Names where Consensus is moving away from Guidance

With 1H Earnings Season right around the corner, we screened for names where consensus moved away from Company guidance in the last 2 months. We screened for names where consensus EPS is down more than 10% in the last 2 months, however guidance is 10% above consensus. For example, Nintendo’s (7974) guidance is 31% above consensus. However, consensus has fallen 17% in the last two months. Other names where consensus is going down and increasing the gap between guidance are FamilyMart (8028), Toppan Printing (7911) and Idemitsu Kosan (5019). The gap between guidance and consensus for FamilyMart is huge Consensus EPS is negative ¥6.3, however guidance is still at ¥232.

On the other side, names where consensus going up and increases the gap between guidance and consensus are Mitsubishi Corp (8058), Toshiba (6502) and Toho Gas (9533). Consensus EPS for Toshiba is up 33% in the last 2 months and now guidance is 29% below consensus. For McDonalds Holding (2702) consensus EPS is ¥18 and up 15% over the last 2 months. However, company guidance is still sitting at ¥8.

Here are the results of the two screens.

EPS Consensus moving up and away from Guidance

EPS Consensus moving down and away from Guidance

Contact Us for a copy of the screen

 


End of 1Q FY3/17 Earnings Summary - Full-year Consensus numbers still a lot more bullish than Guidance

If we look at the 1Q Aggregate numbers, which Sectors are best and worst positioned for the rest of the year? On the positive side, names in the Information and Communication sector achieved 30% of the aggregate OP guidance. Toho (9602) achieved 39% of full-year OP and KONAMI (9766) achieved 36% of its full-year OP guidance. The Pharmaceutical Sector achieved 40% of its aggregate OP. Takeda Pharma (4502) has already achieved 113% of its full-year OP guidance and Eisai (4523) has already achieved 48% of full-year OP guidance. Transportation Equipment achieved 32% of full-year OP guidance. Honda (7267) is at the top with 45% of OP guidance achieved, followed by Toyota Motors (7203) with 38% achieved.

On the other side, only 18% of aggregate OP was achieved in the Machinery Sector. Sankyo (6417) has a negative 16% achieved and Ebara (6361) is basically at nothing achieved. Electronic Appliances companies were only able to achieve 18% of full-year OP guidance. NEC (6701) OP came in at negative 30¥bn OP so that is not a good start for them. Fujitsu (6702) is not much better losing 11¥bn at the OP level in the first quarter. Other Sectors that are not off to a good start are Construction with only 17% of full-year OP achieved, Nonferrous Metals with only 18% achieved and Oil & Coal Products with only 15% of full-year OP guidance achieved.

Contact Us for access to the full screen


FY2016 Earnings Summary and Company Specific Factors

Aggregate Earnings Summary
In this report we breakdown the just finished Earning Season by each sector and look at the new aggregate guidance for FY3/17. However, we are using two of our products that some of you may not be familiar with. So we want to give a brief explanation about them.


Specific Company Factor Analysis
Instead of looking across a universe of Companies to find which factor drive that universe, we use a time series for a specific company to see which factor drives that company. For example, if PBR is high, does the company underperform or does it not matter. Toho Gas is a great example. As you see in the chart below, PBR has a 29% IC, which means that when PBR is low, price rebounds, and when it is high it tends underperform.

Portfolio Analyser
The Portfolio Analyser breaks down the exposure to all the different factors. For this report we are using it to understand attributes of the different sectors. However, the main use is to verify that you have the desired exposures in your portfolio and do not have any unwanted exposures. For example you may have a Value strategy, but in fact the portfolio is more geared to growth. As an example, we screened for names with high Sales Growth and Low PBR. As you can see, this mock-portfolio has huge exposure to Sales yield growth and Book Yield. Happy to discuss the calculations, but this report is not the place to go into detail.

Full report available here


Big differences in new Company Guidance and FY3/17 Consensus estimates - 10 May 2016

Here are the names that reported yesterday with largest gaps in new Company Guidance vs FY3/17 Consensus Estimates.

Positive Side

  • Kitz Corp’s new OP guidance is 36% above FY3/17 consensus OP
  • Sojitz’s new OP guidance is 24% above FY3/17 consensus OP
  • Doshisha’s new OP guidance is 12% above FY3/17 consensus OP

Negative Side

  • LIXIL’s new OP guidance is 40% below FY3/17 consensus OP
  • NGK SPARK PLUG’s new OP guidance is 34% below FY3/17 consensus OP
  • Wacoal Holdings new OP guidance is 33% below FY3/17 consensus OP

Please take a look and let me know if we can do anything else. We back tested Guidance vs. Consensus and sent out the results yesterday. There is a clear difference in performance in names that come out with good guidance and ones that come out with guidance significantly below consensus….


