Long-term readers of Bespoke know that we follow closely stocks that report earnings triple plays. An earnings triple play occurs when a company releases quarterly numbers that 1) beat consensus EPS estimates, 2) beat consensus sales estimates, and 3) raise forward guidance. Go check out the definition of a “triple play” on Investopedia.com (which they’ve given us credit for) if you’d like to read more.
An earnings triple play is usually met with significant buying from investors. Our Earnings Explorer tool contains the quarterly results of nearly every US stock that has reported earnings over the last twenty years. At the tool — which is available to Bespoke Institutional members — users can filter the entire database to find all historical earnings triple plays that have occurred since 2000. We used the tool to find all triple plays over the last ten years, and the summary results from the tool are provided in the snapshot below.
As shown, there have been 4,914 earnings triple plays in the US over the last ten years. On average, these triple plays have seen their share prices rise by 5.63% on their earnings reaction days (the first trading day following the triple play). That’s a significant one-day gain, but it’s also commensurate with the strong earnings report that accompanied it.
The reason we’re bringing up earnings triple plays and their normal upside price reaction is because the ones we’ve seen so far in September have come up woefully short. So far this month, there have been twelve earnings triple plays, and these stocks have averaged a one-day decline of 3.26% on their earnings reaction days. Remember, usually triple plays see a gain of more than 5% on their earnings reaction days. This month, not only are triple plays not averaging gains…they’re actually selling off sharply.
Below is a snapshot of the twelve earnings triple plays we’ve seen this month. You’ll notice that quite a few are some of the most well-known high-fliers of 2020 like DocuSign (DOCU), Peloton (PTON), Chewy (CHWY), and CrowdStrike (CRWD). None of these four managed to post gains in reaction to their earnings triple plays.
From the looks of it, it appears that a lot of the upside earnings strength that companies are showing is already priced into shares before the actual news hits the tape. Click here to start a free trial to Bespoke to unlock full access to all of our research and interactive tools.
