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Q1 Likely to See Strongest Earnings Since 2011: Top 5 Picks
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The ‘America First’ plan might have fueled a solid market rally, but, investors are presently on the lookout for strong earnings growth. The S&P 500 companies are set to release their earnings numbers and projections in the middle of April.
Going by the estimated numbers, the S&P 500 companies are set to post their first quarter of double-digit profit gains in more than two years, while earnings growth may also turn out to be the best since late 2011. Strength in the global economy coupled with Trump’s promises of fewer regulations will certainly help companies come up with strong performances. Consumer confidence is at a 16-year high, which could also mean higher sales and profits for many companies. The jobs market has also been showing steady improvement.
Over the next couple of weeks, let us keep an eye on stocks that are likely to make the most of the first-quarter earnings season. Here, we should also bear in mind that better-than-expected earnings performances generally lead to a rally in the share price.
Q1 Earnings Numbers Should be Really Good
According to estimates, total first-quarter earnings for the S&P 500 cohort are expected to be up 6.5% from same period last year on 6.3% higher revenues. Actual earnings growth, however, is expected to be as high as 10.4% (read more: Q1 Earnings Season Gets Underway).
And if that happens, it will be the first double-digit increase since the third quarter of 2014. Furthermore, it will be the best quarter of growth in about five years, the highest since the companies posted 11.6% growth in the fourth quarter of 2011. The improvement will also follow a 7.4% increase – the highest in two years – in the preceding quarter.
A strong earnings season does justify pricey stock valuations, with the S&P 500 scaling to its most expensive level since 2004 on a forward price-to-earnings basis. The S&P 500 components are expected to come up with strong results, thanks to strength in the global economy. Almost half the S&P 500 components generate their revenues from overseas. Euro zone business activity is at a six-year high, while forecasts from the International Monetary Fund show a pickup in the global economy in 2017 and 2018, especially in developing economies.
Needless to say, the U.S. economy has also received a lot of attention since President Trump’s election. His promises of deregulations and tax reforms have bolstered investors’ sentiments. If Trump and Republicans manage to recover cash stashed overseas at a lower rate, this could set earnings in a higher gear. Tech behemoths including Apple Inc. (AAPL - Free Report) , Microsoft Corporation (MSFT - Free Report) and Alphabet Inc (GOOGL - Free Report) will use some of this cash and invest more in the U.S. by building plants and hiring skilled labor.
Potential Gainers & Losers of Q1
Financials and tech firms are expected to post solid gains. For the Finance sector as a whole, total Q1 earnings are expected to be up 5.4% from the same period last year on 2.9% higher revenues. This would follow 6.7% earnings growth in the fourth quarter of 2016 on 6.3% higher revenues. Bank majors like JPMorgan Chase (JPM - Free Report) , Wells Fargo (WFC - Free Report) and Citigroup (C - Free Report) among others will kick off the earnings season this week. Bank stocks have been maintaining their uptrend since the election, with the Banks - Major Regional industry surging 23.6% since Nov 8 (read more: Can Banks Get Their Mojo Back?).
Earnings for the Technology sector is set to grow 10.7% from the same period last year, while Industrials sectors are anticipated to rise in mid-single digits. Big profits are expected from materials as well. A huge jump in earnings for energy companies is also expected owing to substantially higher oil prices than a year ago. The Energy sector is expected to earn $8.1 billion in Q1, in contrast to a loss of $1.6 billion in the year-earlier quarter.
The table below shows what is expected from the different sectors in Q1, compared with what was achieved in the preceding quarter.
Buy These 5 Stocks for Stellar Earnings Growth
Investors have been gripped with politics lately. However, over the next few weeks, the Wall Street is likely to focus less on Trump’s America First program and more on Corporate America. This calls for investing in five companies from the aforesaid sectors, which are expected to report a significant uptick in first-quarter earnings.