Companies with new Guidance better than FY1 Consensus historically outperform

It is time to start up earnings again and as you know we have been sending out a daily comparing new guidance to FY3/17 consensus estimates. Over Golden Week, we back tested that theory and found that yes, historically Company that issue new Company guidance greater than new FY1 EPS consensus outperform. Companies that come in with new guidance 30% above consensus on average outperformed TOPIX by more than 8% in the most after the announcement. On the other side, Companies that issue new guidance 30% below FY1 consensus underperformed TOPIX by 4% on average.

Now 268 names announced before Golden Week and we ran the same analysis on the names that have reported. The results are very similar. Names that have reported new Guidance 30% more than FY3/17 consensus estimates are up on average 6%. Names that reported new guidance 30% below consensus are on average down 4% relative to TOPIX since they announced numbers.

Below is the historic average returns bucketed into the different groups. Please note that each bucket is not 0 to 10%, 10% to 20% etc…, but greater than 30% and then greater than 20% which also includes all results greater than 30%.

Contact Us for access to the screen or to find out what else we can do for you.


Big Differences in New OP Guidance and FY3/17 Consensus - Fanuc and Nintendo make the list

Here are the names that reported yesterday that gave new OP Guidance significantly lower than FY3/17 OP consensus estimates.

  • Ibiden’s (4062) new OP guidance is 56% below new FY1 consensus OP
  • Fanuc’s (6954) new OP guidance is 39% below new FY1 consensus OP
  • Fancl’s (4921) new OP guidance is 30% below new FY1 consensus OP
  • Nintendo’s (7974) new OP guidance is 27% below new FY1 consensus OP

Contact us for access to the full screen


Names with still some confusion (Consensus Estimates with high Standard Deviation)

With Earnings season right upon us, we screened for names where the Street has not made up its mind. More specifically names where the standard deviation across Analyst estimates is greater than 20% of the mean estimate. I found it interesting that out of the 28 names that made the Screen, 36% did not have Company Guidance. For Example, OP consensus estimate for Mitsubishi Corp is 142,769.4 mm yen. However the Std Deviation is 46,258.4 so the OP range is from 189,028 mm to 96,511 mm yen. So it is pretty much anyone’s guess where Mitsubishi will come in at…. JX Holdings is even worse with a OP consensus range from positive 41,485 to negative 168,451 mm yen.

Contact us for the full screen


What will soon to be FY1 EPS numbers mean

With Year-end Earnings season nearing, we are about to see all the new Guidance and FY1 forecasts. As we have previously shown, Analysts do not really worry about FY2 until it becomes FY1. So we went out and calculated an EPS number based on the 10-year historical median PE. This gives a kind of baseline to compare with the new FY1 estimates. For example, Sankyo’s (6417) current FY2 EPS forecast ¥145, however the 10Y median PE based EPS is ¥309. As you can see in the chart below, the median PE based EPS is significantly higher than any EPS forecast since 2012. If Sankyo’s PE is to move back in line with historical numbers, either EPS has to go up a lot or Price has to give more. 

In the attached files, we have the historical charts with the TOPIX500 universe and then also a screen comparing the PE EPS with current FY2 forecasts with both positive and negative results. For example, TDK’s median PE based EPS is just ¥355 compared to the current FY2 EPS is at ¥1,331. TDK’s current FY2 PE is at 4.5x while its historical median PE is 17x. Maybe the new FY1 estimates will be lower than the current FY2, but there still looks to be good room for expansion.

Contact Us for the screen or charts


When Analysts are confused Price Volatility increases

With Earnings Season just right around the corner we looked for names where there is a high standard deviation in Analyst Estimates. Basically which Companies have analysts estimates all over the place. We then looked back over the last 4 years to see how those “confused” names performed and what happened to volatility over the three months from March 24rd. Aside from last year when there was only a 6% difference in volatility in quintile 5 (highest standard deviation) vs. quintile 1 (lowest standard deviation), quintile 5 volatility was 30% higher than quintile 1 volatility in the previous 3 years.

As you would expected with higher volatility, comes bigger return but positive and negative. Quintile 5, outperformed Quintile 1, three out of the last four years. However in 2012 it was down 16% relative to only 7% for quintile 1. Below I have attached the returns and volatility for the different quintiles.

Quintile Summary

For this season we have highlight names that have a large dispersion of Estimates. We screened for names that 1- five or more Analyst cover the Company. 2- Mkt-Cap above ¥100bn and current FY1 EPS divided by Standard Deviation is greater than 30%. For the ones with the largest standard deviation, they look to have had recently significant declines in EPS forecast over the last couple of months. In the attached file we have also included the historical number for each Company.

Please contact us for a copy of the screen