MW 20 stocks of companies that have put up excellent numbers this earnings season, including a surprise

By Philip van Doorn

It's a good sign when a company can increase sales rapidly while also maintaining pricing power and improving efficiency

With 70% of the S&P 500 reporting quarterly results this earnings season so far, it's time to take an early look and list companies that increased their sales per share the most while improving two important profit margins.

When companies report their financial results each earnings season, some day traders will take action on the news, when companies beat or miss consensus estimates for earnings per share, revenue or an industry-specific metric such as the number of active users for a streaming service. There might even be a reaction to a company's guidance - its own estimates for coming quarters - if those numbers are higher or lower than analysts expected.

Investors may instead want to look at companies' actual results and compare them with those of previous quarters. This could determine whether the companies have maintained pricing power for their products and services while operating efficiently.

Earnings season screen

There is no real end to quarterly earnings seasons because about 20% of the S&P 500 SPX have fiscal reporting periods that don't match the calendar. Through Tuesday, 351 companies, or 70% of the S&P 500 had reported results for fiscal quarters that ended Nov. 15 or later.

The screen doesn't encompass earnings per share, because one-time events (such as goodwill write-downs or other special charges) can distort the bottom line.

Here is how the 351 companies were screened:

-- Increased quarterly sales per share from the year-earlier quarter. We looked at sales per share rather than raw revenue, because the per-share numbers incorporate any dilution to a company's stock if it has issued shares to raise money or to help finance the acquisition of another company. Sales will rise if a company acquires a competitor, but an increased share count illustrates how much of that increase is "available" to investors who held the acquiring company's stock before the new shares were issued. On the other hand, sales per share will increase more rapidly than revenue if a company lowers its share count by repurchasing stock. All per-share figures are adjusted for any stock splits.

-- Improved gross profit margins. A company's gross margin is its net sales, less the cost of goods or services sold, divided by sales. Net sales are sales minus returns and discounts, such as coupons. The cost of goods or services sold includes the actual expenses when making the items or providing the services. Gross margin is a measurement of pricing power and core efficiency.

-- Improved operating margins. A company's operating margin incorporates more overhead and other expenses that aren't directly related to the production of goods and services. It can be summarized as earnings before interest and taxes, divided by sales.

Profit margins vary by industry. So comparisons may be most useful between companies with similar business models.

A combination of sales growth and improving gross and operating margins is a good sign for any company.

Among the 351 companies subject to the screen, gross and operating margins were available from FactSet for 278 of them. These figures aren't available for many companies in the financial sector, because banks and insurers have their own industry-based profitability metrics.

For some companies, FactSet cannot calculate the margins until more detailed 10-Q or 10-K reports are filed with the Securities and Exchange Commission. Sometimes these aren't available until several weeks after a company files its earnings press release.

Here are the 20 companies among the 278 we screened in the S&P 500 that showed the largest increases in quarterly sales per share, while also improving gross and operating margins from a year earlier. You might need to scroll the table to see the right-most columns.

