Wall Street is reacting harshly to earnings misses, punishing companies like Netflix despite beating expectations. High valuations suggest strong results may not be enough to justify stock prices. Analysts at New Constructs are predicting big earnings surprises, identifying companies likely to miss or beat expectations through forensic accounting methods.

New Constructs’ research shows that around 39% of S&P 500 companies are overstating their earnings by an average of 14%, particularly during market rallies. Caesars Entertainment is singled out as having misleading earnings due to unusual income, combining high valuations with slim profit margins. The firm rates Caesars as “unattractive” and likely to miss earnings, with a negative no-growth value per share. Analyst Trainer warns about potential earnings manipulation in S&P 500 companies, with over half underestimating projected earnings. FactSet reports S&P 500 earnings growth at 5.6%, up from initial estimates. Trainer recommends Halliburton Co. stock, citing undervaluation due to one-time expenses. Stock could double in value if expenses are eliminated. Analyst sees potential for stock to rise with strong earnings beat.

Read more at Yahoo Finance: Top analyst sends message on pending ugly earnings miss (plus one big beat)