An investment strategy targeting stocks that raised their full-year operating profit forecasts in their Q2 results is examined. Qualifying stocks are selected from those whose forecasts remained unchanged in Q1, and their excess share-price returns after the results announcements and the proportion of full-year results coming in above plan are analysed using historical data.
As October begins, companies with fiscal years ending in March are entering the main phase of their Q2 results announcements. The focus is on whether companies revise their full-year operating profit forecasts, as revisions made when announcing Q2 results may affect subsequent earnings and share prices.
This series focuses on changes to full-year operating profit forecasts at the time of Q2 results announcements, uses historical data to examine share-price performance after the announcements, and introduces investment strategies. It explains how to narrow the investment universe to stocks whose forecasts remained unchanged in Q1 but were upgraded in Q2.
Share prices also rose in the short term after upward revisions, and excess returns after 2 weeks were positive in every fiscal year. Excess returns through 3 months later were also positive in every fiscal year, particularly reaching 4.9% in the fiscal year ending March 2026. Holding the stocks through the end of the following March also produced positive returns in 5 of the 6 years.
A high proportion also came in above plan in the full-year results, and upward revisions often led to subsequent earnings improvements. Accordingly, a strategy focused on the combination of forecasts left unchanged in Q1 and raised in Q2 can be expected to have a certain degree of effectiveness.
The practical section also covers how to check earnings forecast revisions for qualifying stocks, proposing a practical approach ahead of results announcements from mid-November onward.