These stocks have a positive Earnings ESP. This is our proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Such stocks, in the meanwhile, also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM score of ‘A’ or ‘B’. Here ‘V’ stands for Value, ‘G’ for Growth and ‘M’ for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Lazard Ltd (LAZ - Free Report) is a financial advisory and asset management company. The company has a Zacks Rank #2 and a VGM score of ‘A’. The company is expected to report its earnings results for the quarter ending March on Apr 20 and has an Earnings ESP of +11.27%.
Motorola Solutions Inc (MSI - Free Report) is a provider of communication infrastructure, devices, accessories, software and services. Motorola Solutions has a Zacks Rank #2 and a VGM score of ‘A’. The company is expected to report its earnings results for the quarter ending March on May 4 and has an Earnings ESP of +10%.
MSCI Inc. (MSCI - Free Report) is a leading provider of investment decision support tools to investment institutions worldwide. Its products include indices and portfolio analytics for use in managing equity, fixed income and multi-asset class portfolios. MSCI has a Zacks Rank #2 and a VGM score of ‘B’. The company is expected to report its earnings results for the quarter ending March on April 27. MSCI has an Earnings ESP of +1.18%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Caterpillar Inc. (CAT - Free Report) is a manufacturer of construction and mining equipment. The company has a Zacks Rank #2 and a VGM score of ‘B’. Caterpillar is expected to report earnings results for the quarter ending March on April 28 and has an Earnings ESP of +25.46%.
Chemours Co (CC - Free Report) is a provider of performance chemicals. The company operates through three segments: Titanium Technologies, Fluoroproducts and Chemical Solutions. Chemours has a Zacks Rank #1 and a VGM score of ‘A’. The company is expected to report its earnings results for the quarter ending March on May 1 and has an Earnings ESP of +4.08%.
Most of Zacks’ investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information>>
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Q1 Likely to See Strongest Earnings Since 2011: Top 5 Picks
The ‘America First’ plan might have fueled a solid market rally, but, investors are presently on the lookout for strong earnings growth. The S&P 500 companies are set to release their earnings numbers and projections in the middle of April.
Going by the estimated numbers, the S&P 500 companies are set to post their first quarter of double-digit profit gains in more than two years, while earnings growth may also turn out to be the best since late 2011. Strength in the global economy coupled with Trump’s promises of fewer regulations will certainly help companies come up with strong performances. Consumer confidence is at a 16-year high, which could also mean higher sales and profits for many companies. The jobs market has also been showing steady improvement.
Over the next couple of weeks, let us keep an eye on stocks that are likely to make the most of the first-quarter earnings season. Here, we should also bear in mind that better-than-expected earnings performances generally lead to a rally in the share price.
Q1 Earnings Numbers Should be Really Good
According to estimates, total first-quarter earnings for the S&P 500 cohort are expected to be up 6.5% from same period last year on 6.3% higher revenues. Actual earnings growth, however, is expected to be as high as 10.4% (read more: Q1 Earnings Season Gets Underway).
And if that happens, it will be the first double-digit increase since the third quarter of 2014. Furthermore, it will be the best quarter of growth in about five years, the highest since the companies posted 11.6% growth in the fourth quarter of 2011. The improvement will also follow a 7.4% increase – the highest in two years – in the preceding quarter.
A strong earnings season does justify pricey stock valuations, with the S&P 500 scaling to its most expensive level since 2004 on a forward price-to-earnings basis. The S&P 500 components are expected to come up with strong results, thanks to strength in the global economy. Almost half the S&P 500 components generate their revenues from overseas. Euro zone business activity is at a six-year high, while forecasts from the International Monetary Fund show a pickup in the global economy in 2017 and 2018, especially in developing economies.
Needless to say, the U.S. economy has also received a lot of attention since President Trump’s election. His promises of deregulations and tax reforms have bolstered investors’ sentiments. If Trump and Republicans manage to recover cash stashed overseas at a lower rate, this could set earnings in a higher gear. Tech behemoths including Apple Inc. (AAPL - Free Report) , Microsoft Corporation (MSFT - Free Report) and Alphabet Inc (GOOGL - Free Report) will use some of this cash and invest more in the U.S. by building plants and hiring skilled labor.
