Investors should be on the lookout for companies that could fail with earnings and watch their stock prices fall. Wall Street has been downgrading third-quarter growth estimates for months. According to a recent FactSet release, S&P 500 companies are forecast to post a 4.2% rise in earnings compared to the same quarter a year ago, down from the 7.8% expected on June 30. This is not abnormal, however. third quarter growth estimates tend to fall in previous months. Nearly 10 percent of S&P 500 companies have already reported results, and more than 79 percent beat earnings estimates, according to FactSet. However, several names may still fail. To find them, CNBC Pro looked at FactSet for the S&P 500 stocks that will report next week. Those names have cut earnings estimates by at least 10% over the past three to six months. Investor sentiment about Valero Energy has taken a sharp dip ahead of quarterly results scheduled for Oct. 24. Analysts’ earnings per share estimates have fallen 80.3% over the past three months and 85% over the past six months. However, the stock is favored by 60% of Wall Street analysts. One of them is Morgan Stanley analyst Joe Laetsch, who has an overweight rating and a $165 price target on Valero. That represents a potential upside of 22.5%, having gained about 4% this year. “We see VLO as well positioned in today’s tight refining environment with significant downside exposure to its peers,” Laetsch said in a Tuesday note. “Its asset base is well managed, and we believe VLO will continue to execute, driving (free cash flow) strongly as the refining cycle progresses.” Enphase Energy also made the screener, with analysts polled by FactSet cutting their earnings-per-share estimates by nearly 39% and 35.5% over the past three and six months, respectively. Less than half of analysts rate the stock a buy. RBC Capital Markets analyst Christopher Dendrinos recently cut his outlook on the stock, downgrading Enphase to sector perform from Tuesday’s performance. He also cut his price target to between $25 and $100, which suggests the downgraded stock could gain 8.6%. Dendrinos’ new outlook on the name reflects concerns that Enphase will experience a slower pace of growth next year amid sluggish demand in the residential solar market. Continued adoption of third-party ownership or TPO systems in the U.S. could also weigh on Enphase’s demand growth, he said, as the company has a smaller market share in TPO systems compared to its competitors. With the TPO model, installers retain ownership of the energy system while the homeowner makes monthly payments for the panels or electricity, according to Enphase. Shares in the company, which will report on October 22, are down 30% year to date. Tesla will report earnings on October 23 after the market closes. The company has a high bar to clear before its stock takes a big leap, as the electric vehicle maker disappointed with third-quarter shipments and failed to impress investors with its robotaxi announcement earlier this month. Analysts have cut earnings per share estimates for Tesla by 24.1% over the past three months and 30.8% over the past six months. Overall, 34.5% of analysts rate the automaker a buy. Wells Fargo is on Tesla’s path to earnings, as it reiterated its underweight rating on Tuesday and said it expects the company to miss its third-quarter estimates.
