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Earnings growth in the fourth quarter has been the highest in two years, with total earnings reaching an all-time quarterly record. Consistent earnings growth enthralls all, irrespective of whether a company is a fledgling or established one. Why so? This is because it is the most significant variable in influencing the share price. Take a company’s revenue over a given period of time, subtract the cost of production and, there it is, you have earnings!
However, in addition to actual earnings, expectations of earnings play a vital role in determining share price movement.
Earnings Estimates & Share Prices
We have often seen a decline in the stock price despite earnings growth and a rally in the price following an earnings decline. This is largely a result of a company’s earnings failing to meet market expectations.
Earnings estimates embody analysts’ opinions of factors such as sales growth, product demand, competitive industry environment, profit margins and cost controls. Thus, earnings estimates serve as a valuable tool while making investment decisions. Earnings estimates also help analysts assess the cash flow to determine the fair value of a firm.
Here, we have picked stocks that have displayed historical earnings growth and are also seeing a rise in quarterly and annual earnings estimates.
The Winning Strategy
In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we have added the following parameters:
Zacks Rank less than or equal to 2 (Only Zacks' 'Buys' and 'Strong Buys' are allowed. With the Zacks Rank proving itself to be one of the best rating systems out there, this is a great way to start things off.)
5-Year Historical EPS Growth (%) greater than X-Industry (stocks with a strong EPS growth history).
% Change EPS F(0)/F(-1) greater than or equal to 5 (companies that saw year-over-year earnings growth of 5% or more in the last reported fiscal).
% Change Q1 Estimates over the last 4 weeks greater than zero (stocks that have seen their current quarter earnings estimates revised higher in the last 4 weeks).
% Change F1 Estimates over the last 1 week greater than zero (stocks that have seen their annual earnings estimates revised higher in the last 1 week).
% Change F1 Estimates over the last 4 weeks greater than zero (stocks that have seen their annual earnings estimates revised higher in the last 4 weeks).
The above criteria narrowed down the universe of around 7,839 stocks to only 15. Here are the top five stocks:
BMC Stock Holdings Inc is a diversified lumber and building materials (LBM) distributor and solutions provider that serves construction and repair and remodeling contractors. The company’s estimated earnings growth rate for this year is 48.3%, way more than the industry’s projected gain of 7.6%. The Zacks Consensus Estimate for its current year earnings increased 5.5% over the last 60 days. BMC Stock Holdings has a Zacks Rank #2 (Buy).
Burlington Stores Inc (BURL - Free Report) is a retailer of branded apparel. The company’s estimated earnings growth rate for this year is 19.6%, higher than the industry’s projected addition of 9.4%. The Zacks Consensus Estimate for its current year earnings increased 2.7% over the last 60 days. Burlington Stores has a Zacks Rank #2.
Broadcom Ltd (AVGO - Free Report) is a designer, developer and global supplier of a range of semiconductor devices. The company’s estimated earnings growth rate for this year is 32%, more than the industry’s projected increase of 5.1%. The Zacks Consensus Estimate for its current year earnings increased 6.7% over the last 60 days. Broadcom has a Zacks Rank #1 (Strong Buy).
Heico Corp (HEI - Free Report) designs, manufactures, and sells aerospace, defense, and electronic related products and services. The company’s estimated earnings growth rate for this year is 9.8%, more than the industry’s projected gain of 4.9%. The Zacks Consensus Estimate for its current year earnings increased 1.2% over the last 60 days. Heico has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Health Insurance Innovations, Inc. operates as a developer, distributor, and administrator of cloud-based individual health and family insurance plans, and supplemental products in the U.S. The company’s estimated earnings growth rate for this year is 31.3%, higher than the industry’s projected increase of 6.4%. The Zacks Consensus Estimate for its current year earnings rose 33.6% over the last 60 days. Health Insurance Innovations has a Zacks Rank #1.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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5 Stellar Earnings Growth Stocks to Buy Now
Earnings growth in the fourth quarter has been the highest in two years, with total earnings reaching an all-time quarterly record. Consistent earnings growth enthralls all, irrespective of whether a company is a fledgling or established one. Why so? This is because it is the most significant variable in influencing the share price. Take a company’s revenue over a given period of time, subtract the cost of production and, there it is, you have earnings!