   Company                          Ticker    Increase in sales per share  Gross margin  Gross margin for year-earlier quarter  Operating margin  Operating margin for year-earlier quarter 
   Micron Technology Inc.           MU                              80.7%        38.44%                                 -0.74%            48.25%                                     16.34% 
   Seagate Technology Holdings PLC  STX                             44.0%        34.92%                                 23.60%            23.74%                                     10.29% 
   General Motors Co.               GM                              37.5%        10.17%                                  7.70%            23.24%                                      9.11% 
   Western Digital Corp.            WDC                             28.7%        35.38%                                 16.23%            20.91%                                     -0.23% 
   Enphase Energy Inc.              ENPH                            27.5%        50.92%                                 47.04%            22.18%                                      8.40% 
   Amphenol Corp. Class A           APH                             27.4%        34.29%                                 33.07%            25.70%                                     24.68% 
   Fox Corp. Class A                FOXA                            25.1%        23.73%                                 17.57%            15.30%                                      8.17% 
   Advanced Micro Devices Inc.      AMD                             23.7%        46.36%                                 40.40%            24.54%                                     19.80% 
   Intuitive Surgical Inc.          ISRG                            23.2%        68.04%                                 66.24%            35.62%                                     29.26% 
   Meta Platforms Inc.              META                            22.1%        84.74%                                 81.05%            71.89%                                     51.62% 
   NVR Inc.                         NVR                             21.7%        23.39%                                 22.91%            17.06%                                     15.62% 
   Lam Research Corp.               LRCX                            19.2%        47.37%                                 47.16%            32.68%                                     30.99% 
   Aptiv PLC                        APTV                            19.1%        22.87%                                 16.91%            20.46%                                     14.17% 
   Generac Holdings Inc.            GNRC                            18.1%        38.66%                                 34.17%            19.59%                                     18.18% 
   Expedia Group Inc.               EXPE                            17.4%        82.82%                                 81.02%            17.27%                                     14.76% 
   Netflix Inc.                     NFLX                            17.1%        43.41%                                 39.91%            63.37%                                     60.42% 
   Fair Isaac Corp.                 FICO                            17.0%        80.15%                                 78.08%            41.61%                                     40.36% 
   Fortinet Inc.                    FTNT                            16.9%        81.75%                                 77.30%            54.32%                                     29.28% 
   S&P Global Inc.                  SPGI                            16.5%        60.63%                                 58.06%            46.91%                                     40.29% 
   Lennox International Inc.        LII                             16.5%        33.85%                                 30.72%            20.36%                                     17.40% 
                                                                                                                                                                            Source: FactSet 

Click on the tickers for more about each company.

Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page

Micron's $(MU)$ 81% increase in quarterly sales per share reflects its improvement from what was a down period for sales of computer storage memory, which traditionally has been a cyclical business. Late in 2023, the company's chief executive, Sanjay Mehrotra, said Micron was "well positioned to capitalize on the immense opportunities artificial intelligence is fueling across end markets," with its new high bandwidth memory products for data centers. When reporting the most recent results on Dec. 18, Mehrotra said in the company's earnings press release that "data center revenue surpassed 50% of our total revenue for the first time." He added that Micron was continuing "to gain share in the highest margin and strategically important parts of the [AI hardware] market."

You might be surprised to see that General Motors Co. $(GM)$ ranks third on the list, with sales per share increasing 37.5% from the year-earlier quarter. This reflects a 28% decline in the company's share count as it spent $7.1 billion to repurchase shares during 2024. To emphasize how important a commitment to buybacks can be, the company's fourth-quarter sales totaled $47.7 billion, increasing "only" 11% from a year earlier. But even that is an impressive number for a legacy auto manufacturer.

Here is recent coverage of some of the other companies on the list:

-- AMD stops giving AI-chip revenue forecast. History says that's not a great sign.

-- Forget DeepSeek. Zuckerberg says Meta will spend hundreds of billions on AI.

-- Netflix's live-sports strategy is paying off. But its next play might surprise you.

-- Netflix keeps defying the doubters. One now thinks the stock could soar 56%.

In case you are wondering about Nvidia

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February 13, 2025 10:02 ET (15:02 GMT)

MW 20 stocks of companies that have put up -2-

On Feb. 26, Nvidia Corp. $(NVDA)$ will announce results for the fourth quarter of its fiscal 2025 ended Jan. 26. Analysts polled by FactSet are expecting the company to report quarterly revenue of $38.019 billion, increasing 72% from the year-earlier quarter, while they expect quarterly earnings of 84 cents a share, up from a split-adjusted 49 cents for the year-earlier quarter. The stock underwent a 10-for-1 split in June.

Based on consensus estimates for operating numbers, Nvidia's quarterly gross margin is expected to be 73.49%, narrowing from 75.97% for the year-earlier quarter. Its operating margin is expected to come in at 65.90%, improving from 63.34% for the year-earlier quarter.

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-Philip van Doorn

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