We’ve been tracking earnings “triple plays” for the last 15+ years.  A company registers an earnings triple play when it reports results that 1) beat consensus EPS estimates, 2) beat consensus revenue estimates, and 3) raise forward guidance.  You can read more about the term over at Investopedia where they’ve given Bespoke credit.

Historically about 5-10% of earnings reports have been triple plays, and below is a chart showing the rolling 3-month percentage of all earnings reports that have been triple plays.  You’ll notice that coming out of the COVID recession in the spring of 2020, the percentage of companies reporting triple plays began to spike, and the number kept on rising all the way through the spring/summer of 2021.  It’s now apparent that analysts were way too conservative with estimates in the 12-18 months after the initial COVID crash, which resulted in an extremely high percentage of companies beating both EPS and revenue estimates.  At the same time, companies themselves were getting more and more positive on the future of their businesses, and the result was a spike in the percentage of companies raising guidance.  At its peak earlier this year, nearly 20% of all earnings reports were triple plays over the prior three-month period, which was 50% higher than the prior highs around 12% seen in the mid-2000s.  That kind of rate was clearly unsustainable, and as you can see in the chart, the percentage of companies reporting triple plays is currently falling back down to more normal levels.

Using our Earnings Explorer tool, we can track how stocks that report triple plays have historically reacted to the news.  As shown in the snapshot below, over the last ten years, there have been just over 5,600 earnings triple plays, and these stocks have averaged a one-day gain of 5% on the first full trading day following the earnings release.  That one-day gain of 5% shows how positively investors typically view earnings triple plays.

Taking a closer look at one-day price reactions to triple plays, below we show the average one-day price change for stocks reporting triple plays on a rolling three-month basis.

As you can see, the average one-day gain for triple plays fell sharply after the Covid recession at the same time that the percentage of companies reporting triple plays was spiking.  This intuitively makes sense — the more common triple plays are, the less investors will reward the stocks that are reporting them.

Stocks reporting triple plays were barely posting gains of more than 1% on their earnings reaction days this past summer, but lately we’ve seen investors treat triple plays more positively.  As shown in the chart, the average one-day gain for stocks reporting triple plays has been rising sharply in recent months and is now back above 4%.  This comes as we’re seeing less companies report triple plays.

Over the last week, the 82 stocks that have reported earnings triple plays have averaged a one-day gain of 5.67%, and more than a quarter of them have gained more than 10%.

We love tracking the list of individual companies reporting earnings triple plays because it’s a great starting point for further research.  Companies reporting triple plays typically have fundamental momentum.

Bespoke subscribers can track both earnings trends more broadly and also see a continuously updated list of recent earnings triple plays.  If you’d like to see the list of this earnings season’s triple plays, simply click here to start a two-week trial to Bespoke Premium today.

Print Friendly, PDF & Email