Potential Gainers & Losers of Q1
Financials and tech firms are expected to post solid gains. For the Finance sector as a whole, total Q1 earnings are expected to be up 5.4% from the same period last year on 2.9% higher revenues. This would follow 6.7% earnings growth in the fourth quarter of 2016 on 6.3% higher revenues. Bank majors like JPMorgan Chase (JPM - Free Report) , Wells Fargo (WFC - Free Report) and Citigroup (C - Free Report) among others will kick off the earnings season this week. Bank stocks have been maintaining their uptrend since the election, with the Banks - Major Regional industry surging 23.6% since Nov 8 (read more: Can Banks Get Their Mojo Back?).
Earnings for the Technology sector is set to grow 10.7% from the same period last year, while Industrials sectors are anticipated to rise in mid-single digits. Big profits are expected from materials as well. A huge jump in earnings for energy companies is also expected owing to substantially higher oil prices than a year ago. The Energy sector is expected to earn $8.1 billion in Q1, in contrast to a loss of $1.6 billion in the year-earlier quarter.
The table below shows what is expected from the different sectors in Q1, compared with what was achieved in the preceding quarter.
Buy These 5 Stocks for Stellar Earnings Growth
Investors have been gripped with politics lately. However, over the next few weeks, the Wall Street is likely to focus less on Trump’s America First program and more on Corporate America. This calls for investing in five companies from the aforesaid sectors, which are expected to report a significant uptick in first-quarter earnings.
These stocks have a positive Earnings ESP. This is our proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Such stocks, in the meanwhile, also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM score of ‘A’ or ‘B’. Here ‘V’ stands for Value, ‘G’ for Growth and ‘M’ for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Lazard Ltd (LAZ - Free Report) is a financial advisory and asset management company. The company has a Zacks Rank #2 and a VGM score of ‘A’. The company is expected to report its earnings results for the quarter ending March on Apr 20 and has an Earnings ESP of +11.27%.
Lazard Ltd. Price and EPS Surprise
Lazard Ltd. Price and EPS Surprise | Lazard Ltd. Quote
Motorola Solutions Inc (MSI - Free Report) is a provider of communication infrastructure, devices, accessories, software and services. Motorola Solutions has a Zacks Rank #2 and a VGM score of ‘A’. The company is expected to report its earnings results for the quarter ending March on May 4 and has an Earnings ESP of +10%.
Motorola Solutions, Inc. Price and EPS Surprise
Motorola Solutions, Inc. Price and EPS Surprise | Motorola Solutions, Inc. Quote
MSCI Inc. (MSCI - Free Report) is a leading provider of investment decision support tools to investment institutions worldwide. Its products include indices and portfolio analytics for use in managing equity, fixed income and multi-asset class portfolios. MSCI has a Zacks Rank #2 and a VGM score of ‘B’. The company is expected to report its earnings results for the quarter ending March on April 27. MSCI has an Earnings ESP of +1.18%. You can see the complete list of today’s Zacks #1 Rank stocks here.
MSCI Inc Price and EPS Surprise
MSCI Inc Price and EPS Surprise | MSCI Inc Quote
Caterpillar Inc. (CAT - Free Report) is a manufacturer of construction and mining equipment. The company has a Zacks Rank #2 and a VGM score of ‘B’. Caterpillar is expected to report earnings results for the quarter ending March on April 28 and has an Earnings ESP of +25.46%.
Caterpillar, Inc. Price and EPS Surprise
Caterpillar, Inc. Price and EPS Surprise | Caterpillar, Inc. Quote
Chemours Co (CC - Free Report) is a provider of performance chemicals. The company operates through three segments: Titanium Technologies, Fluoroproducts and Chemical Solutions. Chemours has a Zacks Rank #1 and a VGM score of ‘A’. The company is expected to report its earnings results for the quarter ending March on May 1 and has an Earnings ESP of +4.08%.
Chemours Company (The) Price and EPS Surprise
Chemours Company (The) Price and EPS Surprise | Chemours Company (The) Quote
Looking for Ideas with Even Greater Upside?
Most of Zacks’ investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information>>