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Despite strong quarterly earnings results from industry heavyweights last week, stocks fell by midday Monday. With that said, this week once again features some big-name companies that might have to really impress in order to move the needle.
Yet while these industry giants are set to grab a lot of attention, other recognizable companies are also scheduled to report their quarterly earnings results. Therefore, investors should look for stocks that are expected to report better-than-expected earnings while avoiding any companies that could disappoint.
Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to surprise, in one way or the other. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
In contrast, a stock with a Zacks Rank #3 (Hold) or worse, coupled with a negative Earnings ESP, is one that we typically want to avoid during earnings season.
Today, we are giving our readers a free look at three of these weak stocks in order to help them identify the high-risk companies ahead of their upcoming earnings reports.
Check them out now:
1. Fitbit
Fitbit stock surged on Monday after the company announced a new healthcare-focused partnership with Alphabet's (GOOGL - Free Report) Google. Prior to today’s gains, shares of Fitbit had climbed nearly 4% over the last month in a sign that investors might expect the struggling fitness wearable giant to turn things around. Our current consensus estimates don’t support this optimism. Fitbit’s quarterly revenues are expected to fall by over 17.5% to hit $246.08 million. The company is also projected to report an adjusted quarterly loss of $0.20 per share, which would mark a 33.3% decline.
Meanwhile, Fitbit’s Most Accurate Estimate—the representation of the most recent analyst sentiment—calls for an adjusted loss $0.21 per share, which is 1 cent worse than our current consensus estimate. Fitbit is also currently a Zacks Rank #5 (Strong Sell) and sports an Earnings ESP of -6.33%. This means Fitbit is a stock that could fall short of earnings estimates when it reports after market close on Wednesday, May 2.
Shares of Yum Brands have climbed nearly 32% over the last year and have managed to experience gains over the last few months while many other stocks have experienced at least a marginal decline. Looking ahead, Yum’s quarterly earnings are expected to pop by 4.6% to reach $0.68 per share.
However, investors will be disappointed to note that the owner of Taco Bell, Pizza Hut, and Kentucky Fried Chicken is projected to see its Q1 revenues sink by 23.9% to hit $1.08 billion. Yum is also currently a Zacks Rank #3 (Hold) and holds an Earnings ESP of -1.18%. Yum’s negative ESP figure comes from the fact that its Most Accurate Estimate falls 1 cent below our current consensus estimates. Therefore, investors might want to avoid Yum before it reports its Q1 earnings on Wednesday morning.
Square stock sunk 2.8% through early afternoon trading on Monday just two days before it is scheduled to report its first quarter financial results, which might mean that investors are apprehensive. Square's Q1 revenues are projected to surge by 35.1% to reach $623.75 million.
On the other end of the income statement, Square is expected to report quarterly earnings of $0.05 per share, which is exactly the same figure it posted in the year-ago period. With that said, Square is currently a Zacks Rank #3 (Hold) that rocks an Earnings ESP of -0.44%. This means that Square might be poised to miss earnings estimates, meaning investors should be cautious about the stock.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
3 Stocks to Avoid Ahead of Earnings
Despite strong quarterly earnings results from industry heavyweights last week, stocks fell by midday Monday. With that said, this week once again features some big-name companies that might have to really impress in order to move the needle.
Microsoft (MSFT - Free Report) , Amazon (AMZN - Free Report) , and Facebook all posted strong quarterly earnings results last week. Yet none of them have been able to sustain any real post-earnings momentum. This week, Apple (AAPL - Free Report) and Tesla (TSLA - Free Report) are all scheduled to report their quarterly financials (also read: Upcoming Earnings Reports to Watch: MCD, AAPL, TSLA).
Yet while these industry giants are set to grab a lot of attention, other recognizable companies are also scheduled to report their quarterly earnings results. Therefore, investors should look for stocks that are expected to report better-than-expected earnings while avoiding any companies that could disappoint.
Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to surprise, in one way or the other. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
In contrast, a stock with a Zacks Rank #3 (Hold) or worse, coupled with a negative Earnings ESP, is one that we typically want to avoid during earnings season.
Today, we are giving our readers a free look at three of these weak stocks in order to help them identify the high-risk companies ahead of their upcoming earnings reports.
Check them out now:
1. Fitbit
Fitbit stock surged on Monday after the company announced a new healthcare-focused partnership with Alphabet's (GOOGL - Free Report) Google. Prior to today’s gains, shares of Fitbit had climbed nearly 4% over the last month in a sign that investors might expect the struggling fitness wearable giant to turn things around. Our current consensus estimates don’t support this optimism. Fitbit’s quarterly revenues are expected to fall by over 17.5% to hit $246.08 million. The company is also projected to report an adjusted quarterly loss of $0.20 per share, which would mark a 33.3% decline.
Meanwhile, Fitbit’s Most Accurate Estimate—the representation of the most recent analyst sentiment—calls for an adjusted loss $0.21 per share, which is 1 cent worse than our current consensus estimate. Fitbit is also currently a Zacks Rank #5 (Strong Sell) and sports an Earnings ESP of -6.33%. This means Fitbit is a stock that could fall short of earnings estimates when it reports after market close on Wednesday, May 2.
2. Yum! Brands (YUM - Free Report)
Shares of Yum Brands have climbed nearly 32% over the last year and have managed to experience gains over the last few months while many other stocks have experienced at least a marginal decline. Looking ahead, Yum’s quarterly earnings are expected to pop by 4.6% to reach $0.68 per share.
However, investors will be disappointed to note that the owner of Taco Bell, Pizza Hut, and Kentucky Fried Chicken is projected to see its Q1 revenues sink by 23.9% to hit $1.08 billion. Yum is also currently a Zacks Rank #3 (Hold) and holds an Earnings ESP of -1.18%. Yum’s negative ESP figure comes from the fact that its Most Accurate Estimate falls 1 cent below our current consensus estimates. Therefore, investors might want to avoid Yum before it reports its Q1 earnings on Wednesday morning.
3. Square (SQ - Free Report)
Square stock sunk 2.8% through early afternoon trading on Monday just two days before it is scheduled to report its first quarter financial results, which might mean that investors are apprehensive. Square's Q1 revenues are projected to surge by 35.1% to reach $623.75 million.
On the other end of the income statement, Square is expected to report quarterly earnings of $0.05 per share, which is exactly the same figure it posted in the year-ago period. With that said, Square is currently a Zacks Rank #3 (Hold) that rocks an Earnings ESP of -0.44%. This means that Square might be poised to miss earnings estimates, meaning investors should be cautious about the stock.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>