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Find Strong Stocks Ahead of Q2 Earnings Season with this First Profit Screener

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May’s better-than-projected retail sales figures released on Tuesday helped stocks surge. Wall Street and investors were also likely pleased by reports that the Trump administration is considering a $1 trillion infrastructure spending plan. And a newly released University of Oxford study found that a generic steroid significantly reduced deaths of severely sick coronavirus patients.

Retail sales climbed 18% last month from April to help highlight that the pandemic’s worst economic days are likely behind us, as economies around the world reemerge from their pandemic lockdowns. Meanwhile, the Fed continues to do all it can to boost market confidence and provide support.

The S&P 500 is now back above 3,100, after slipping last Thursday, and is up 36% from the market’s March 23 lows. And the rally could continue, even with some volatility sprinkled in, especially since the market is poised to remain in “don’t fight the Fed” mode.

With this in mind, one of the next major market catalysts might be Q2 earnings season, when firms report the period that will hopefully bear the brunt of the pandemic downturn.

The second quarter reporting cycle unofficially starts with JPMorgan (JPM - Free Report) on July 14. But from our perspective here as Zacks, the Q2 earnings began with Adobe’s (ADBE - Free Report) report on June 11 (also read: 5 Charts that Tell the Coronavirus Corporate Earnings Story).

On that note, we used our ‘First Profit’ stock screener to help investors find strong stocks that might be worth looking at in preparation for Q2 earnings season...

First Profit

The idea is to search for companies that recently reported their first quarterly profit. More specifically, the screen searches for firms that just posted their first profit last quarter, after not posting a profit for at least the previous four quarters.

Finding companies that recently reported their first profits help investors find stocks that can prove to be big winners. These companies may vary widely. Some of the firms might be new, and this recent profit is perhaps the only profit in its short history.

Meanwhile, other companies might have held an impressive and long history of quarterly profitability, but for whatever reason haven't seen a profit in a while. Therefore, the return to profit could spark a turning point that management had promised or Wall Street had been clamoring for.

The concept is relatively simple: if the trend has been one of improvement, there is a solid chance the trend will continue. This is true whether a company has been profitable, or is just reaching that key inflection point.

And that’s what we are screening for today…

• EPS for the previous 4 Quarters less than or equal to 0

(This means in each of the previous 4 quarters (except the most recently reported quarter) the company has reported earnings of less than or equal to zero, i.e., no profit.)

• EPS for the recently reported quarter greater than 0

(This time, the company reported earnings greater than zero, meaning they finally showed a profit.)

• Current Price greater than or equal to 5

(Stocks that are trading for less than $5 are more speculative.)

The screen is pretty simple, yet powerful. Here are 3 of the 21 stocks that made it through this week's screen…

CytomX Therapeutics, Inc. (CTMX - Free Report)

MACOM Technology Solutions Holdings, Inc. (MTSI - Free Report)

GCI Liberty, Inc. (GLIBA - Free Report)

Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.

Click here to sign up for a free trial to the Research Wizard today.

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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/.

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