Names That Could Delight

 | Oct 12, 2012 | 9:30 AM EDT
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Last week, we looked at companies at risk of participating in earnings-warning season. Names with large declines in their earnings-per-share estimates during the quarter clearly have deteriorating businesses, and should be avoided on the long side. (By the way, even if these at-risk names don't warn, don't get complacent -- they could still miss on the actual report, and/or they could guide down.) 

Now that earnings season is under way, let's walk on the sunnier side of the street and look for names with the potential to surprise to upside. Using a similar methodology, I sorted through large-cap names to find the ones whose EPS estimates have been raised the most during the quarter. These names have clear earnings momentum and improving businesses, and could surprise and/or guide up.

What stands out? Despite the softness in technology, earnings at Nvidia (NVDA) are surging as the company accelerate sales of its graphics processors. Look at housing, as well! Every one of the homebuilders is showing wonderful earnings acceleration. That group is on fire.

Similarly, some of the energy complex is looking good despite the volatility in oil prices. Names such as HollyFrontier (HFC) are especially generous; Holly has paid a couple special dividends this quarter, no less. Many of the financials are looking good, but keep in mind that this is a very large group with a couple hundred names, so the long list may not reflect an underlying strength in the group. Still, individual names are attractive, such as AIG (AIG), back from the dead, or Discover (DFS).

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