An earnings triple play is a stock that reports quarterly earnings results and 1) beats analyst EPS estimates, 2) beats analyst sales estimates, and 3) raises forward guidance. We created the term years ago as a way to highlight companies that have strong earnings momentum, and we've been tracking them closely ever since.
Based on history, a stock that reports an earnings triple play has a good chance of seeing an upside share-price reaction. Here are some stats you may find interesting from our Earnings Explorer database:
Of the 210,000+ individual quarterly earnings reports since 2001 across nearly all US-listed stocks, just under 64% have beaten consensus analyst EPS estimates. The percentage of reports that have included both a beat on EPS and sales estimates drops down to 44%. When you include forward guidance and only want quarterly reports that 1) beat EPS estimates, 2) beat sales estimates, and 3) raise forward guidance, the number drops all the way down to 6%.
So just 6% of all earnings reports since 2001 have been a "triple play." And on the first trading day after a "triple play" earnings report, the average performance of the stock reporting has been a one-day price gain of 5.2%.
That gets us to the 19 earnings triple plays we've seen so far this earnings season, which began on 10/12 when the big banks began releasing their Q3 results.
As the snapshot of these 19 triple plays below shows, not only have they not been trading higher, but the large majority have fallen in reaction to the news. The average one-day share price change for the 19 triple plays so far this season has been a decline of 2.3%, and only four of 19 have traded higher. That's quite shocking, but it's indicative of the "sell first and ask questions later" environment we've been in this month, especially for AI stocks.
A case in point are the three AI infrastructure stocks that reported earnings triple plays after the close last Thursday: Western Digital (WDC), Bloom Energy (BE), and Maxlinear (MXL). Rather than seeing a rush of buying after their triple-play results were released, all three fell on Friday, with WDC and MXL down nearly 3%, and BE down 11%.
One thing we're confident of is that over the long term, the average earnings triple play will continue to trade positively. Who knows when the current negative script will end, but we're watching closely for the next act.
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