However, in addition to actual earnings, expectations of earnings play a vital role in determining share price movement.
Earnings Estimates & Share Prices
We have often seen a decline in the stock price despite earnings growth and a rally in the price following an earnings decline. This is largely a result of a company’s earnings failing to meet market expectations.
Earnings estimates embody analysts’ opinions of factors such as sales growth, product demand, competitive industry environment, profit margins and cost controls. Thus, earnings estimates serve as a valuable tool while making investment decisions. Earnings estimates also help analysts assess the cash flow to determine the fair value of a firm.
Here, we have picked stocks that have displayed historical earnings growth and are also seeing a rise in quarterly and annual earnings estimates.
The Winning Strategy
In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we have added the following parameters:
Zacks Rank less than or equal to 2 (Only Zacks' 'Buys' and 'Strong Buys' are allowed. With the Zacks Rank proving itself to be one of the best rating systems out there, this is a great way to start things off.)
5-Year Historical EPS Growth (%) greater than X-Industry (stocks with a strong EPS growth history).
% Change EPS F(0)/F(-1) greater than or equal to 5 (companies that saw year-over-year earnings growth of 5% or more in the last reported fiscal).
% Change Q1 Estimates over the last 4 weeks greater than zero (stocks that have seen their current quarter earnings estimates revised higher in the last 4 weeks).
% Change F1 Estimates over the last 1 week greater than zero (stocks that have seen their annual earnings estimates revised higher in the last 1 week).
% Change F1 Estimates over the last 4 weeks greater than zero (stocks that have seen their annual earnings estimates revised higher in the last 4 weeks).
The above criteria narrowed down the universe of around 7,839 stocks to only 15. Here are the top five stocks:
BMC Stock Holdings Inc is a diversified lumber and building materials (LBM) distributor and solutions provider that serves construction and repair and remodeling contractors. The company’s estimated earnings growth rate for this year is 48.3%, way more than the industry’s projected gain of 7.6%. The Zacks Consensus Estimate for its current year earnings increased 5.5% over the last 60 days. BMC Stock Holdings has a Zacks Rank #2 (Buy).
Burlington Stores Inc (BURL - Free Report) is a retailer of branded apparel. The company’s estimated earnings growth rate for this year is 19.6%, higher than the industry’s projected addition of 9.4%. The Zacks Consensus Estimate for its current year earnings increased 2.7% over the last 60 days. Burlington Stores has a Zacks Rank #2.
Broadcom Ltd (AVGO - Free Report) is a designer, developer and global supplier of a range of semiconductor devices. The company’s estimated earnings growth rate for this year is 32%, more than the industry’s projected increase of 5.1%. The Zacks Consensus Estimate for its current year earnings increased 6.7% over the last 60 days. Broadcom has a Zacks Rank #1 (Strong Buy).
Heico Corp (HEI - Free Report) designs, manufactures, and sells aerospace, defense, and electronic related products and services. The company’s estimated earnings growth rate for this year is 9.8%, more than the industry’s projected gain of 4.9%. The Zacks Consensus Estimate for its current year earnings increased 1.2% over the last 60 days. Heico has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Health Insurance Innovations, Inc. operates as a developer, distributor, and administrator of cloud-based individual health and family insurance plans, and supplemental products in the U.S. The company’s estimated earnings growth rate for this year is 31.3%, higher than the industry’s projected increase of 6.4%. The Zacks Consensus Estimate for its current year earnings rose 33.6% over the last 60 days. Health Insurance Innovations has a Zacks Rank #1.
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.
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.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »