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Earnings ESP

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3 Finance Stocks Poised to Beat Earnings Estimates


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The widespread optimism surrounding the recovery in Europe and China as well as political truce in the U.S. can also be felt in the financial sector. Standing out as the most liquid market in the world, the U.S. financial sector promises high growth and reduced unemployment on increased economic activity. The industry also offers an array of financial instruments and products for managing risk, creating wealth and meeting financial needs.
Also, the sector remains in excellent shape with respect to earnings. So far, 49.4% of the sector participants have reported third-quarter results, which have been strong in terms of both beat ratios (percentage of companies coming out with positive surprises) and growth.
Beat ratios for both earnings and revenues were pretty robust at 56.4% and 43.6%, respectively. Also, total earnings for the companies have shown an impressive 13.0% year-over-year increase despite a slight decline in revenues.
For a detailed look at the earnings outlook for this sector and others, please read our Earnings Trend report.
Given the positive sentiment, it might be a good idea to bet on a handful of finance stocks that slated to report earnings for the quarter ended Sep 30 in the coming days and are poised to beat estimates. An earnings beat will add to investors’ confidence in these stocks, leading to rapid price appreciation.
The Way to Pick Right Stocks
Picking the most rewarding stocks within the finance sector might be a tricky task unless one narrows down the list. One way to do that is by choosing stocks that have the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – and a positive Zacks Earnings ESP.
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising with their upcoming earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Here are 3 finance stocks that have the right combination of elements to deliver an earnings beat in the upcoming announcement.
Apollo Investment Corporation (AINV - Snapshot Report) is a Zacks Rank #2 stock with an earnings ESP of +4.76%. The Zacks Consensus Estimate for the fiscal second quarter 2014 is 21 cents per share.
Headquartered in New York City, Apollo Investment is a closed-end investment company considered as a business development entity under the Investment Company Act of 1940. The company provides direct equity capital, mezzanine and senior secured loans, and subordinated debt and loans mainly to middle-market private companies.
The company has registered an average positive earnings surprise of 6.8% over the trailing 12 months.
- Apollo Investment is scheduled to announce its fiscal second-quarter 2014 results before the opening bell on Nov 8.
Credit Acceptance Corporation (CACC - Snapshot Report) carries a Zacks Rank #3 and has an earnings ESP of +0.77%. The Zacks Consensus Estimate for the third quarter is $2.59 per share.
Based in Southfield, Michigan, Credit Acceptance Corporation is a specialized financial services company which provides funding, receivables management, collection, sales training and related services to automobile dealers.
- Credit Acceptance Corporation is scheduled to announce its third-quarter 2013 results after the market closes on Oct 30.
Nationstar Mortgage Holdings Inc. (NSM - Snapshot Report) has a Zacks Rank #3 and an earnings ESP of +2.36%. The Zacks Consensus Estimate for the third quarter is pegged at $1.27 per share.
Lewisville, Texas-based Nationstar Mortgage Holdings is a mortgage lender. It offers servicing, origination, and real estate services to financial institutions and consumers. The company’s clientele include national and regional banks, government organizations, securitization trusts, private investment funds and other owners of residential mortgage loans and securities.
Moreover, the company has registered an average positive earnings surprise of 21.8% over the trailing 12 months.
- Nationstar Mortgage Holdings is expected to announce its third-quarter 2013 results on Nov 8.
Going Forward
Though the finance sector’s growth has decelerated over the last few quarters, all eyes are on it in third-quarter results. With an expected 12.2% year-over-year growth in total earnings, investors can look forward to strong momentum in the sector.
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