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5 Stocks Poised for Post-Earnings Pop

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With earnings season kicking in as we speak, that’s the thing topmost on investors’ minds. And this earnings season stands out from the rest, because of all that it can tell us about the impact of the virus, the lockdown, trade with China and a whole lot of other things that have had investors on the edge.

One thing is certain. Although there are fears of a second outbreak, lockdowns have generally served their purpose in ramping up preparedness to deal with the crisis. So it’s extremely unlikely for another lockdown of the scale that we’ve already seen.

That being said, operations are also not going to be as smooth as they’ve been in the past. The highly mechanized processes will see minimal impact, but labor-intensive processes are likely to see an impact to efficiency because of constraints imposed by social distancing.

So with that being the backdrop, it’s apparent that this earnings season will set the tone for the rest of the year and hopefully give us a better idea of when we might expect a recovery.

Because of the uncertain nature of the economy and the Fed’s initiatives, it’s important to be able to grab short term opportunities when we see them. The earnings season should open up many such opportunities.

The idea I’m highlighting here is based on recent estimate revisions on stocks with a Buy Rank (Zacks Ranks #1 and #2).

First up is Diebold Nixdorf, Inc. (DBD - Free Report) .

The Zacks Rank #2 company provides connected commerce solutions including automatic teller machines (ATM), and financial and point of sale (POS). Its offerings include electronic card systems, monitoring software, fraud control, retail cash cycle management and electronic shelf labeling services.

The VGM (value-growth-momentum) Score A and Growth Score A indicate that the stock is recommended for all investors, irrespective of their risk appetite, but is particularly attractive for growth investors.

It operates in the Financial Transaction Services industry, which is in the top 16% of 250+ Zacks-classified industries. A low rank indicates a high position for an industry, because it has positive things going for it. It’s expected that constituent stocks therefore gain from these inherent advantages the industry has in a given situation or at a given time. It has also been seen that the top 50% of Zacks-classified industries beats the bottom 50% by a factor of more than 2 to 1.

The company is expected to report on Jul 29 and its earnings expected surprise prediction (ESP) is 14.29%. This is the percentage difference between the most accurate estimate and the Zacks Consensus Estimate. It’s based on the principle that more current estimates include new information that earlier estimates didn’t consider, treating the difference as the upside potential in Buy- or Hold-ranked (Zacks Rank #3) stocks.

And sure enough, seven days ago, the Zacks Consensus Estimate for 2020 (ending December) moved from a loss of 49 cents to a profit of 27 cents. The 2021 estimate went from $1.10 to $1.36. Historically, the shares have responded positively to when the company met or exceeded the Zacks Consensus Estimate and negatively to when it missed. The first quarter was an exception because of the pandemic and shares responded positively because it could have been much worse. So a positive surprise should lead to upside in share prices.

Second is FormFactor, Inc. (FORM - Free Report)

FormFactor is an OEM of automated wafer probe cards, analytical probes, probe stations, thermal sub-systems, and related services used in the back-end portion of the semiconductor manufacturing process.

The Zacks Rank #2 company has a VGM Score A and Growth Score A.

The Electronics – Semiconductors industry, of which it is a part, is in the top 36% of 250+ Zacks-classified industries.

The company is expected to report on Jul 29 and its earnings expected surprise prediction (ESP) is 11.1%.

Over the last seven days, the Zacks Consensus Estimate for 2020 (ending December) moved from $1.13 to $1.18. The 2021 estimate went from $1.26 to $1.31. Historically, the shares have not shown much correlation to the company’s performance versus the Zacks Consensus Estimate. However, the last quarter was an exception, with the shares moving notably higher in what was an exceptional quarter. Since pandemic effects continued in the second quarter, a positive surprise is likely to lead to positive movement in share prices.

Third, Legg Mason, Inc. (LM - Free Report) .

The global asset management firm operates proprietary mutual funds and separately-managed accounts (SMAs). Its range of services includes asset management, investment banking and related financial services through its various subsidiaries in U.S., UK, Australia, Bahamas, Brazil and China.

The Zacks Rank #2 company has a VGM Score A and Growth Score A.

It operates in the Financial - Investment Management industry, which is in the top 8% of 250+ Zacks-classified industries.

The company is expected to report on Aug 6 and its earnings expected surprise prediction (ESP) is 1.2%.

Over the last seven days, the Zacks Consensus Estimate for 2021 (ending March) moved from $2.76 to $2.93. The 2022 estimate went from $3.27 to $3.35. Historically, the shares have responded positively to when the company met or exceeded the Zacks Consensus Estimate. So a positive surprise should lead to upside in share prices.

Then, Synaptics Inc. (SYNA - Free Report) .

Synaptics is a leader in designing and marketing human interface solutions such as touchpads for notebook computers, capacitive touch screen controllers for handsets and biometric fingerprint sensors for mobile devices.

The Zacks Rank #1 company has a VGM Score A and Growth Score A.

It operates in the Electronics – Semiconductors industry, which is in the top 36% of 250+ Zacks-classified industries.

The company is expected to report on Aug 13 and its earnings expected surprise prediction (ESP) is 10.6%.

Over the last seven days, the Zacks Consensus Estimate for 2020 (ending June) moved up a couple of cents to $5.83. The 2021 estimate went from $4.37 to $4.59. Historically, the shares have responded positively to positive earnings surprises. So this quarter should be no different.

Finally, Vista Outdoor Inc. (VSTO - Free Report) .

Vista Outdoor develops, manufactures and distributes optics, accessories and eyewear. The company operates in two segments: Shooting Sports and Outdoor Products. Its product line includes binoculars, laser rangefinders, riflescopes, trail cameras, archery accessories, blinds, decoys, game calls, gun care products, mounts, powder, reloading equipment, targets, target systems, safety and protective eyewear, fashion and sports eyewear under the Bushnell, Primos, Bollè, Serengeti, Cèbè, RCBS, Hoppe's, Uncle Mike's, Gold Tip, Weaver and Tasco brands.

The Zacks Rank #2 company has a VGM Score A and Growth Score A.

It operates in the Leisure and Recreation Products industry, which is in the top 2% of 250+ Zacks-classified industries.

The company is expected to report on Aug 13 and its earnings expected surprise prediction (ESP) is 20.0%.

Seven days ago, the Zacks Consensus Estimate for 2021 (ending March) moved up a couple of cents to $0.39. The 2022 estimate went from $0.45 to $0.50. Historically, the shares price movements haven’t shown much correlation to positive earnings surprises. So the chances of a positive movement in share prices in response to a positive surprise are about even.

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