whether staying home or taking a vacation, people are increasingly turning to Disney to cure their Covid blues. It’s not a ‘one or the other’ decision but both. This means Disney has its arms wrapped around the entertainment industry like never before. As the theme park business continues to recover and streaming TV takes off, Disney will only get stronger.
How Did MGM Resorts International Do in Q4?
Analysts were expecting MGM Resorts International (NYSE: MGM) to report similar results to the third quarter’s $0.02 EPS. Instead, the hotel operator delivered its best quarter since the pandemic began with EPS of $0.12. The news pushed MGM’s stock near a 52-week high before a late-week market downturn dragged it lower.
After posting five straight quarters of net losses, MGM Resorts has returned to profitability. Vaccine rollouts and loosened travel restrictions are finally breathing life back into its hotel and casino operations. Meanwhile, its online sports betting and iGaming businesses are booming as more states move to legalize Internet-based gambling.
As the NFL Pro Bowl and NHL All-Star Game showed us, the Las Vegas strip is lighting back up. With indoor capacity restrictions now removed, revenue was up 277% at MGM’s sin city resorts. Revenues were also up sharply at the company’s non-Vegas U.S. destinations while MGM China revenue was up just 3% amid travel restrictions around Macau.
Going forward, MGM Resorts will be less dependent on Macau for overseas growth. It was recently chosen by Osaka, Japan as the city’s integrated resort partner which will diversify revenue streams in the Asia-Pacific. Back at home, the emerging U.S. sports betting and iGaming space stands to be a major growth catalyst as the BetMGM brand gains traction. Last quarter’s big earnings beat could be signaling investors to place their bets.
Why Did Mattel Beat Q4 Earnings Estimates?
Mattel, Inc. (NASDAQ: MAT) reported Q4 adjusted EPS of $0.53 which topped the Street’s $0.30 by a wide margin. It was the seventh straight time that the toy manufacturer exceeded quarterly earnings forecasts.
This time around Mattel rode a healthy consumer spending environment to record 10% top line growth led by 13% growth in North America. Dolls, action figures, building sets, games, and toy vehicles continued to fly off the shelves despite the impact of cost inflation on retail prices. Growth outside North America was a more modest 7% but nevertheless contributed to the overall outperformance.
Despite the broad-based geographic strength, however, not all brands had increased sales. Barbie sales were up an impressive 18% which offset slight sales declines in the Hot Wheels, Fisher Price, and Thomas & Friends brands.
Still the 77% positive earnings surprise was more than enough to spur investors to bid up Mattel’s stock with gapped up in heavy volume to a fresh 52-week high on February 10th. A hefty debt burden has long been a major concern around Mattel, but based on recent improvements in operating cash flow, it may be play time for investors.
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