These stocks join Meta and Eli Lilly as the biggest winners this earnings season

By Philip van Doorn

Other companies showing double-digit sales growth and improved profit margins include Micron and Lam Research

We're nearing the end of second-quarter earnings season, so this is a good moment to screen the S&P 500 and show which companies increased revenue the most while also improving their profit margins.

The following screen isn't related to the headlines about companies "beating" or "missing" consensus estimates among analysts working for brokerage firms. After all, a company might beat its earnings estimate by losing less money than it had been expected to lose. Instead, the screen focuses on sales growth from a year earlier, with two quality filters that highlight pricing power and efficiency.

Earnings-season stock screen

We are focused on financial results for the second quarter, but about 20% of companies in the S&P 500 SPX have fiscal years that don't match the calendar.

Through Thursday, 453 of the companies had reported results for fiscal quarters ending May 25 or later.

We screened the 453 companies for the following:

Increased quarterly sales per share from a year earlier. We looked at the per-share figures because these would reflect dilution to shareholders if a company issued stock to raise money. Conversely, sales per share would rise if a company lowered its share count by repurchasing stock.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. A combination of an expanding gross margin and increasing sales is a good sign. Improved operating margins. The 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.

Increasing sales rapidly while improving gross and operating margins might be particularly impressive during a period of upward pressure on wages and other rising input costs.

Profit margins vary by industry, so high margins alone might not make for good comparisons between companies. They might be most useful for comparisons within peer or industry groups.

We didn't look at earnings per share in the screen because one-time events and accounting adjustments can distort bottom-line profit figures.

Among the 453 companies, gross margin and operating margin figures were available from FactSet for 407 companies. These figures typically aren't available for 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 quarterly 10-Q 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 407 we were able to screen in the S&P 500 showing the largest increases in quarterly sales per share, while also improving gross and operating margins from a year earlier:

   Company name                  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                           76.8%        26.90%                                -17.80%            38.85%                                      8.29% 
   Hess Corp.                     HES                           36.4%        41.29%                                 30.16%            58.40%                                     49.42% 
   Eli Lilly and Co.              LLY                           35.8%        80.80%                                 78.26%            41.75%                                     31.15% 
   General Motors Co.              GM                           29.8%        13.02%                                 11.95%            15.34%                                     12.79% 
   Western Digital Corp.          WDC                           29.6%        35.95%                                  7.22%            19.47%                                    -11.64% 
   Deckers Outdoor Corp.          DECK                          25.7%        54.82%                                 49.35%            18.21%                                     12.39% 
   First Solar Inc.               FSLR                          24.4%        49.02%                                 38.05%            49.29%                                     37.28% 
   Lam Research Corp.             LRCX                          23.7%        47.78%                                 45.78%            31.63%                                     29.85% 
   Moody's Corp.                  MCO                           22.4%        68.08%                                 65.26%            49.59%                                     43.71% 
   Meta Platforms Inc Class A     META                          22.2%        81.30%                                 81.29%            47.41%                                     45.83% 
   ServiceNow Inc.                NOW                           20.7%        78.99%                                 78.09%            13.40%                                     10.56% 
   Netflix Inc.                   NFLX                          19.5%        45.68%                                 42.92%            67.40%                                     65.06% 
   Ansys Inc.                     ANSS                          18.8%        87.30%                                 85.14%            34.64%                                     26.98% 
   Chipotle Mexican Grill Inc.    CMG                           18.7%        26.10%                                 24.34%            23.02%                                     21.25% 
   Insulet Corp.                  PODD                          17.1%        67.74%                                 66.13%            15.11%                                     12.41% 
   Royal Caribbean Group          RCL                           17.0%        38.64%                                 34.71%            36.79%                                     32.66% 
   Carnival Corp.                 CCL                           17.0%        23.34%                                 17.45%            20.65%                                     15.37% 
   S&P Global Inc.                SPGI                          16.9%        61.23%                                 57.72%            51.37%                                     43.60% 
   HCA Healthcare Inc.            HCA                           16.2%        15.61%                                 14.50%            20.29%                                     19.31% 
   PulteGroup Inc.                PHM                           16.1%        30.25%                                 29.85%            22.87%                                     22.82% 
                                                                                                                                                                        Source: FactSet 

A stock screen is only a snapshot, but it might be a useful tool as part of your own research. Click the tickers for more about each company, including corporate profiles, financials, ratings and price ratios.

Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on the MarketWatch quote page.

Don't miss: The S&P 500's largest stocks are now cheaper, and Amazon shines by this metric

-Philip van Doorn

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08-10-24 0545ET

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