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It is not surprising that during an earnings season, investors look for stocks that can beat market expectations. This is because investors always try to position themselves ahead of time and look to tap stocks that are of high quality in nature.
Why Is a Positive Earnings Surprise So Important?
Historically, stocks of companies with solid quarterly earnings (on a nominal basis) fall if they miss or just meet market expectations. After all, a 20% earnings rise (though it looks good apparently) doesn't tell you if earnings growth has been exhibiting a decelerating trend. If that is the case, the company's fundamentals are in question.
There is also the factor of seasonal fluctuation. If a company's Q1 is seasonally weak and Q4 is strong, it is likely to report a sequential earnings decline. In such cases, growth rates are ambiguous while judging the company's true health.
Meanwhile, Wall Street analysts study companies' financials and initiatives to forecast earnings. They, in fact, club their insights and the company's guidance to arrive at an earnings estimate. So, outperforming that estimate is almost equivalent to beating the company's own expectation as well as market perception. And if the company manages to surpass earnings by a wide margin, it typically drives the stock higher right after the release.
How to Find Those Gems?
Since it is hard to predict if a company will beat or miss in the upcoming earnings season, investors can check its earnings surprise history. A notable track record generally acts as a tailwind. It revs up chances of beating estimates in the next release, too, as investors expect the company to use the same old trick to surpass expectations or is smart enough to pull off a beat in the next release.
Here are five of the 10 stocks that passed the screen:
Albemarle: Albemarle Corp. is a premier specialty chemicals company with leading positions in attractive end markets globally. It has a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.
The average earnings surprise of ALB for the past four quarters is 24.16%.
Crocs: The company is one of the leading footwear brands focusing on comfort and style. It carries a Zacks Rank #1.
The average earnings surprise of CROX for the past four quarters is 21.88%.
Fortinet: Fortinet, Inc. is a provider of network security appliances and Unified Threat Management network security solutions to enterprises, service providers and government entities worldwide. It presently has a Zacks Rank #2.
The average earnings surprise of FTNT for the past four quarters is 10.32%.
Enphase Energy: This Zacks Rank #2 global energy technology company delivers energy management technology for the solar industry.
The average earnings surprise of ENPH for the past four quarters is 21.76%.
Marathon Petroleum: Marathon Petroleum Corp. is a leading independent refiner, transporter and marketer of petroleum products. It currently has a Zacks Rank #2.
The average earnings surprise of MPC for the past four quarters is 56.68%.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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For Immediate Release
Chicago, IL – November 2, 2022 – Stocks in this week’s article are Albemarle (ALB - Free Report) , Crocs (CROX - Free Report) , Fortinet (FTNT - Free Report) , Enphase Energy (ENPH - Free Report) and Marathon Petroleum (MPC - Free Report) .
Top 5 Stocks with Solid Earnings Beat Potential
It is not surprising that during an earnings season, investors look for stocks that can beat market expectations. This is because investors always try to position themselves ahead of time and look to tap stocks that are of high quality in nature.
Why Is a Positive Earnings Surprise So Important?
Historically, stocks of companies with solid quarterly earnings (on a nominal basis) fall if they miss or just meet market expectations. After all, a 20% earnings rise (though it looks good apparently) doesn't tell you if earnings growth has been exhibiting a decelerating trend. If that is the case, the company's fundamentals are in question.
There is also the factor of seasonal fluctuation. If a company's Q1 is seasonally weak and Q4 is strong, it is likely to report a sequential earnings decline. In such cases, growth rates are ambiguous while judging the company's true health.
Meanwhile, Wall Street analysts study companies' financials and initiatives to forecast earnings. They, in fact, club their insights and the company's guidance to arrive at an earnings estimate. So, outperforming that estimate is almost equivalent to beating the company's own expectation as well as market perception. And if the company manages to surpass earnings by a wide margin, it typically drives the stock higher right after the release.
How to Find Those Gems?
Since it is hard to predict if a company will beat or miss in the upcoming earnings season, investors can check its earnings surprise history. A notable track record generally acts as a tailwind. It revs up chances of beating estimates in the next release, too, as investors expect the company to use the same old trick to surpass expectations or is smart enough to pull off a beat in the next release.
Here are five of the 10 stocks that passed the screen:
Albemarle: Albemarle Corp. is a premier specialty chemicals company with leading positions in attractive end markets globally. It has a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.
The average earnings surprise of ALB for the past four quarters is 24.16%.
Crocs: The company is one of the leading footwear brands focusing on comfort and style. It carries a Zacks Rank #1.
The average earnings surprise of CROX for the past four quarters is 21.88%.
Fortinet: Fortinet, Inc. is a provider of network security appliances and Unified Threat Management network security solutions to enterprises, service providers and government entities worldwide. It presently has a Zacks Rank #2.
The average earnings surprise of FTNT for the past four quarters is 10.32%.
Enphase Energy: This Zacks Rank #2 global energy technology company delivers energy management technology for the solar industry.
The average earnings surprise of ENPH for the past four quarters is 21.76%.
Marathon Petroleum: Marathon Petroleum Corp. is a leading independent refiner, transporter and marketer of petroleum products. It currently has a Zacks Rank #2.
The average earnings surprise of MPC for the past four quarters is 56.68%.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2011591/top-5-stocks-with-solid-earnings-beat-potential
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Visit: https://www.zacks.com/
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.